SWR another 6.5+ million calculations

[2017ish]

Thanks for your extremely thoughtful comments. I agree: there are studies that show that consumption expenditures go down with age. Is that because people want to consume less or because they have to consume less? ....

...

I had this same question when I first ran across the research. Surely, it won't apply to moi?

It pretty obviously depends upon where you start the analysis. Blanchett's 2014 article, which is the one I tend to turn to, indicates that, ceteris paribus, most people will experience dipping rates in expenditure increase (including negative rates), even when well funded. Even the high-wealth low-spending cohort follows the so-called smile--albeit with a higher increase rate than the matched or ill-funded cohort. Even though you've read it before, here is the link for convenience: https://www.onefpa.org/journal/Pages/MAY14-Exploring-the-Retirement-Consumption-Puzzle-.aspx

Of course, ceteris paribus doesn't exist. First, he (like most professionals) is focusing on spending post-50, which is well past the start dates for folks like yourself. No surprise if you have different spending change rate in the first decade or two. (Given the paucity of extreme early retirees, I wonder if there can be any generally applicable data for them? It is a special, highly-self-selective cadre....) Second, some folks who've been delaying gratification until an earlyish, mid-50s retirement are going to have at least a spike in spending once they hit it. (Guilty as charged, I hope. )

Still, I see this study and its like as being consistent with my anecdotal experience when applied to the demographic in question. In-Laws typify this for me (although they are not the only ones I see this in; so too, forum member imoldernu's posts provide quite valuable insights). They have been spending less despite having no need whatsoever to do so. Lots of traveling in 50s/60s, and even early seventies. As the seventies progressed, and now into the late 80s, not so much; "been there, done that," not interested in doing it again with artificial knees and less muscle mass. Their other expenses are very minimal and they are content home bodies with a couple of domestic trips a year; thus, until they need medical/living assistance, their spending curve will likely continue to drift down or flat-line.

 

[tulak]

Late to this thread, but my target has always been ~3.5% WR. Why?

Because a few years ago I ran simulations in Firecalc telling me this WR works for 40+ years.

It's nice to read that it has been confirmed by others.

 

[FREE866]

I get it that studies show 4% SWR with 30 years, and less for 40 years, and all that, but those numbers do not include social security benefits, so the SWR for most people can withstand something higher, no?

Thank you for this post...this is my situation...I'm hesitant to say I "retired" 2 weeks ago, but I am no longer working...
I will be taking out ~4% , but once SS hits ( in 20 years at age 70 or 12 years at 62) I expect my withdrawal rate % will be much lower...
When I use the Fidelity Calculator I'm fine with the "below average returns" selection and FIRECALC has me at 97% success ...that said, articles like the one that started this thread always scare me!

 

[haha]

For people like myself who have supposedly adequate capital, an owned home, and reasonable health the biggest unknown is luck. I'd say we had best pick out the most powerful gods, and make offerings often and always.

Ha

 

[clifp]

What's with the sour mood here in the forum? We all seem to agree that <4% is the prudent thing to do, right? Let's all do a high-five and group hug and be happy!

As I mentioned before, some very influential bloggers (Mr. Money Mustache, MadFIentist, etc.) all claim the 4% rule is a-OK. You are right in that many of my close blogging friends are much more cautious. And most of them like my SWR series because finally, someone spent the effort to do some SWR research for the FIRE crowd and confirm what many already suspected.
Since I'm the first to do a comprehensive analysis for the FIRE crowd I am entitled to a slightly "self-confident" title. If you come up with something better, use an even more grandiose title.

And no disrespect to you, but this seems to be the last resort of folks who ran out of good arguments: the "you lost me as a reader when ..."
It's a red herring. Besides, my put selling strategy has less risk than equities (about half, 6% p.a. since 2011). Exactly because I am a conservative and cautious investor. Explaining it would require more details on option math, risk management,etc., but I'm not going to waste any more space on this red herring.

I fundamentally agree with you that the problem with MoneyMustache folks is extrapolating the 4% rule from 30 years to 50 or 60 years. I also agree that in world where bonds provide return-free risk to quote Buffett it is even more dangerous to use 4%. I've even been using a put selling strategy for quite a while. (I slow down when $vix is under 20 and stop when it drops <15)

But fundamentally you are wrong that there is a blind obedience or trust on the 4% rule on this forum. It is almost certainly one of the most hotly debated topics.

But a big difference between this forum and most of the folks of MMM is that a very large proportion of the folks, this isn't an academic exercise. Early retirement is a bit like sex, needs to be experienced not just described. Your first bear market after you've quite your job is an emotional roller coaster. Not everybody has the temperament to calmly sell bonds and buy stock when rebalancing

I'm always happy to see new people re-examine withdrawal strategies and if they have good analytical skills even the better. But you aren't the first to examine this comprehensively. I have got 3-400 page PDF tome somewhere on this hard drive. (I can't even remember the author's name.) I personally have been looking at SWR since 98 (shortly after trinity study was published) and discussing it on the internet since I retired in 1999. We have other folks on the forum who retired early before you were born. Lots of masters and PHds on the forum and more than a few people from the world of finance.

All that said, welcome.

 

[Dd852]

Early retirement is a bit like sex. .

Indeed: it is fun, it can be done alone but is better with a partner, it can provide great pleasure but can't be the purpose of life all on its own, doesn't necessarily need a lot of money to be performed happily etc etc!

 

[daylatedollarshort]

I fundamentally agree with you that the problem with MoneyMustache folks is extrapolating the 4% rule from 30 years to 50 or 60 years.

I agree with that and would add that they were assuming that ACA subsidized rates would be here to stay, and we all know how that is turning out. Many of us here age 50+ have health insurance premiums alone that without subsidies are over $20K a year, not including high deductibles, high out of pocket maximums and sometimes unavoidable out of network costs from in network hospital stays.

Future annual healthcare costs are probably more of a game changer for most very early ER types in the U.S. than whether they can safely withdraw 4% or 3.5% or maybe even less per year.

 

[Sunset]

Interesting that the topic on this thread has drifted to dementia...

I couldn't follow it...