The Four Percent Rule

[RobbieB]

I could care less if "the model goes out the window", I only care about how much dough I have and how fast I'm spending it.

These calculators are good for giving you a warm fuzzy before you retire but after?

You are on your own, the die is cast. No model is ever going to put more dough in your account or cut your spending, improve the market, lower inflation or keep you out of the hospital.

[audreyh1]

Quote:

Originally Posted by RobbieB I could care less if "the model goes out the window", I only care about how much dough I have and how fast I'm spending it. These calculators are good for giving you a warm fuzzy before you retire but after? You are on your own, the die is cast. No model is ever going to put more dough in your account or cut your spending, improve the market, lower inflation or keep you out of the hospital.

The models can still help you decide whether to cut your spending and/or lower your withdrawal rate, or increase them. Or what the effects might be if you change your asset allocation. Or if you decide to pull a chunk of money out for a one-time large purchase, how the resulting projected income might change.

As long as you haven't retired with too little money, and/or have 100% fixed expenses locked in, you can course correct even during retirement.

You can also reevaluate your situation after a good market run, or after a poor one.

[NW-Bound]

Quote:

Originally Posted by RobbieB You are on your own, the die is cast. No model is ever going to put more dough in your account or cut your spending, improve the market, lower inflation or keep you out of the hospital.

No model is going to cut the spending. You have to do that yourself, sometimes because there's no alternative.

[growing_older]

Quote:

At year end I subtract the unspent amount from the total portfolio on my spreadsheet and add it to the "mad money cell (which I have just adjusted up or down based on the past year's performance).

I like this description very much. If I have a spending rate that is comfortable, I am strongly inclined to maintain a lifestyle I have become accustomed to. If I see I have more portfolio than I really need, I can of course add expenses a bit at a time, but I would much prefer to know that some "mad money" is available for a big purchase from time to time (maybe a once in a lifetime trip, for example). I don't want to change my regular month-in-month-out expenses. But I want to stay within the plan for safe expenses even with occasional big purchases. This method gives me a very intuitive way to do that.

[Backdraft57]

Just like to say great thread! Thanks to all the wisdom shared here. I have only been at retirement for six months and so far just living off pension and my vacation and sick leave payouts. Next year will be different and I will need to start withdrawal from 457 account. I have learned a lot from you all so thanks for all you have shared here.

Sent from my SM-G935V using Early Retirement Forum mobile app

[RobLJ]

I also enjoyed the thread. Basically, I'm planning to run on a 5-5.5% withdrawal rate until SS, reduced to 3.5-4% after SS kicks in.
I'm still working 1/3 time and DW is working and plans to work for another 4-6 years (to vest fully in the 401k in her new job), so we added 7% to the portfolio in 2016, barring an "event." No withdrawals yet.
Both amounts have about 30%-35% of slack (vacations, etc.) built in, so like pb4uski I probably won't be spending it all, but stashing some in cash, either for splurges or a rainy day.
I also plan to recalculate when we actually do start withdrawing, which could be next year, if I'm not renewed at part-time.
FireCalc gave me the confidence to go ahead, go part-time the July before last, move to Reno, and buy the dream house (and tell DW she could quit now, in 2 years or whenever she wants).

[marko]

Quote:

Originally Posted by RobbieB No model is ever going to put more dough in your account or cut your spending, improve the market, lower inflation or keep you out of the hospital.

The speedometer on that cycle of yours is not going to tell you to speed up or slow down but it's a good thing to know how fast you're going.

[Totoro]

Quote:

Originally Posted by marko The speedometer on that cycle of yours is not going to tell you to speed up or slow down but it's a good thing to know how fast you're going.

Nice analogy.

Also works with downhill / uphill or wind speed. It doesn't tell you the inclination or wind speed, but if you're going 40mph it's safe to say it's not just you who's doing the paddling