Thanks , Independent, for taking the time craft a reply to my newbie question, it's folks like you who make this site such a wonderful resource.
I understand about the assumption that the interest from my instruments will need to be 4% or higher to cover inflation.
I had suggested splitting assets into two buckets - one to cover $32k for 9 years, the other to cover $48k for all years. I think you're talking about the first 9 years here?
If so, I don't think there is any magic in 4%. Inflation could be anything over the first 9 years. We can get a consensus expectation from bond yields, but the herd doesn't know either. When I retired, we had CDs for the first 5 years, and I-Bonds for the next 7. The I-Bonds are CPI indexed, so I didn't need to worry about inflation with them, and I just took the inflation risk on the CDs for the first 5 years.
As for withdrawal, does it mean I have to adjust my annual amount every year? 48kx1.04=49920 for year 2 and so forth?
Now I think we're talking about the $1.2 million bucket that would provide the $48k.
The backtesting that supports the 4% withdrawal idea assumed that withdrawals would go up with the
actual CPI.
So, if your first year withdrawal is $48,000, and actual CPI growth is 5%, you'd withdraw $48k x 1.05 = $50,400 in the second year.
OTOH, if the actual CPI growth is 2%, you'd withdraw $48,000 x 1.02 = $48,960 in the second year.
The rental properties we hold will produce part of the 1.2 million. At this moment I estimate rentals to contribute 60k to my 80k annual budget . The remaining 20k will come from income from REITs, stocks and our cash float. We envision having to liquidate a property to get a lump sum only if say my DH's mother meets with a catastrophic health event or if DD wants to take a PhD.
Okay, the rentals are included in the $1.2 million, and seem to make up the bulk of it.
In that case, the 4% "rule", or the equivalent 25x in the first post, may not be relevant to your situation. That number was developed to allow for the volatility of common stocks and the order of returns risk. I expect real estate is noticeably different.
You're the expert on how much net income you can expect from your rentals, how stable it is, whether you expect it to go up as fast as your living costs, and how much market risk you are taking in some future sale. I can say that those seem to be the types of things one would consider, but then I run out of things to say.