4% rule

[thepalmersinking]

If the portfolio has dividends. Is the 4% rule still valid? Can the amount be adjusted upwards to get the same result.

 

[W2R]

No, it's 4% including the dividends and capital gains AFAIK.

 

[RE2Boys]

And taxes

 

[Blue Collar Guy]

its 4 % withdrawal of the portfolio value, including the dividends

then minus the taxes and living expenses, that my understanding.

 

[thepalmersinking]

Any backdated experience on whether this rule is valid anymore?

 

[Blue Collar Guy]

search this awesome forum, look under withdrawal rates

Any backdated experience on whether this rule is valid anymore?

tons of threads on this stuff, make a pot of coffee and get a pack of smokes, and run your numbers 25 different ways thru the fire calculator its fun take notes, u dont really need the coffee or the cigarettes but thats what i did,

 

[Montecfo]

4% is gross. You have to also remove management fees/costs if you are incurring those, I understand.

 

[Major Tom]

Any backdated experience on whether this rule is valid anymore?

Sure. Enter your details into Firecalc, set a retirement period of 30 years, a portfolio mix with 60% equities, and use the "Investigate" tab to look for a spending level that will result in a 95% success rate. With my numbers, Firecalc gave me a spending level that actually resulted in a 95.7% success rate. This represented a WR of 4.02%.

Firecalc is updated every year, so this would seem to indicate that the 4% "rule" (for which I read "guideline") is still good. At least it is, considering past results, which is the best anyone can do.

 

[Meadbh]

tons of threads on this stuff, make a pot of coffee and get a pack of smokes, and run your numbers 25 different ways thru the fire calculator its fun take notes, u dont really need the coffee or the cigarettes but thats what i did,

If you smoke enough, you will die before you run out of money!

 

[mickeyd]

Is the 4% rule still valid?

It's not really a rule, so feel free to pick your own amount.

 

[OldShooter]

It's not really a rule, so feel free to pick your own amount.

A useful thing I learned long ago: "To every complex problem there is a simple solution, usually wrong."

IMO 4% is a good rule of thumb when thinking about spending and portfolios, but it is only that. There are many things that would cause one to tweek the number up or down, including portfolio construction, market behaviors, life expectancy, etc.

It doesn't consider spending needs, either. Early in retirement spending might be higher for travel or other fun. Later spending might go down as you stay at home more. Or it might go up with medical issues.

We spend well under 4%, which makes me feel fairly comfortable.

 

[WoodsWalker]

I came across a very short, intelligent book called "The 4% Rule and Safe Withdrawal Rates In Retirement by Todd R. Tresidder". It convinced me that 4% rule may not work in the future. I'm hoping to retire next year, counting on 2%, to be very conservative.
I've read several books on retirement so far, this was the gloomiest but also convincing. As Yogi Berra said: "'It's tough to make predictions, especially about the future"' and I don't want any nasty surprises (running short of funds) in 20 years.

 

[USGrant1962]

It's not really a rule, so feel free to pick your own amount.

It's more of a guideline.

 

[Totoro]

4% is gross. You have to also remove management fees/costs if you are incurring those, I understand.

The Trinity study includes 1% fees I believe. Also, it actually was 4.5%.

 

[audreyh1]

The Trinity study includes 1% fees I believe. Also, it actually was 4.5%.

No fees considered in the Trinity study - it was pure indexes.

And the 4.5% was from a different study - SAFEMAX (Bengen). I don't believe this one considered fees either.

The only study I've seen that considered 1% fees was Pfau's work, and he came up with a much lower safe withdrawal rate also due to more pessimistic market outlook projected from recent market history.

 

[kcowan]

If you smoke enough, you will die before you run out of money!

Don't count on it! MIL died at 93 with lung cancer. Her RIF was down to $24000. Pretty close!

 

[Totoro]

No fees considered in the Trinity study - it was pure indexes.

And the 4.5% was from a different study - SAFEMAX (Bengen). I don't believe this one considered fees either.

The only study I've seen that considered 1% fees was Pfau's work, and he came up with a much lower safe withdrawal rate also due to more pessimistic market outlook projected from recent market history.

I was wrong, indeed no fees in Trinity nor Bengen, was confusing the three items above. The 4.5% by Bengen actually was his second study, the first one was 4.15% or thereabouts.

Anyway, thanks for correcting.

 

[Blue Collar Guy]

great when im depressed ill read the book

I came across a very short, intelligent book called "The 4% Rule and Safe Withdrawal Rates In Retirement by Todd R. Tresidder". It convinced me that 4% rule may not work in the future. I'm hoping to retire next year, counting on 2%, to be very conservative.
I've read several books on retirement so far, this was the gloomiest but also convincing. As Yogi Berra said: "'It's tough to make predictions, especially about the future"' and I don't want any nasty surprises (running short of funds) in 20 years.

 

[LOL!]

Any backdated experience on whether this rule is valid anymore?

https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/

is recent, complete, well-researched, and the real deal.

 

[Blue Collar Guy]

this is my reading assignment for tonight

https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/

is recent, complete, well-researched, and the real deal.

thank you

 

[Ready]

https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/

is recent, complete, well-researched, and the real deal.

Very interesting read, thanks for sharing.

So for me, planning for 40 years, it looks like I need to ratchet it down to 3.25% under current conditions and a 60/40 allocation to be "safe".

 

[broadway]

I was planning on 4% withdrawal rate but on 75% of my total assets.
As it turns out that is equivalent to 3% of 100% of my total assets.
Maybe I am psychic.

My current allocation is 55/45.

 

[timemoveson]

Thought on Todd Tressider

I think Todd Tressider's "How Much Money Do I Need to Retire?" is excellent and deals with the complexity of all the piece parts extremely well. It doesn't advocate a specific amount or percentage. It let's you assemble your own package intelligently.

Several of his other short books, blog posts, and in particular his Retirement Calculator are excellent too.

No affiliation of course, just a fan of the work and his general tone, and the fact he appears to have lived the experience in a way that is relevant to many FIRE aspirants.

 

[Blue Collar Guy]

it took me more than 1 evening to read it, doesnt firecalc runs these scenarios already . i put in my expected year soc sec will be gotten, and then i run it with zero soc sec

 

[timemoveson]

it took me more than 1 evening to read it, doesnt firecalc runs these scenarios already . i put in my expected year soc sec will be gotten, and then i run it with zero soc sec

uh, no. FIRECALC is a really cool tool but not to be confused with logic behind a plan for financial independence leading to early/retirement.