In my modeling, over long periods of time Bob Clyatt’s method tracks the % remaining portfolio method very closely over the worst case scenarios. It takes slightly longer to drop (in years), goes down as far, then slightly longer to recover.
Yes, I remember you mentioning this aspect, plus IIRC you have arrived at a 4.35% SWR vs the non rounded down Bengen WR of 4.15%.
More power to you! That is a very worthy cause. We were blessed similarly 2 yr 2 mos ago.
My unease with that is that we have been in a torrid bull market. The S&P is over 10x what it was in 2009. Has it ever gone up that much in over a similar time period? It seems to me we are at greater risk of a pull-back, perhaps a deep or extended one. I know what the FireCalc modeling says, but if these 17 years are unprecedented, the next few years may be as well, in the other direction (either a down market, high inflation, or both). FireCalc only projects the future based on past results. It cannot predict the future.
That particular “SWR” wasn’t a depletion rate either. It was a rate at which the portfolio was likely to at least maintain over the very long term, like 30 40 years, and that was for 50% total stock market, 50% 5 year treasuries. The method guarantees that the portfolio will never deplete, so the question becomes what is the max portfolio drawdown looking at historical data which means how tight might you have to fasten your belt before recovering.
It doesn’t. It’s not an upward ratchet. You have to be willing to withdraw less $$ at times.
Why pick 2009 to compare when it was deep in a bear market? I think it will be better to compare historical average returns.
I had the same visceral response to the retire again concept. You really should go to the other thread I linked and read it through. I think I made the case against it as well as anyone could, and I ran many, many scenarios to try to show the contrary, but the FIRECalc math said, no, you don't increase the risk of failure above what it was initially.
is it really as high as 9%? wow
Actually I thought it was higher. IIRC, if one retired in 1982, then the WR could have been (in hindsight) over 10%.
I have seen a historical SWR chart somewhere, it spreads out between 4 to 9 percent with average around 6%.
My point is that not all starting points are equal. FireCalc will give you the same results whether you are starting in a bear market poised to recover, or a bull market on the verge of correction, or anywhere in between. * Where do you think we are at right now? I picked 2009 because it is pertinent to the current situation, showing just how long we have been on a run (with a few minor corrections that were quickly absorbed), but you can take any number of years back from today.
Yes, I read that thread, and acknowledge the FIRECalc math. What I'm saying is that we've possibly had the best 16-17 year in the years FIRECalc uses. Since we've gone above the bounds of FIRECalc on the high end, isn't it possible we'll go below the bounds on the low end? Trying not to stray into politics, the US is being run very differently than it had been since at least the FDR days, if not before. I don't think it's a stretch to think that the next few/many years may not follow historical results. Hopefully that won't be the case. But this time it really could be different. People are free to think FIRECalc sets the bounds, but I don't believe that.
4% rule is not based on market average of about 10% a year for the past decade or so. Hence it is conservative and unlikely that you will run out of money by using 4% withdrawal. Moreover, once you build in inflation, market returns of 10% does not seem as inflated. Picking 2009 is not pertinent because you are looking at all doom and gloom as opposed to simply looking at market average. There are ways to mitigate against SORR, whether it is called bucket strategy or setting aside 5 years of fixed income type of investments.
FIRECalc is not based on market averages at all, nor is the Bengen/Trinity study. If you don't understand how FIRECalc works, you won't understand its limitations, so you won't understand the point I'm trying to make.
If one uses the % of remaining portfolio methodology, then one would ratched up and down.
No argument there.
Understood.
I understand your point. FIRECalc requires us to assume the future will not be worse than the worst of the past, and that may turn out not to be true. That's one of the reasons why we waited to retire until: 1) our COLA'd sources of income (pension and SS) could cover our yearly spending; and 2) our portfolio was large enough to cover the same spending using the regular 4% rule. In other words, a 100% margin for error.
