Firecalcs implied 3.59% SWR seems overly conservative....

[brewno]

I very much enjoy playing with the firecalc calculator.

When utilizing the "investigate" option and inputting "100% safe" portfolio value option for the standard portfolio type, it gives an implied safe withdrawal rate of 3.59% for a 30 year withdrawal frame. That seems overly conservative...more conservative than the classic 4% rate often quoted...and certainly more than the more recently promulgated "4.5%" rate proposed by Mr Kitcies, etc.

Any thoughts or opinions about that?

 

[razztazz]

The 4% normally quoted is also understood to be not 100% safe. It's only 95 or 96% safe.


I, personally, am not all that in love with Kitces & Bengen's 4.5% is the new 4% guideline. Sure they wave a lot of numbers and analyses around, but really, everybody does that. Maybe I'm the one being too conservative.

 

[SecondCor521]

Well, assuming that FIREcalc is doing the math correctly, the 3.59% number is what it would have been in the past in order to have the worst 30 year period barely survive (it looks like that sequence ended with $206). Personally I think FIREcalc probably is doing the math correctly, and I don't try to argue with math.

The next two questions are:

1. Do the default values represent my situation? In my case, they don't, so I change the defaults to match my situation as closely as possible. I can get pretty close.

2. Do you think the future will be better or worse than the past, in particular that worst 30 year sequence in FIREcalc? No way to tell of course; our crystal balls are all in the shop. My personal opinion is that it will be slightly better economically, so I use 95% in that investigate tab and see what spending level my inputs would have supported historically.

In my case, the number in (2) is way more than I'm spending now, so I'm working on that.

 

[tulak]

It’s overly conservative until it isn’t.

I’ll probably go with 3.5%. Or maybe some form of VPW: https://www.bogleheads.org/forum/viewtopic.php?f=10&t=120430&sid=4fa3d5d7a0b4fb20df4cced0f9478ca8

 

[OldShooter]

It’s overly conservative until it isn’t. ...

This. The problem is that none of these calculators can predict the future and it is reasonable IMO to believe that the next 30 years will not be like the last 30. In my Adult-Ed investing class I use lighthearted pop quizzes to make some important points. Here is the first one they get:

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The point being, of course, that the consequences of an estimation error are highly asymmetrical. Overestimating is not a big deal while underestimating is.

 

[Dtail]

The 4% WR was based on the concept that it had a 95% success rate. Firecalc agrees with and uses that historical concept.
However, if one wishes for a 100% success rate, then the WR is 3.59% based on historical sequencing.