I ask chatGPT to tell me about the 4% withdrawal rule.

[mrfeh]

You must also account for inflation, If you decide you need $40k income after 30 years of 3% inflation, you must accumulate 25 times $97,000 to have the equivalent spending of $40k today.

The 4% guideline takes inflation into account.

 

[Time2]

The 4% guideline takes inflation into account.

But during your accumulation phase it is not accounted for.
If you decide you need to have $40k in today's dollars to retire, but you're not retiring for 36 years from now, you must account for inflation during those 36 years. After that FireCalc handles inflation.

 

[audreyh1]

Seems to me, the 4% is most useful for those people that don't have a large portfolio, They need to maximize their income just to live, pay the rent, electric bill and buy food, i.e. they are on the edge, but also need to be very careful that they don't run out of money before they die. If you have a certain spending to have the lifestyle you want and your portfolio is larger than your (spending / 0.04%) then the 4% guide should just give you confidence that you will not run out of money over 30 years. Making it very useful in both situations. It is also a starting point to give you a number to shoot for in your accumulation phase. You must also account for inflation, If you decide you need $40k income after 30 years of 3% inflation, you must accumulate 25 times $97,000 to have the equivalent spending of $40k today.

Yes exactly, that method is for people who have very rigid fixed expenses and little discretionary spending. It replicates a COLA pension in terms of guaranteed income.

If you have enough to cover a high amount of discretionary spending you have a lot of flexibility to respond to changing market conditions. This is key.