Nords said:
This really hurts, considering that it's coming from the guy who taught me how to allocate my assets and beat inflation for six decades.
Just back from a week backpacking in the Sierra Nevada -- man I love the ER lifestyle! Don't have the satellite uplink like C-T so have missed out on this long-even-by-our-standards thread.
So Bernstein thinks we should all stay at work? -- guess it explains why he declined to write a blurb for the cover of my book on ER -- Frankly, when it comes to finding someone 'famous' (publisher's request) to write a blurb for a book on ER, you realize that almost anybody famous is working their butt off for a really long time, and has no concept of ER, or particular sympathy for it. So I'd rather by ER than famous, I guess. And I have no interest in keeping up with the Joneses -- have you seen how much they paid for that new BMW?
I do think there is some good news on the SWR front that nobody has hit on yet in this thread-- if you look at almost all the SWR studies, they either take a simple amount in year #1 and adjust it up for inflation every year, regardless of market performance, and/or they use nutty portfolio allocations which have lots of volatility, often involving large percentages of SP500.
If you make a concerted effort to reduce volatility in your portfolio by picking nice low-fee funds from many diffferent equity markets -- small, value, international and oh, sure a bit of those US megacaps which so skew the sp500-- along with bonds (foreign and domestic, high yield and GNMA) and other stuff, possibly outside of funds entirely, (illiquid investments in commercial real estate, commodities, energy, or private businesses), then your SWR calculations will come back very much more favorably than they would from a more volatile portfolio.
Then, if you say 'we all want to stay early retired, so if the market tanks, I'll tighten my belt a little, and maybe even take on a bit of part-time work for some added income", then you can live with an approach that takes a percentage of asset values each year, as opposed to giving yourself steady annual raises despite market performance.
This has the added benefit of giving you a raise if markets go up, something we all like,too.
Actually I modelled all this for my book, with the help of Keith Marbach (zunna.com). We even modelled a rule that lets you take 95% of whatever you gave yourself last year, even if markets tank worse than that, and the cost of this smoothing out was very slight over all the long run (75 year+) data we were using.
Anyway, pull this together and you can be back at your 4%+ withdrawal rate safely over long time periods, with a very high probability of keeping the portfolio intact in real terms, never mind just keeping it from crashing to zero.
So the lesson I take from all this: Keep fishing, keep sailing, keep hanging out in the garden and playing with the kids. Leave the rat race for somebody else.