But one way to think of this is, if you accept a (say) 3.5% WR from using FIRECALC, you are roughly expecting a 3.5% real return. Yes, roughly, as the portfolio end point will often be significantly higher or lower than the starting point. Ballpark.
-ERD50
I see where you're going but a bit of a stretch since the end point will be higher or lower than the starting point in 100%, or near 100%, of the cases. And if you accept a 3.5% WR using FireCalc, you're actually expecting less than a 3.5% real return because with FireCalc surviviability achieved by depleting capital is OK.
Right. The 'roughly', '
roughly', 'significantly higher', and 'ballpark' where supposed to convey that. I probably would have been better with the actual point that there is no single 'real return' number to capture it.
However, it got me thinking. Now this is just a data point for reference, it doesn't really mean anything since there is no volatility anywhere, but I threw together a spreadsheet, and assuming totally flat responses, here's what it would take to run the portfolio just down to zero in the final year (I may be off by a year or two, depending on what the proper way is to load the spending versus return, but they are consistent for comparison purposes):
4% WR; 30 years, 1.22% real return required
4% WR; 40 years, 2.53% real return required
3.5% WR; 30 years, .32% real return required
3.5% WR; 40 years, 1.75% real return required
And of course, for ZERO real return, you just divide 100 by the years required, so 30 year would be 3.33% WR, 40 year would be 2.50% WR. But no one should assume their portfolio will even keep up with inflation (outside of TIPS, but then you still have tax drag).
I guess that gives some frame of reference for what we would need from a TIPS investment? And then there is that old bugaboo of whether CPI reflects your own personal inflation rate. It's just numbers.
-ERD50