Safe W/D Rate Adjustment

[SecondCor521]

But FIRECalc assumes that that money goes away completely, so even in the face of inflation and even if you held that excess cash at 0% return*, you would still be safer than the case for which FIRECalc solved.



* Although I assume you would have that excess cash earning at least some return that would offset some inflation.

Ah, I misunderstood your last sentence I quoted.

I agree that having extra assets outside of whatever portfolio one puts into FIREcalc make your actual risk safer than what FIREcalc calculates - unless those outside assets have some potential to leak back and destroy your portfolio, it would have to be so. Outside cash certainly does this.

I was setting aside FIREcalc considerations and just looking at the notion of holding cash vs. other investments. In that view, cash does have inflation risk as I noted and may or may not be safer than other options depending on what risks one considers and of course what timeframe a person is looking at.

 

[TheWizard]

I just want to note that withdrawal rate does not and need not equal spending. Rather, supposing you were using FIRECalc as a guide, it is technically the percentage you could "uninvest" from your portfolio every year and still have the same portfolio survival probability, given the asset allocation and inflation parameters you set. Just because you "uninvest" it, however, doesn't mean you must spend it. You could put any you don't spend into cash. To my mind, that can only be safer.

This is especially true for those of us with those of us with majority of portfolio in tax-deferred, hence subject to RMDs at age 72+.

In my case, however, I don't keep the excess in cash. Beyond about $10k in checking, the excess gets reinvested into stock index funds in my taxable account.
There's some risk with that so we'll see how it goes...

 

[Midpack]

My highlighting of your quote from the originator:

So yeah, they actually are saying you can follow their model. And as you highlighted, they also say you may have to or want to make adjustments.

Seems hard to know what the originators really recommend with such conflicting advice. So I took exception to your statement that someone was "using SWR exactly as intended" by doing back of the envelope calculation. You don't even know what those calculations might be.

The discussion is academic to me since I use VPW. I don't like using the Trinity study since there's no real guidance on when to make adjustments.

As I noted they’re on record saying don’t do 4% plus inflation adjusted many times, but your mind is made up so I won’t bother. Now we know why some here misinterpret what SWR mean for future withdrawals.