Safe Withdrawal Rates are rubbish

[Diogenes]

I find it odd that many of the ER critics ("4% rule is rubbish", "you need tons-o-bucs for LTC", "50% stock market drops that never recover" - you know the types) ignore that it is no different than when you are working. When working you could get laid off, you might have to take a pay cut, you don't get a raise just because inflation was 20%, you don't know your future spending, you could get a debilitating disease. That's called life.

The difference is, that being a worker already implies being at the mercy of the employment market. We are contingent, at-will, vulnerable. If [expletive] happens, we promptly react, sometimes acceding to degradation, austerity, humiliation, just to keep bread on the table. The laid-off executive becomes a cab driver, a street-sweeper, a peddler of vegetables from a shopping cart, parked next to the skyscraper that formerly sported his name.

Being a retiree implies insulation from the vagaries of markets or societal forces. It means an aristocratic detachment from the bread-riots and barricades. Retirees might complain that the vegetables aren't as fresh, or the streets aren't as cleanly swept, or the cabs are tardy. But they would never stoop to such degradation as going back to work, let alone in a menial capacity.

 

[FREE866]

I knew a fellow, and he believed he was going to die soon, so he maxed out his credit cards on purpose living it up. Well it turned out he had mis-interpreted or was later found that his condition wasn't so serious that he would probably go another decade or two!

What an idiot

 

[Brett_Cameron]

They're a mental shortcut for ignoring the difficult problem of preparing for an unknown future, and mask over a complexity of decisions that includes at least the following:

Deciding on the length of retirement you want/need to fund. The "rule" usually assumes a 30 year retirement. Is that appropriate for your particular solution? Shouldn't you decide for yourself?

Starting with the "rule" results in an annual spending amount. I think it would be better to start with your actual current spending for a baseline. That way, your lifestyle can drive the decision. Furthermore, if we start with a spending amount, and then incorporate our retirement nest egg, we can divide them to get the years of funded retirement in current dollars. Now, with the years of funded retirement, the problem becomes clearer.

How am I going to grow the funds to make up the difference between the years I have funded and the years I want/need to have funded?

How am I going to ensure my growing funds at least match inflation (in addition to the unfunded years)?

These questions are much more useful to have detailed answers for, as opposed to some discussion about how comfortable you are with such and such success rate in Firecalc.

Thanks for reading my rant ;-)

When I made my plan/projection for retirement, I laid out my projected future spending with expected life changes then evaluated my future income projections to see if it was viable. This included forecasting taxes and use of FIRECALC.