My strategy is to live off of my social security and an enjoyable part-time job for as long as I can so I don't have to touch my modest 401k until I'm over 70.
For me the 4% is just an arbitrary budget number on a spreadsheet. As Josh alluded to you need a starting point. Some years/months it will be more and other times it will be less. The goal is to live comfortably, enjoy retirement and not having to eat cat food for dinner nor lighting cigars with 100-dollar bills. If there is some left over after we are gone so be it however, I won't lose eternal sleep if there isn't.
You can adjust your asset allocation so you don't have to sell stocks in a down market, but you can't do much to lower the rate of inflation ( other than paying off house and cars , lowering your personal rate of inflation).
My money on the market averages 12% a year. I wouldn’t take 12% a year but I will take more than 4%. I have a bucket system and can adjust in down years.
The problem is assuming that people are able to achieve standard results in the market. This is not the case. Most people achieve far under the average market results. This is especially true if you have a financial advisor who is not a fiduciary and will charge you commissions.
Could not agree more. I should have retired 5 years earlier and need to learn how to spend more. But making money is my hobby right now for some reason. LOL
Someone needs to do a study on inflation adjusted, REAL retirement spending in households with a paid off house. Once you account for the fact people spend a lot less during the middle years of retirement, and the fact that inflation does not affect those with paid off homes and vehicles nearly as much, I bet the true safe withdrawal rate is over 6%.
No amount of 'models' based on historic data will accurately predict what is actually going to happen. So I think realizing that all our plans are simply a 'best' guess' and that we will have to be flexible and see what happens is the way to go. If you happen to retire just before a 5-10 year period of stagflation hits globally, it won't matter how good you 'plan' was -- you are likely to not have a very comfortable retirement. ps. When looking at how someone who retired in '72 fared compared to someone who retired in '74 I think you also need to allow for the impact of those two years on the retirement savings of the person who retired in '74. You can't just assume the same starting amount (eg. $1MM). If someone was sitting two years out from retirement in '72, they would also have seen their 'nest egg' drop in real terms during their last two working years (as by that stage contributions have the least impact compared to investment returns on retirement savings in most cases). So, even though they weren't yet in the retirement/withdrawal phase (so impact of negative real returns isn't as bad), they still would have probably started their retirement with LESS (in real terms) in '74 compared to if they had retired in '72. So just comparing the same starting values for retiring in '72 vs '74 probably overestimates the real impact of sequence of return risk in those two cases.
It's soo reassuring to know how truly safe the 4% rule is. Basically, once retired (even early retirement in your 40/50s), if you can have $1,000,000 invested in the stock market and live off $40,000 per year adjusted for inflation every year, you can do this FOREVER pretty much 100% of the time! Here's to FIRE and the road to riches.
This is one of the best videos you have produced THANK YOU I would appreciate viewers thoughts on variable withdraw rate, spending more in first 10 years then reducing to a lower withdraw rate?
Even though I know this to be true, having retired only two years ago, I am still hesitant to spend more due to sequence of return risk and longevity. However, I am not living on cat food😂
If you save up enough for retirement that you can buy an indexed lifetime annuity that will provide enough retirement income in perpetuity, this eliminates both sequence of return and longevity risk. Makes things easy for those of us who have a lifetime of moderate spending rates behind us. Retirement sucks if you have spent your entire working life spending lots and saving little. There is a reason it is called 'delayed gratification'. Isn't there an old 'grasshopper and squirrel' parable about this? ;)
exactly,spend at least 5% or more,especially if u have 3 or 4 years worth out of the markets,the average person needs to stop worrying about this,just use what the lord gave u,its called a brain , if your wondering.
odds are anyone retiring this year is likely to experience this dreaded sequence of returns scenario. The big market drop is coming soon. It's way overdue.
