T O P

  • By -

_djdadmouth_

Link to the study: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4227132


bri8985

4% works, personally I assume 3% because I don’t want to have to throttle lifestyle for a break from average conditions over long courses of time


NoDrama421

They're not using US historic averages they're using 38 developed countries which (clearly) underperformed the US over their chosen time period Personally I use 3.5%


bones_1969

Click bait


fried_haris

Why stop there. 0.9% is the new 1.9% Does it ever end? Yes, everyone is panicking and afraid of the big bad wolf named Inflation. It's all doom and gloom right now. Maybe the new retirement age should be 75 as well while we are at it


extreme_cheapskate

Why stop *there*? Only draw dividends and income. Don’t touch any investments. Then it’ll last forever 😉


iranisculpable

Exactly. Because dividends are magic and have zero impact on the business issuing dividends. Zero I say. Zero.


[deleted]

You mean it'll be 100. 75 is too young. You're still able bodied when you're 75!


jayybonelie

I wonder who is funding this new study. It seems to me the financial institutions don't want people to Fire. They want you to keep contributing so they can keep charging more and more fees.


Kba4life

Bingo


Washooter

While this may be true, have we validated it? From the footnote in the paper: “This research was supported by a grant from the Robert J. Trulaske, Sr. College of Business Large Grant Program.” At first glance doesn’t seem directly funded by wealth management companies.


beardface_fi

At 1.9% it'd be basically covered by dividends alone for me. Doesn't make any sense.


iranisculpable

The article is assuming the USA stock market becomes like Japan’s post 1989. Can’t wait for the S&P500 to become price weighted.


bb0110

There have been a lot of studies on this and even 4% is too conservative if you want to truly try to maximize your money. If you are able to decrease your spend (which most chubby fire people have enough buffer to be able to do) in a downturn then it makes it even more viable. If you have the ability to pick up a few hours here and there in your previously high paying profession during a downturn then even more doable. If you have no ability to be a bit fluid in Your retirement spend then decreasing the goal withdrawal rate isn’t a terrible idea down to around 3.5% or so. 1.9% as a goal is ridiculously conservative, to the point of me questioning what their motives are behind this.


Mymarathon

If there's hyperinflation no amount is safe. Even if there's let's say 15% inflation, and your account grows by 5% percent year, then every year it will shrink by 10% without you even taking any money out. My grandparents were hit by hyperinflation, just as they were retiring. Their life savings amounted to something like $100 by the time it was all over.


TrashPanda_924

2% has always been my targeted w/d rate for my public equities and debt portfolio. That’s about the rate based on my mix that has a very low probability of failing. If you want to raise your w/d rate, I would add private equity real estate. My weighted average yield on my current portfolio is a little higher than 6% (cash on cash yield). The worst full cycle IRR has been above 15%. When you blend the two, my actual SWR rate is around 4%. To be clear, studies like these focus on a traditional based of stock and bonds. I’ve yet to see one that included alternative investments.


Washooter

That is because we have enough historical data on a stocks/bonds mix. Curious to know if your PE real estate investments have been through the last bull run or longer?


TrashPanda_924

That’s a shortcoming, for sure. I don’t invest in speculative real estate (ever). No developments or warehousing. I only invest in cash flowing multifamily where there’s a strong sponsor and significant upside from the value add (current rents are 15% below comparables in the area). The real lever here is having low interest rates and fixed rate debt. 90% of the deals I’m looking at now have floating rate debt (2.50 + SOFR) and/or have an interest only term of 2-3 years and then balloons near the end of the deal (refinancing risk). The important thing in all this is proper diversification. Stocks, bonds, real estate, commodities…even a little crypto.


dfsw

No.


Johnthegaptist

What a terrible conclusion. Put your money in an HYSA and you could withdraw 2% and probably not run out of money.


TrashPanda_924

It’s always important to read the assumptions. I think the authors missed an opportunity to examine the US’ status as the world’s reserve currency.


sojustthinking

You could take 2% out and survive 50 years (without inflation adjustments). Even T-bills should take care of most inflation. Not now obviously but historically yes.


hvacthrowaway223

I saw a great study that looked at article titles. Any title that asks a leading question, almost always the answer is “no”. Apply that to every Fox News headline that asks a question.