Dearest Homer, that "would probably be enough" and "you can always" have the strong smell of "hope". More like you have no idea if it would be possible or not, but would live "on a wing and a prayer". Contingency plans that have a little more to back them up would be nice.HomerJ wrote: ↑Fri Sep 01, 2017 5:18 pmYou don't have to cut all the way back to 3%. All the scenarios where 4% fails, people are just assumed to be just blindly pulling 4% pius inflation each year no matter what.gilgamesh wrote: ↑Fri Sep 01, 2017 3:12 pmThis is true if 66.66% of your typical retirement annual expenses is allocated for the 4 vacations. Assuming all 4 big vacations costs the same.HomerJ wrote: ↑Fri Sep 01, 2017 2:28 pmGood post. It's exactly the point I make when people talk about 4% withdrawals and the chance of "failure".bligh wrote: ↑Thu Aug 31, 2017 2:23 pmAwesome podcast. One thing I dont get is why more people dont break their retirement spending down into required and discretionary. I dont see why you couldn't say something like 'Your required spending should be less than 3% of your portfolio (ie. worst case) and your discretionary spendings should not be more than 1.5% of your portfolio."
So in good times you spend 4.5% but in bad times you drop it to 3%. Let's face it, I'm probably not going to be eating out as much or going for that Alaskan cruise when the the next 2008-2009 crash comes along. Vacations, restaurants and such are part of my planned/budgeted retirement expenses, but they are discretionary.
Personally that is what I am planning. Stick with an inflation adjusted 4% withdrawal rate, but make sure that I would be able to live a non-miserable existence on 3% if needed. Plus like, most people, I don't account for Social Security at all. That is just a safety factor built into the numbers. I think it will probably be there when I am eligible for it, but am I willing to depend on it being there? No.
For most of us here, failure doesn't mean you're eating under a bridge. Failure means you may cut back to 2 vacations a year instead of 4 for a few years during a big crash.
Going from 4.5% to 3% is cutting 33.33% cut in expenditure. If that translates into cutting 2 of the 4 vacations, then 4 vacations costs 66.66%
This is why I say it's important actually put it in dollar terms and seeing whether these assumed spending adjustments are possible....trivializing it by saying it's just going from 4 vacations to 2 vacations most likely doesn't apply for most.
Just cutting back enough where you stop taking inflation adjustments for 5-10 years would probably be enough to change the numbers.
Plus, you can always just get a SPIA 15 years in, if a good chunk of your money is gone.
People here are way too conservative. And that's coming from me! I'm already way over on the scaredy cat scale.
People need to recognize there is another risk besides running out of money. The risk of running out of time. Working an extra 3-5 years to get your SWR down to 3% may be a very poor decision.
Agree with you 100% on running out of time. If I could retire 5 years earlier, I be gone, but only if I had a reasonable expectation of actually being able to survive. It would really really suck to quit your job and then have to tell the wife, "Honey, remember when I told you we didn't need to worry about eating cat food? We could just. . . . Well, I was wrong about that. Would you like the seafood pate or the. . . ."