Ben Felix - How to Retire Early (The 4% Rule)

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Freefun
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Ben Felix - How to Retire Early (The 4% Rule)

Post by Freefun » Mon May 11, 2020 5:23 pm

Another good vid from Mr. Felix

https://youtu.be/3BScK-QyWIo
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by YRT70 » Mon May 11, 2020 9:14 pm

Good video. Thanks for sharing.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by PowderDay9 » Mon May 11, 2020 9:35 pm

Liked the video but I think 2.5% withdrawal rate for early retirees is way to conservative. That's covering 40 years assuming all your investments do is keep up with inflation.

I agree with his other points though including US outperformance may not continue, variable withdrawal strategy, etc.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Mon May 11, 2020 9:48 pm

Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Mon May 11, 2020 10:03 pm

geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Triple digit golfer » Mon May 11, 2020 10:05 pm

willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
But what about bond yields being so low?

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Mon May 11, 2020 10:13 pm

Triple digit golfer wrote:
Mon May 11, 2020 10:05 pm
willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
But what about bond yields being so low?
What about it? Bonds have had negative real returns for large swaths of the past, such as 1941-1981. The bond bull market from 1982-2013 seems to have created the myth that it's been historically typical for bonds to have robustly positive returns. IIRC, the real return of sovereign bonds in developed nations over the last ~100 years was only about 1%.

Beyond that, starting bond yields have not been meaningfully predictive of future safe (or perpetual) withdrawal rates for reasonably balanced portfolios. Starting stock valuations have been much more predictive of the same.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Mon May 11, 2020 10:14 pm

Triple digit golfer wrote:
Mon May 11, 2020 10:05 pm
willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
But what about bond yields being so low?
What about’m? Will that stay the same forever? Did it stay the same forever in the 1940s?
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Random Poster » Mon May 11, 2020 10:19 pm

Even though he starts off with a review of the 4% rule using a 50/50 portfolio, he ends up saying that a 100% stock portfolio has a 95% or greater success rate over a 60 year term when the withdrawal rate is 2.5%?

That would seem to be an exceptionally obvious conclusion, but the range of outcomes, as he noted, is quite wide.

I’m not sure what his proposed withdrawal rate is for a 50/50 portfolio, though.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Triple digit golfer » Mon May 11, 2020 10:19 pm

My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Mon May 11, 2020 10:27 pm

Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
Even with lower future expected bond and stock rates, the 4% WR should still work for most retirement periods with >50% equites... nobody knows anything, but we do know the last 100 years of returns
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Mon May 11, 2020 10:31 pm

Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
That's not supported by the historical data. The '4% rule' held up throughout all 30 year periods including those in the 1941-1981 period when bonds had negative real returns.

There's a lot more to safe and perpetual withdrawal rates than expected returns alone.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by YRT70 » Mon May 11, 2020 11:45 pm

geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate.
in backtesting.

That's an incredibly important distinction to make, and it's crucial to his argument.

Not that I believe 2.5% will be necessary in the future, that seems extremely cautious.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by CyclingDuo » Tue May 12, 2020 6:25 am

YRT70 wrote:
Mon May 11, 2020 11:45 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate.
in backtesting.

That's an incredibly important distinction to make, and it's crucial to his argument.

Not that I believe 2.5% will be necessary in the future, that seems extremely cautious.
There's also the novel concept of using one's human capital to produce an income stream. :beer
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by desiderium » Tue May 12, 2020 6:39 am

CyclingDuo wrote:
Tue May 12, 2020 6:25 am
YRT70 wrote:
Mon May 11, 2020 11:45 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate.
in backtesting.

That's an incredibly important distinction to make, and it's crucial to his argument.

Not that I believe 2.5% will be necessary in the future, that seems extremely cautious.
There's also the novel concept of using one's human capital to produce an income stream. :beer
Actually, the last one took me a long time to figure out. After torturing myself with firecalc, i-orp, self-criticism about my spending, and the many arguments about these calculations, I discovered I had saved enough. I could quit my job now and live without lifestyle changes, as long as I could make around half of my current spend (easy in my fortunate situation with part time or contract work).

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Triple digit golfer » Tue May 12, 2020 6:59 am

willthrill81 wrote:
Mon May 11, 2020 10:31 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
That's not supported by the historical data. The '4% rule' held up throughout all 30 year periods including those in the 1941-1981 period when bonds had negative real returns.

There's a lot more to safe and perpetual withdrawal rates than expected returns alone.
I'm not saying that it didn't hold up. I'm saying that all else equal in the future, lower bond returns will mean a lower safe withdrawal rate than when bond returns are higher.

Now, all else likely won't be equal, but we can't assume that something else will make up for lower expected bond returns.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Wanderingwheelz » Tue May 12, 2020 7:47 am

Triple digit golfer wrote:
Tue May 12, 2020 6:59 am
willthrill81 wrote:
Mon May 11, 2020 10:31 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
That's not supported by the historical data. The '4% rule' held up throughout all 30 year periods including those in the 1941-1981 period when bonds had negative real returns.

There's a lot more to safe and perpetual withdrawal rates than expected returns alone.
I'm not saying that it didn't hold up. I'm saying that all else equal in the future, lower bond returns will mean a lower safe withdrawal rate than when bond returns are higher.

Now, all else likely won't be equal, but we can't assume that something else will make up for lower expected bond returns.
As hard as it is to imagine, today’s low yielding bonds are paying the same real return as what’s been historically typical.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by dwickenh » Tue May 12, 2020 8:22 am

Wanderingwheelz wrote:
Tue May 12, 2020 7:47 am
Triple digit golfer wrote:
Tue May 12, 2020 6:59 am
willthrill81 wrote:
Mon May 11, 2020 10:31 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
That's not supported by the historical data. The '4% rule' held up throughout all 30 year periods including those in the 1941-1981 period when bonds had negative real returns.

There's a lot more to safe and perpetual withdrawal rates than expected returns alone.
I'm not saying that it didn't hold up. I'm saying that all else equal in the future, lower bond returns will mean a lower safe withdrawal rate than when bond returns are higher.

Now, all else likely won't be equal, but we can't assume that something else will make up for lower expected bond returns.
As hard as it is to imagine, today’s low yielding bonds are paying the same real return as what’s been historically typical.
+1
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Tue May 12, 2020 9:28 am

Triple digit golfer wrote:
Tue May 12, 2020 6:59 am
willthrill81 wrote:
Mon May 11, 2020 10:31 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
That's not supported by the historical data. The '4% rule' held up throughout all 30 year periods including those in the 1941-1981 period when bonds had negative real returns.

There's a lot more to safe and perpetual withdrawal rates than expected returns alone.
I'm not saying that it didn't hold up. I'm saying that all else equal in the future, lower bond returns will mean a lower safe withdrawal rate than when bond returns are higher.

Now, all else likely won't be equal, but we can't assume that something else will make up for lower expected bond returns.
Today's 0% real bond yields are notably better than the worst we've seen in U.S. history.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Tue May 12, 2020 9:34 am

willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
"I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery."
Or perhaps one or more of these goals as well:
- costs related to parents
- savings for children
- expenses for select charities
- savings for extended family

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Tue May 12, 2020 10:25 am

smitcat wrote:
Tue May 12, 2020 9:34 am
willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
"I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery."
Or perhaps one or more of these goals as well:
- costs related to parents
- savings for children
- expenses for select charities
- savings for extended family
That's why I said 'most'. However, a 3% withdrawal rate has historically led to the portfolio continuing to grow significantly, resulting in funds to cover all those things. For instance, the year 2000 was the worst starting year for retirees in decades, yet those who made 3% withdrawals from a 60/40 portfolio have 102% of their inflation-adjusted starting balance remaining after 20 years of withdrawals. In all other starting years since at least 1972, retirees would have had significantly more than that 20 years into their withdrawals.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by tea_pirate » Tue May 12, 2020 10:28 am

smitcat wrote:
Tue May 12, 2020 9:34 am
willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
"I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery."
Or perhaps one or more of these goals as well:
- costs related to parents
- savings for children
- expenses for select charities
- savings for extended family
How are all of those line items not "expenses" which should be factored into the initial withdrawal rate?

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by vipertom1970 » Tue May 12, 2020 10:30 am

Will, if a person needs a 1.5% withdraw rate then there is nothing to worry about at a portfolio of 95/5 cash correct ?

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Tue May 12, 2020 10:36 am

vipertom1970 wrote:
Tue May 12, 2020 10:30 am
Will, if a person needs a 1.5% withdraw rate then there is nothing to worry about at a portfolio of 95/5 cash correct ?
The worry in that situation wouldn't be running out of money. The potential concern would be the regret in having kept working at a job you didn't love in order to accumulate at least twice as large of a portfolio as you needed to. A 1.5% withdrawal rate requires double the portfolio size of a 3% withdrawal rate. Someone who could have implemented a 3% withdrawal rate in the year 2000, had a 20% saving rate, and had a 60/40 AA would not have been able to implement a 1.5% withdrawal rate until September of 2017. That's a really big opportunity cost for most people.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by JoMoney » Tue May 12, 2020 10:54 am

There's always "something" to worry about. The more you have, the more you have to lose.
As far as SWR's go, a TIPs ladder amortized over remaining life expectancy is almost "risk free", and I would suggest a SWR lower than that is overly conservative.
Felix doesn't say a precise age his rate is for, but if under age 40 it probably is a reasonable, but very conservative estimate.

Using a rough life-expectancy of age 85 for those 60 and under, and a 0% real return on TIPs, that would suggest
For a 60 year old, 85-60= 25 years, x / 25 = 4% of x
For a 50 year old, 85-50= 35 years, x / 35 = roughly 3% of x
For a 40 year old, 85-40= 45 years, x / 45 = roughly 2.5% of x

For those willing to take some risk above TIPs, it's not unthinkable of earning more than 0% real, but it is more risky.
One could also work into this SWR expectations of Social Security, and the ability to exchange remainder of portfolio for a SPIA at some point, which would insure the SWR against longevity.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by HomerJ » Tue May 12, 2020 11:00 am

Triple digit golfer wrote:
Tue May 12, 2020 6:59 am
willthrill81 wrote:
Mon May 11, 2020 10:31 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
That's not supported by the historical data. The '4% rule' held up throughout all 30 year periods including those in the 1941-1981 period when bonds had negative real returns.

There's a lot more to safe and perpetual withdrawal rates than expected returns alone.
I'm not saying that it didn't hold up. I'm saying that all else equal in the future, lower bond returns will mean a lower safe withdrawal rate than when bond returns are higher.

Now, all else likely won't be equal, but we can't assume that something else will make up for lower expected bond returns.
Sure, sure...

But when bond returns were higher, the safe withdrawal rate was 6%-7%.

If we were telling people to pull 6%-7% with today's low bond returns, we'd be wrong to do so...

But we never say that... We never assume good returns when talking about 4% withdrawals.. 4% represents the WORST times in the past.

And 4% worked in the past with low bond returns.

Nothing guaranteed going forward, but it's a solid place to start, and good bond returns are not required for it to work.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Triple digit golfer » Tue May 12, 2020 11:06 am

HomerJ wrote:
Tue May 12, 2020 11:00 am
Triple digit golfer wrote:
Tue May 12, 2020 6:59 am
willthrill81 wrote:
Mon May 11, 2020 10:31 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:19 pm
My point is that with lower future expected bond returns than the last 40 years, the withdrawal rate of an X% stock portfolio won't be as safe as it was in the past. A lower withdrawal rate will likely be required.
That's not supported by the historical data. The '4% rule' held up throughout all 30 year periods including those in the 1941-1981 period when bonds had negative real returns.

There's a lot more to safe and perpetual withdrawal rates than expected returns alone.
I'm not saying that it didn't hold up. I'm saying that all else equal in the future, lower bond returns will mean a lower safe withdrawal rate than when bond returns are higher.

Now, all else likely won't be equal, but we can't assume that something else will make up for lower expected bond returns.
Sure, sure...

But when bond returns were higher, the safe withdrawal rate was 6%-7%.

If we were telling people to pull 6%-7% with today's low bond returns, we'd be wrong to do so...

But we never say that... We never assume good returns when talking about 4% withdrawals.. 4% represents the WORST times in the past.

And 4% worked in the past with low bond returns.

Nothing guaranteed going forward, but it's a solid place to start, and good bond returns are not required for it to work.
Thanks for clarifying. My plan, which is 15 years away and can certainly go far better or far worse than expected, is to retire at age 50 with a 50/50 portfolio and withdraw 3.5% per year forever. Of course, health insurance is the big question. Regardless, from the above chart and the Trinity Study, a 50/50 portfolio and withdrawal rate of 3.5% should have us not running out of money until 90 with 98% certainty or 100 with 93% certainty. Again, no guarantees, obviously.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by dkturner » Tue May 12, 2020 11:12 am

geerhardusvos wrote:
Mon May 11, 2020 10:14 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:05 pm
willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
But what about bond yields being so low?
What about’m? Will that stay the same forever? Did it stay the same forever in the 1940s?
No, but it did for the rest of your life if you retired in the 1940s, so bond total returns don’t have to be low forever to rain on your parade. For the 41 year period of 1941-1981 the real annualized total return of 10 year Treasuries was a negative 2.25%. A 50/50 equity/fixed Income allocation would have delivered a 2% real annualized return. Timing is everything when it comes to your retirement date.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by willthrill81 » Tue May 12, 2020 11:13 am

dkturner wrote:
Tue May 12, 2020 11:12 am
geerhardusvos wrote:
Mon May 11, 2020 10:14 pm
Triple digit golfer wrote:
Mon May 11, 2020 10:05 pm
willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
But what about bond yields being so low?
What about’m? Will that stay the same forever? Did it stay the same forever in the 1940s?
No, but it did for the rest of your life if you retired in the 1940s, so bond total returns don’t have to be low forever to rain on your parade. For the 41 year period of 1941-1981 the real annualized total return of 10 year Treasuries was a negative 2.25%. A A 50/50 equity/fixed Income allocation would have delivered a 2% real annualized return. Timing is everything when it comes to your retirement date.
And yet the '4% rule' held up throughout that period, providing definitive proof that you don't even need positive, much less robustly 'good', returns from bonds in order for that withdrawal rate to work.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by tvubpwcisla » Tue May 12, 2020 11:14 am

What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
Stay invested my friends.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Tue May 12, 2020 11:18 am

tea_pirate wrote:
Tue May 12, 2020 10:28 am
smitcat wrote:
Tue May 12, 2020 9:34 am
willthrill81 wrote:
Mon May 11, 2020 10:03 pm
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery.

Since 1970, the perpetual withdrawal rate for a 60/40 portfolio has been 3.5%. And had the retiree followed Bogle's advice for the infamous endowment fund and moved a measly 5% of the allocation from stock into gold, the PWR would have been 3.7%.
"I agree. Anything lower than a 3% withdrawal rate is 'recklessly conservative' for most early retirees, IMHO, unless one of their financial goals is to be the Scrooge McDuck of the cemetery."
Or perhaps one or more of these goals as well:
- costs related to parents
- savings for children
- expenses for select charities
- savings for extended family
How are all of those line items not "expenses" which should be factored into the initial withdrawal rate?
I guess they could all be somehow estimated as 'expenses' but they are not typically considered as SWR expenses - specifically when you are years or decades away from retirement.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by BW1985 » Tue May 12, 2020 11:36 am

Never heard of Ben Felix. Is he pretty well known/respected in the investment community?
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ValuationsMatter » Tue May 12, 2020 12:52 pm

I'd always liked the idea of a 3% non-fixed non-CPI adjusted withdrawal rate as a planning factor. For my goals, it's achievable, conservative, and may even allow for significant growth if there are no major shocks. What I like is that such a portfolio can withstand a great deal of headwind, allows for the occasional splurge, and if paired with an annual income goal that is comfy, then one can absorb market shocks in stride.

I like redundancy. So, I hope to hedge with a Gov't pension. I don't count social security. I don't count on any supplemental income or windfall.

I set an annual goal for FI in my 20s that now equates to about $75k/yr. Modest, but enough to enjoy an active life. That necessitates $2.5M in the portfolio. Or some offset with the pension.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by reln » Tue May 12, 2020 1:36 pm

The worst times in the most successful stock market in the world is not representative of what can happen.

The 4% rule fails in out of sample tests.

The 4% rule ignores taxation, investment costs, account value, valuations, increasing or decreasing life expectancy, the impact of non financial assets, and behavior.

No w/d strategy of the form "X% inflation adjusted" can be both safe AND efficient.

If X = 0% or less, I'll conceed it's safe it is but not efficient.

If X > 0%, it's not safe because of sequence risk can make the initial 4% into 8% in year 2, 16% in year 3, etc and there is no guarantee that the financial assets will recover. If it were guaranteed there would be no risk premium.

Like he very briefly alluded, safe and efficient w/d strategies are mathematically complex and require many years of maths and financial education to understand. For example, if you cannot construct a stochastic model with dynamic copulas and Markov chains, you cannot correctly analyze this problem.

But an approximately good solution is one that at minimum updates based on your new account value and life expectancy (ie, using the IRS LE tables).

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ValuationsMatter » Tue May 12, 2020 1:49 pm

reln wrote:
Tue May 12, 2020 1:36 pm
Like he very briefly alluded, safe and efficient w/d strategies are mathematically complex and require many years of maths and financial education to understand. For example, if you cannot construct a stochastic model with dynamic copulas and Markov chains, you cannot correctly analyze this problem.

But an approximately good solution is one that at minimum updates based on your new account value and life expectancy (ie, using the IRS LE tables).
Nice post and conclusion. I can do/have done markov chains and a lot of stochastic modeling. I've never heard the term dynamic copulas, but I appreciate the math homework! ;-)

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Leesbro63 » Tue May 12, 2020 11:43 pm

tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by tvubpwcisla » Wed May 13, 2020 6:40 am

Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
Stay invested my friends.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ScubaHogg » Wed May 13, 2020 6:53 am

tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
A 4% withdrawal rate of a $900,000 portfolio (ie, $3000/mo) is mathematically the same in terms of failure rate as a 4% WD of a $1.5M portfolio (ie, $5000/mo). The failure rate is the same, all else being equal.
“There is no problem so bad you can’t make it worse.” - Chris Hatfield, Astronaut mantra

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by tvubpwcisla » Wed May 13, 2020 7:03 am

ScubaHogg wrote:
Wed May 13, 2020 6:53 am
tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
A 4% withdrawal rate of a $900,000 portfolio (ie, $3000/mo) is mathematically the same in terms of failure rate as a 4% WD of a $1.5M portfolio (ie, $5000/mo). The failure rate is the same, all else being equal.
In your example, when you retire with $900,000.00 that is all you have. That is what you accumulated with your investments over your lifetime. So, if you have a portfolio of $900,000.00 when you retire (ie, $3,000/mo / 4% WR) and your bills are $2,000.00 per month vs $5,000.00 per month, the investor with bills of $5,000.00 per month would run out of money first. What am I missing? Can you please explain how having lower monthly expenditures will not affect the success or failure of the 4% WR? If what you are saying is true, that means I can have monthly expenditures of $10,000.00 per month on a $3,000.00 per month withdrawal rate and be fine. Something is not adding up? Seems like I would run out of money very fast.
Stay invested my friends.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by Leesbro63 » Wed May 13, 2020 7:25 am

tvubpwcisla wrote:
Wed May 13, 2020 7:03 am
ScubaHogg wrote:
Wed May 13, 2020 6:53 am
tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
A 4% withdrawal rate of a $900,000 portfolio (ie, $3000/mo) is mathematically the same in terms of failure rate as a 4% WD of a $1.5M portfolio (ie, $5000/mo). The failure rate is the same, all else being equal.
In your example, when you retire with $900,000.00 that is all you have. That is what you accumulated with your investments over your lifetime. So, if you have a portfolio of $900,000.00 when you retire (ie, $3,000/mo / 4% WR) and your bills are $2,000.00 per month vs $5,000.00 per month, the investor with bills of $5,000.00 per month would run out of money first. What am I missing? Can you please explain how having lower monthly expenditures will not affect the success or failure of the 4% WR? If what you are saying is true, that means I can have monthly expenditures of $10,000.00 per month on a $3,000.00 per month withdrawal rate and be fine. Something is not adding up? Seems like I would run out of money very fast.
You’re mixing the concept of how long a portfolio will last, with the behavioral aspect of living below your means. There are lots of stories of people retiring on $1million per year going broke, as well as stories about people retiring happily and comfortably on $50,000 per year (even less) till death in their 90’s.

The need to live at or below your means is required at every level for a portfolio to be sustainable for 30+ years. And “your means” has come to be understood as 4%, or less, of a diversified portfolio (plus Social Security and other non-portfolio income like pensions).
Last edited by Leesbro63 on Wed May 13, 2020 7:33 am, edited 5 times in total.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Wed May 13, 2020 7:26 am

tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
Expenses as a ratio of portfolio and fixed income does matter but expenses relative to just expenses means very little.
If your only goal is to have low expenses it should be quite straightforward and easily achieved.
Certainly not anything near any of our goals...

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by tvubpwcisla » Wed May 13, 2020 7:30 am

smitcat wrote:
Wed May 13, 2020 7:26 am
tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
Expenses as a ratio of portfolio and fixed income does matter but expenses relative to just expenses means very little.
If your only goal is to have low expenses it should be quite straightforward and easily achieved.
Certainly not anything near any of our goals...
Thanks, that makes sense. Appreciate the clarification. I am going to mix a low WR (2.5 - 3%) with low expenses (< $3,000.00 per month) to leave as much money as possible for future generations of my family and meaningful charitable causes. I'm going to do with less so others can have more.
Stay invested my friends.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Wed May 13, 2020 7:32 am

tvubpwcisla wrote:
Wed May 13, 2020 7:30 am
smitcat wrote:
Wed May 13, 2020 7:26 am
tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
Expenses as a ratio of portfolio and fixed income does matter but expenses relative to just expenses means very little.
If your only goal is to have low expenses it should be quite straightforward and easily achieved.
Certainly not anything near any of our goals...
Thanks, that makes sense. Appreciate the clarification. I am going to mix a low WR (2.5 - 3%) with low expenses (< $3,000.00 per month) to leave as much money as possible for future generations of my family and meaningful charitable causes. I'm going to do with less so others can have more.
"I'm going to do with less so others can have more"
If that is what is important to you - I would have a solid plan to ensure that the funds get to where you want them to.

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by tvubpwcisla » Wed May 13, 2020 7:34 am

smitcat wrote:
Wed May 13, 2020 7:32 am
tvubpwcisla wrote:
Wed May 13, 2020 7:30 am
smitcat wrote:
Wed May 13, 2020 7:26 am
tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm


The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
Expenses as a ratio of portfolio and fixed income does matter but expenses relative to just expenses means very little.
If your only goal is to have low expenses it should be quite straightforward and easily achieved.
Certainly not anything near any of our goals...
Thanks, that makes sense. Appreciate the clarification. I am going to mix a low WR (2.5 - 3%) with low expenses (< $3,000.00 per month) to leave as much money as possible for future generations of my family and meaningful charitable causes. I'm going to do with less so others can have more.
"I'm going to do with less so others can have more"
If that is what is important to you - I would have a solid plan to ensure that the funds get to where you want them to.
Thanks, that is good advice.
Stay invested my friends.

cherijoh
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by cherijoh » Wed May 13, 2020 7:52 am

geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I think it depends on what you have thrown into your retirement budget. If you were already using a bare-bones budget (as we sometimes see posted when someone in their early 50's is laid off unexpectedly and wants to completely retire), I personally wouldn't be satisfied with a 70% success rate. The consequences of being wrong (i.e., running out of money vs. doubling your portfolio) are not equivalent.

On the other hand, we also see some of the one more year (OMY) crowd posting about padding their budget with 40% discretionary spending and then worrying that they can't retire on a 2.5% withdrawal rate (for the padded budget). If your retirement budget is super generous, then a projected 70% success rate is fine. If your portfolio is tanking, you have plenty of discretionary spending to trim. This is also true for those close to retirement who ignore the impact of SS and extrapolate their early retirement withdrawal rate for their entire retirement.

The most important thing IMO is that if you are going to use a more aggressive withdrawal rate is to make sure that you have adequately accounted for early retiree healthcare, taxes, and irregular expenses (e.g., home repairs and replacing your car).

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geerhardusvos
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by geerhardusvos » Wed May 13, 2020 8:13 am

cherijoh wrote:
Wed May 13, 2020 7:52 am
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I think it depends on what you have thrown into your retirement budget. If you were already using a bare-bones budget (as we sometimes see posted when someone in their early 50's is laid off unexpectedly and wants to completely retire), I personally wouldn't be satisfied with a 70% success rate. The consequences of being wrong (i.e., running out of money vs. doubling your portfolio) are not equivalent.

On the other hand, we also see some of the one more year (OMY) crowd posting about padding their budget with 40% discretionary spending and then worrying that they can't retire on a 2.5% withdrawal rate (for the padded budget). If your retirement budget is super generous, then a projected 70% success rate is fine. If your portfolio is tanking, you have plenty of discretionary spending to trim. This is also true for those close to retirement who ignore the impact of SS and extrapolate their early retirement withdrawal rate for their entire retirement.

The most important thing IMO is that if you are going to use a more aggressive withdrawal rate is to make sure that you have adequately accounted for early retiree healthcare, taxes, and irregular expenses (e.g., home repairs and replacing your car).
If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%.
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by sleepysurf » Wed May 13, 2020 8:16 am

BW1985 wrote:
Tue May 12, 2020 11:36 am
Never heard of Ben Felix. Is he pretty well known/respected in the investment community?
He's an Advisor/Portfolio Manager for a Canadian firm (see... https://www.pwlcapital.com/profile/benjamin-felix/) that advocates passive funds with factor tilts. He has a "Boglehead-ish" YouTube channel (https://www.youtube.com/channel/UCDXTQ8 ... QxA/videos) where he succinctly explains key investing topics, and also co-hosts (with colleague Cameron Passmore) a weekly podcast that is likewise extremely informative... https://rationalreminder.ca/

IMHO, he would be a superb guest for the Bogleheads on Investing podcast.
Retired 2018 | ~50/45/5 (partially sliced and diced)

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by ScubaHogg » Wed May 13, 2020 9:28 am

tvubpwcisla wrote:
Wed May 13, 2020 7:03 am
ScubaHogg wrote:
Wed May 13, 2020 6:53 am
tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm
tvubpwcisla wrote:
Tue May 12, 2020 11:14 am
What Ben forget to mention in his video, which was great by the way, is to keep your expenses low.

If you go into retirement with monthly bills of $3,000.00 per month vs $5,000.00 per month you have a much better chance of being successful regardless of the withdrawal rate that you chose.

Thanks for sharing the video.

:moneybag
The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
A 4% withdrawal rate of a $900,000 portfolio (ie, $3000/mo) is mathematically the same in terms of failure rate as a 4% WD of a $1.5M portfolio (ie, $5000/mo). The failure rate is the same, all else being equal.
In your example, when you retire with $900,000.00 that is all you have. That is what you accumulated with your investments over your lifetime. So, if you have a portfolio of $900,000.00 when you retire (ie, $3,000/mo / 4% WR) and your bills are $2,000.00 per month vs $5,000.00 per month, the investor with bills of $5,000.00 per month would run out of money first. What am I missing? Can you please explain how having lower monthly expenditures will not affect the success or failure of the 4% WR? If what you are saying is true, that means I can have monthly expenditures of $10,000.00 per month on a $3,000.00 per month withdrawal rate and be fine. Something is not adding up? Seems like I would run out of money very fast.
Yes, obviously if someone has a 900,000 portfolio and spends 3000/mo it's going to last longer than the same portfolio will at 5000/mo. But that's not what we are talking about. We are talking about withdrawing 4% of a portfolio. 4% doesn't care how big the portfolio is, it's always 4%.

In your first example the person withdrawing 4% of a 1.5M portfolio is withdrawing 5000/mo. With regards to failure rate, that's mathematically the same thing as 4% of a $900,000 portfolio (ie, 3000/mo).

To put it another way, three people withdrawing 3000/mo of a 900,000 portfolio, 5000/mo of a 1.5M portfolio, and 10,000/mo of a 3M portfolio all have the exact same probability of running out of money, all else being equal.
“There is no problem so bad you can’t make it worse.” - Chris Hatfield, Astronaut mantra

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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by smitcat » Wed May 13, 2020 9:28 am

geerhardusvos wrote:
Wed May 13, 2020 8:13 am
cherijoh wrote:
Wed May 13, 2020 7:52 am
geerhardusvos wrote:
Mon May 11, 2020 9:48 pm
Interesting how he even admits that 40 years still has close to 90% success rate. For most retirees, that’s pretty good. I personally am comfortable with anything above 70 to 80% on firecalc. In the video he references early retirement now analysis. With a 75/25 Portfolio, there really is excellent historical success with a 4% rule even beyond 30 years. Even without my ability to earn a little income, it is historically overwhelmingly safe. Even with current high stock valuations, a 3.5% withdrawal rate as an example, should be plenty safe for a 40 to 50 year retirement horizon when having at least 50% stocks. Things are crazy in the world right now, but I fail to see how we won’t continue to have at least reasonable market returns over long periods of time. He even admitted that the World portfolio supports a 3.5% withdrawal rate...

2.5% WR is way too conservative. You are way more likely to double your portfolio than you are to run out of your money at that rate...
I think it depends on what you have thrown into your retirement budget. If you were already using a bare-bones budget (as we sometimes see posted when someone in their early 50's is laid off unexpectedly and wants to completely retire), I personally wouldn't be satisfied with a 70% success rate. The consequences of being wrong (i.e., running out of money vs. doubling your portfolio) are not equivalent.

On the other hand, we also see some of the one more year (OMY) crowd posting about padding their budget with 40% discretionary spending and then worrying that they can't retire on a 2.5% withdrawal rate (for the padded budget). If your retirement budget is super generous, then a projected 70% success rate is fine. If your portfolio is tanking, you have plenty of discretionary spending to trim. This is also true for those close to retirement who ignore the impact of SS and extrapolate their early retirement withdrawal rate for their entire retirement.

The most important thing IMO is that if you are going to use a more aggressive withdrawal rate is to make sure that you have adequately accounted for early retiree healthcare, taxes, and irregular expenses (e.g., home repairs and replacing your car).
If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked. Because then when retirement income like pensions or SS kicks in, they are even more golden. But even without that considered they are very likely OK with a equity portfolio greater than 50%.
Agree with Cherijoh , a clear post

"If someone is in their 50s and they have 25X their living expenses (even bare bones), they are financially independent, free and clear, no questions asked."
50's and 25X are very typically too light with a couple.

"Because then when retirement income like pensions or SS kicks in, they are even more golden"
There are folks without these plans ,or very small benefits.

"But even without that considered they are very likely OK with a equity portfolio greater than 50%."
On a strict 25X they are not - perhaps if you conclude that it is an acceptable risk to run out of money based on past returns then that is fine but its not likely OK.

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tvubpwcisla
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Re: Ben Felix - How to Retire Early (The 4% Rule)

Post by tvubpwcisla » Wed May 13, 2020 9:31 am

ScubaHogg wrote:
Wed May 13, 2020 9:28 am
tvubpwcisla wrote:
Wed May 13, 2020 7:03 am
ScubaHogg wrote:
Wed May 13, 2020 6:53 am
tvubpwcisla wrote:
Wed May 13, 2020 6:40 am
Leesbro63 wrote:
Tue May 12, 2020 11:43 pm


The dollar amount of your expenses has nothing to do with whether a 4% SWR will survive 30 years or not. That being said, a lot of BH threads now acknowledge that it’s unrealistic to mechanically take 4%, inflation adjusted, for 30 years. Having room to trim your budget makes things feel better when times get tough.
I disagree. I have seen countless number of investor withdrawal rates fail because they spend too much; even some as low as 3%. In fact, it is the number one reason people run out of money in retirement. I find it very important to keep your monthly expenditures as low as possible.
A 4% withdrawal rate of a $900,000 portfolio (ie, $3000/mo) is mathematically the same in terms of failure rate as a 4% WD of a $1.5M portfolio (ie, $5000/mo). The failure rate is the same, all else being equal.
In your example, when you retire with $900,000.00 that is all you have. That is what you accumulated with your investments over your lifetime. So, if you have a portfolio of $900,000.00 when you retire (ie, $3,000/mo / 4% WR) and your bills are $2,000.00 per month vs $5,000.00 per month, the investor with bills of $5,000.00 per month would run out of money first. What am I missing? Can you please explain how having lower monthly expenditures will not affect the success or failure of the 4% WR? If what you are saying is true, that means I can have monthly expenditures of $10,000.00 per month on a $3,000.00 per month withdrawal rate and be fine. Something is not adding up? Seems like I would run out of money very fast.
Yes, obviously if someone has a 900,000 portfolio and spends 3000/mo it's going to last longer than the same portfolio will at 5000/mo. But that's not what we are talking about. We are talking about withdrawing 4% of a portfolio. 4% doesn't care how big the portfolio is, it's always 4%.

In your first example the person withdrawing 4% of a 1.5M portfolio is withdrawing 5000/mo. With regards to failure rate, that's mathematically the same thing as 4% of a $900,000 portfolio (ie, 3000/mo).

To put it another way, three people withdrawing 3000/mo of a 900,000 portfolio, 5000/mo of a 1.5M portfolio, and 10,000/mo of a 3M portfolio all have the exact same probability of running out of money, all else being equal.
Thanks for that explanation. 100% agree. Appreciate it!

:sharebeer
Stay invested my friends.

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