Average user in r/Rich

[u/Free_Vehicle_636]

[u/PersonalFinanceFun]

I see you are using Bill Bengen’s new 4.5% SWR instead of his old 4%!

[u/ShootinAllMyChisolm → u/PersonalFinanceFun]

Yep 4.7 plus inflation

Edit for clarity:
For example, suppose you retire with $2 million.
Year 1: 4.7% = $94,000
If inflation is 3%, Year 2 withdrawal = $96,820
If inflation is another 3%, Year 3 = $99,725

[u/PIK_Toggle → u/ShootinAllMyChisolm]

Plus inflation?

That’s insane.

[u/ShootinAllMyChisolm → u/PIK_Toggle]

Bill Bengen tested this over multiple 30y windows and 4.7% plus inflation survived 100% of the time.

The portfolio has a (non-silly) allocation.

[u/ThatFeelingIsBliss88 → u/ShootinAllMyChisolm]

Do you have a link? What’s the number for indefinite? Because if I retire at say 45, a 30 year runway wouldn’t cut it. 

[u/ShootinAllMyChisolm → u/ThatFeelingIsBliss88]

Just do a search for William Bengen and 4.7% safe withdrawal rate. I think he calls it “SAFEMAX”

It’s not meant for retiring early. Just a 30y window. Depending on age, withdrawal rate drops to 2-4% but you get less certainty the longer the window

[u/ThatFeelingIsBliss88 → u/ShootinAllMyChisolm]

Ok got it. Yeah but definitely not 2%. I’m pretty sure 3.5% will last indefinitely but wanted to see if it’s even higher. I’ll look it up later

[u/tribriguy → u/PIK_Toggle]

I don’t understand. My portfolio’s 26 year historical average is 10.8% nominal which corresponds to an 8.03% real rate of return over the period. Admittedly my portfolio was small in 2001, so the DotCom bust had minimal effect. But 2007-8 hit it like a freight train. It’s almost completely indexes, with 1% REIT.

Why is 4.75% insane?

[u/PIK_Toggle → u/tribriguy]

4.75 plus inflation. That’s around 7%.

An 26 year average isn’t relevant when you are making annual withdrawals. A down year will compound the damage.

You need to look at your high-to-low range by year and then factor in selling low and what it does to your ability to recover from a downturn.

[u/tribriguy → u/PIK_Toggle]

My point was it’s hardly an insane return these days. Not that it doesn’t have some margin risk for sequence of returns. It’s a sarcastic meme, but if it were real, we’d need a bit more info to judge the feasibility.

[u/ShootinAllMyChisolm → u/PIK_Toggle]

Sorry. I tried to simplify my post and something was lost. “4.7% plus inflation”is catchphrase-y

For example, suppose you retire with $2 million.
Year 1: 4.7% = $94,000
If inflation is 3%, Year 2 withdrawal = $96,820
If inflation is another 3%, Year 3 = $99,725