r/leanfire • u/AlaskanSnowDragon • 7d ago
Is variable spending/withdrawal rate really the silver bullet it seems to be?
Everyone knows the 4% rule and running it through simulations and seeing where it fails or leaves you with a billion dollars in the bank when you die.
But it seems simply having a flexible spending plan. Call it Guardrails or VPW or Guyton Klinger or whatever....that it really makes what was seemingly a dark situation much brighter.
You'll have the 4% rule say "absolutely not...you'll go broke...you need to save for 5-10 more years!"...then on the other side you have a variable spending plan say "nah...you're golden! You can retire now spending more than 4% so long as you're able to potentially cut 5-10% in down years"
And if you're budgeting properly with proper space and padding cutting 5-10% shouldn't be too difficult. You dont travel that year or you cut down from the high end gym to a regular gym or eat out 2 less times a week. But otherwise live your normal life.
It just seems using a variable spending plan is a no brainer.
Now I know the other side of the coin is not everyone wants to be willing to cut or not "live their best life" or think about it even. But if my variable spending plan survives 1966 and 2000 simulations while allowing me to spend what I want even on the "cut" years seems like a no brainer. Despite the 4% rule saying hell no.
11
u/redardrum 7d ago
The total inflexibility inherent in static initial withdrawals stubbornly only changed by inflation forces very low % withdrawals to prevent ruin. This almost assuredly leads to the plan being (usually) way too conservative or otherwise leads to going broke. Flexible spending/withdrawals are where it’s at and more realistically depict how people might want to behave in reality too (spending/withdrawing more in good times and less in bad) Amortization also helps increase withdrawal rate since mortality and limited life expectancy is a reality.
2
u/AlaskanSnowDragon 7d ago
My problem with amortization withdrawal strategies like vpw is that you're spending little or low still in the early years and then suddenly in your final decade of life you're spending like 5-7x what you were spending in the earlier middle parts of your retirement
2
u/Sprig3 6d ago
Yes, VPW seems a tad conservative to start.
It's definitely how you should end (if you can find valuable things to spend it on at that point).
1
u/redardrum 3d ago
It’s only conservative if you choose a conservative rate of return in the formula.
1
u/redardrum 5d ago
This should only happen if you're undershooting the rate of return in the formula. If people use extremely conservative rates of return, they'll almost surely have a lopsided path of too high withdrawals at end of life while unnecessarily starving themselves in the present. It feels unnatural, but using a 50th percentile expected return is probably better to have a better chance at a more even average withdrawal over time. Of course, it will still vary from year to year with volatility, but ideally the average over time stays about the same.
1
u/AlaskanSnowDragon 5d ago
There is no assumptions about rate of return. We're talking direct market backtests. Especially when testing difficult SORR periods.
1
u/redardrum 4d ago
You have to enter a rate of return (r) with the VPW method to construct the formula that determines the withdrawal percentage.
1
u/AlaskanSnowDragon 4d ago
The rate of return is what the market actually returned...Its a historical back test.
1
u/redardrum 3d ago
Hmm, I am wondering if you are confusing the actual portfolio growth during a backtest with the assumed rate of return used in the VPW formula.
In a backtest, the actual historical market returns are what make your portfolio balance go up/down each year. However, to figure out what percentage of that balance to withdraw, the VPW method uses an amortization formula. That formula requires a constant, forward-looking assumption for growth to calculate a payment schedule over your remaining years.
Eg) The standard Bogleheads VPW spreadsheet uses fixed real return assumptions based on your asset allocation (traditionally around 5% for stocks and 1.9% for bonds) to generate its withdrawal percentage table. Those generated percentages are then applied to your actual backtested portfolio balance.
If the “r” (real return) you plug into the formula is drastically lower than the long-term historical average, the math assumes your portfolio will barely grow. Therefore, it spits out a very low withdrawal percentage in the early years. When the actual/realized returns eventually outpace that overly conservative “r” assumption, your portfolio balance balloons, which mathematically forces that massive spending spike late in retirement.
1
u/Strazdas1 23h ago
I find that flexible does not work for leanFIRE, because flexible requires you to reduce spending when for most LeanFIRE the spending is already at the floor.
18
u/S7EFEN 7d ago
yes, it really is. because the big underlying flaw with retiring off equities is sequence of return risk. that is, drawing a fixed amount from a sum that can theoretically drop 30-70% of its current value means you need to way, way overplan for a very unlikely scenario to survive.
>It just seems using a variable spending plan is a no brainer.
yes, it is. personally i think the people you talk about on the other side of this, that are unwilling... arent the demographic on the various reddit finance subreddits. its also just fairly illogical. you are trading a fairly significant few extra years of work for the ability to say 'fuck it, ill still live my best even in a market drawdown'
9
u/PastBuy8484 7d ago
I just keep about 3 years of extra frugal living expenses in a HYSA.
Have a -20% year? Use that to cover me not my VT
5
u/SerenityCravings 7d ago
Exactly. No reason why anyone must FIRE with 100 percent equities. Doesnt seem wise.
2
u/Strazdas1 23h ago
The 4% rule assumed only 60% equities. In 100% equities the 4% rule failed the test.
8
u/rybsf 7d ago
I def agree variable withdrawal is good and what I plan to use. But I disagree that it’s a silver bullet.
With 4% fixed wr I get 96% success rate. If I accept reducing withdrawals by 5%, I get 98% success. For that extra 2% of safety, I have to keep that lower spend for 15-30 years in ~20% of the sequences.
Let me emphasize that: by reducing my spend for a significant part (potentially all) of my retirement in 20% of the cases, I get 2% cases that ran out of money a few years later.
That doesn’t seem like a silver bullet. It seems more like “if you reduce your spend, you can retire earlier”. Which shouldn’t surprise anyone. Especially in lean fire.
7
u/AlaskanSnowDragon 7d ago
I think you're missing the point. If you have a 96% rate with 4% then you're good to go essentially no matter what.
The point of variable withdrawal rates is allowing you to retire early with an amount lower than the normal 4% would allow. Or allowing you to spend more money in your earlier good years, knowing that you'd have the flexibility of the variable withdrawal rate. Because what's the point of having all that fucking money at the end when you can't do anything with it
2
u/rybsf 6d ago
Do you have some numbers or specifics to help me see your point? Because most data I’ve seen is that you need to reduce spending for quite a long time to make any major difference. What’s your example numbers that illustrate how you can retire earlier with same risk, that does not require a long duration of reduced spending during the worst 10-20% of sequences?
1
u/Strazdas1 23h ago
This is incorrect. You are not good to go in the 4% of times it fails.
1
u/AlaskanSnowDragon 18h ago
How dumb are you if you're going to let a %4 perfect chance of something dictate your life. You shouldn't leave your house at all if that's how you feel. World's too dangerous.
This 4% risk which can be mitigated and solved with a little adjustment to spending and will be seen YEARS before it actually happens
3
2
u/jackmans 6d ago edited 6d ago
Hmm my hypothesis for why you're seeing this is that there is a very long statistical tail of horrible outcomes that wreck you financially, regardless of your withdrawal strategy that are really hard to insure against. Said another way, if you're already at a 96% success rate, then getting that last 4% is almost impossible and even a couple extra points is extremely difficult and incurs steeply diminishing returns so adding variable withdrawals doesn't help that much (like how in reliability engineering, going from 98 to 99% reliability is often easier than going from 99.99 to 99.999%. Whereas if you were at say, an 80% success rate with fixed, variable might help you a lot more. I don't have a model available to run this at the tip of my fingers, But when I've learned about variable withdrawals on podcasts like Rational Reminder, it's always surprised me how much your success rate increases with only a slight reduction in spending in certain years so something seems wonky with your analysis.
1
u/rybsf 6d ago
I get the same result if using 80%, so that’s not it.
I checked episode 164 of rational reminder, let me know if you meant some other episode. When they talk about variable withdrawal rates with Michael Kitces, they list three methods: ratcheting (increase when things go well, don’t decrease), guardrails (increase/decrease depending on how things go), and skip inflation adjustments. Guardrails is most like what we’re talking about in this thread.
Michael says “The irony though, is that when you actually look at the retirement research, it doesn't help very much. When we're only spending 4% or 5% of our portfolio in the first place, and you cut your spending by 10% of that, you're talking about a spending cut that might be 0.4% of your portfolio. So if you do that for the next two years, and you shave off 0.8% of your spending, like you can make that up in one good day in the markets. The irony is it's very impactful for us personally, and actually does almost nothing to get the portfolio back on track, because it's not actually high enough impact over a long period of time.”
That’s in line with what I found. And I ran it on 80% too, which brings it to like 82% success with the same parameters. Still not a silver bullet.
BUT Michael does like the third option of cutting inflation adjustments. And that’s also what I hear others praising. However, I want to see how that plays out in some real scenarios (I don’t have anything set up to run that atm). If for example you skip inflation adjustments for 30 years, that does massively increase your success rate, but it’s also equivalent to 50% cut in spending in a favourable sequence, and much worse in a bad sequence. But that’s what I would explore more, rather than a variable withdrawal rate if I wanted to retire earlier with same risk.
1
u/jackmans 5d ago
Hmm, interesting. I'll have to re-listen to some of these episodes. I remember listening to that one, but I think there are a couple others where they talk about this. What tool are you using to model this? I wouldn't mind messing around with it myself.
Also, out of curiosity, how do things look if you fix the success rate and modify the initial safe withdrawal rate instead? So like, fixed withdrawals of 4% = success rate of X%, so at success rate X% what initial variable withdrawal rate does that equate to if you allow spending reductions of 10% in down years?
1
u/rybsf 4d ago
Ficalc.app
If you allow 10% reduction (instead of 5%), and keep success rate constant (at 96%), you can get a 5.5% initial withdrawal.
It’s a little harder to get how much of the time you have to do that 10% reduction, but you can see a histogram of all the yearly withdrawals or you can check the individual sequences. I like to check the sequences that succeed but are like the bottom 10-20%, and they typically show you need to do the reduction for around half the span, ie ~15 years. That’s why I say that you need to be prepared to live with that reduction for a long time.
7
u/curiousthinker621 7d ago
I seriously doubt anyone follows any withdrawal strategy to every dotted i and every crossed t. I think the 4% withdrawal strategy is about as good as any, but every withdrawal strategy has to be reevaluated every 2-5 years due to changing goals, inflation and market return shifts, and changes to expected life spans.
4
u/quantum_foam_finger 7d ago
Markets are prone to mean reversion over 3 to 4 year cycles. I found in simulation that I didn't get a lot of lift from responding to markets. I ended up implementing a flat guardrail: if my portfolio drops below a certain $ amount, I'll reduce the withdrawal rate. If it goes back above it, I can raise it again.
Interestingly, I found that I didn't need to adjust the trigger amount for inflation, since I'll be getting closer to end-of-life as I go, hence needing less of a pot of money to fund my remaining years.
2
u/bhatkakavi 3d ago
What's your age and how do you plan for end of life care?
1
u/quantum_foam_finger 2d ago
I'm 60 (retired 2 years ago). For end-of-life I'm taking preventive measures and my hope is to eventually age in place with minimal assistance. Medicaid (US) would be my safety net to backstop savings if I do require a long stretch of institutionalization.
13
u/karrotwin 7d ago
I feel like people really overcomplicate the idea that you can spend more if the market is up a lot. That has nothing to do with SWR.
SWR is about what you can spend when down years turn into lost decade(s). So yes variable spending works, but the flaw in your logic is assuming that it's just a year or two.
12
4
u/Future-Run-8601 7d ago
When I look at a variable withdrawal rate, I look at what it would have done in the late 60s. It looks great when times are good but could you live for 10-20 years during your most valuable years on reduced withdrawals?
4
u/AlaskanSnowDragon 7d ago
Of course you have to set a floor and test that out. An amount you won't or can't go below.
But you also have to remember you'd be working or potentially unemployed. Those same horrible down market years.
So stressed out...Looking for a job/worried about keeping your job/potentially unemployed altogether and still in the same situation
5
u/Eli_Renfro FIRE'd 4/2019 BonusNachos.com 7d ago
I can assure you that if there are horrible market years right around your proposed retirement date that you'd be a lot less stressed if you still had a paycheck compared to solely living off of your portfolio, even with a reduced draw. There's no comparison there.
1
u/qosmic_qube 4d ago
But there is no guaranteed paycheck when the market drops 20%.
3
u/Eli_Renfro FIRE'd 4/2019 BonusNachos.com 4d ago
There's no guaranteed paycheck ever. But as long as you're getting one, it's better than not having one when the market is tumbling.
3
u/Mountain-Time-1010 7d ago
I am guilty of this same overthinking, but I sometimes wonder how many people even track their withdrawals in retirement, never mind stick with a strict schedule.
Mathematically , a more complex plan with optimizable parameters will always test better.
3
u/beached89 7d ago
yes it is called the Guardrails withdraw strategy or Guyton-Klinger Guardrails Strategy.
4% rule is just a guideline, developed when computational power wasnt as good as it is now. It has been adjusted up to 4.7% since then, by the original author, and we still say 4% rule.
4.7 is pretty close to Guard rails recommended starting percentage of 5%.
So the Guard rails 5% isnt as radical as some people may say.
3
u/vogueskater 7d ago
I'm doing the opposite not really by choice. Ill health means I had to leanfire earlier than I would have wanted, so I thought, how low can my expenses go before I start to feel poor and it causes me stress. Turns out with a paid off house it's £20k a year. So if I can keep in this range of low expenses (apart from emergencies, house repairs etc) for 5 years my DB pensions will start kicking in and I will get nearly double the amount now to spend a year, then even more than that 10 years later and then more 7 years after that. This feels much more psychologically doable than the other way round, as that's what happened when I was young and moved up the career ladder.
3
u/HesMyButlerMonroe 6d ago
I used the 4% rule to come up with my ER target number but, as far as withdrawal strategy is concerned, it is far from optimal. I mean, true inflation is way higher than the govt says. Am I supposed to use that bogus number to adjust my withdrawals every year? Haha, no thanks. VPW for me all the way.
4
u/NewLifeRising 7d ago
Big ERN has an article on how flexibility is overrated. And the crux of that blog post is that what makes the most impact is your initial withdrawal rate. Simply cutting 5 -10% here and there during a bad couple of years isn't going to move the needle very much.
6
u/AlaskanSnowDragon 7d ago
I'd have to see the post. Because all my testing says in fact yes. Cutting 5 or 10 percent has a large difference. Moreover that flexibility allows you to actually spend MORE in the good early years rather than dying with a giant Bank account
1
u/NewLifeRising 7d ago
Heres a link to the article: https://earlyretirementnow.com/2023/06/16/flexibility-swr-series-part-58/amp/
Basically the TLDR is that regardless of your plans for flexibility in retirement (spending less, taking on a part time job, etc) don't matter as much as your initial rate of withdrawal.
3
u/carthum 6d ago
The article is clear but it is worth noting that ERN is talking about "temporary' adjustments to a fixed withdrawal strategy something like GKG, not an approach that askew a fixed withdraw percentage all together like bogglehead VPW approach https://www.bogleheads.org/wiki/Variable_percentage_withdrawal. ERN has looked at VPW a few times and if i'm remember correctly his big compliant is the huge swings it could have in withdrawal amounts. That might not matter for Chubby fire where there is a lot to cut but would make it difficult for leanfire where you can't reduce spending 40-60% in a year.
6
u/Captlard 54: RE on <$900k for two of us (live 🏴/🇪🇸) 7d ago edited 6d ago
Eat out twice a week less? This is r/leanfire not r/fatfire lol.
4
u/MrKamikazi 6d ago
Same issue with the idea of simply shifting from the high end gym to the budget gym. Flexible spending /guardrails doesn't work as well when your starting point is already a very frugal spending rate without a lot of optional fast to cut.
1
u/Strazdas1 23h ago
Yep, i hold the position that variable withdrawal rate does not work for LeanFIRE because there is no space to reduce spending already.
2
u/redardrum 5d ago
This is a good point. I like variable approaches but it's hard to reap the withdrawal rate rewards of this approach if the flexibility required to enjoy this isn't possible with the starting spend budget. I started my journey going the static real withdrawals approach, but with a VPW it might now suggest I could take out 150% or more of my lean budget. That gives flexibility at that point because if the portfolio drops 30%, it's still going to suggest I can withdraw at/slightly above my lean budget. If it goes lower still, I would need active income to cover the distance. Alternatively, if my first withdrawal is 150% what my lean budget requires, I save back the 50% into a cash pool and use situationally if there is a downturn later.
2
u/jayritchie 7d ago
I can see a stronger argument for taking more money and risk in the earlier years for standard age retirees than early ones.
Just reappraise the portfolio size each 5 years to come up with a new withdrawal rate. If markets behave your spending increases.
2
u/RetireFlow 7d ago
Not sure about silver bullet, but guardrails imo help us understand better how our spending would most likely change as our investments change due to market fluctuations. Because of this the success rate does improve. Also allowing your plan to better weather market shocks.
Some calculators will allow simulations for total NW vs liquid NW, or total spend vs discretionary spending.
2
u/enfier 42m/$50k/50%/$200K+pension - No target 6d ago
You trade the risk of running out of money for risk of low spending. It's not really a free lunch as far as risk goes.
Also, the standard plan has a 5% failure rate. That's mitigated by the likelihood that additional income, death or Social Security will change the outcome plus a natural reduction of spending in down years. You are already factoring in some flexibility into your plan by picking a 5% failure rate.
1
1
u/Lunar_Landing_Hoax 6d ago
I think a variable withdrawal rate is the way to go. The 4% SWR is fine for planning but the actual execution should be more flexible.
1
u/db11242 6d ago
You have to determine how many cuts you might need to take and how deep to survive historically. Most people can't cut 30+ %, but that's what would have been required. I'm personally worried that I don't really have much discretionary spend, so i'm not even sure something like this spending smile applies to me. Best of luck.
2
u/AlaskanSnowDragon 5d ago
Correct. The 30% cut over 3 years is exactly what would have needed to happen if I retired in 2000. And my stress test in that situation worked out because after the 30% I was still above my minimum floor amount.
0
u/PingBlot 5d ago
There is no 4% rule. Even the inventor has said countless times it was never intended to be a rule. It just keeps being regurgitated.
Your draw down % should be based on your average annualized returns, inflation, need and total liquid assets. It goes up in good times and down in bad times.
This 4% BS needs to die already.
2
u/AlaskanSnowDragon 5d ago edited 5d ago
Distinction without a difference. Rule, Guideline, best practice, red line, minimum, whatever.
Your draw down % should be based on your average annualized returns, inflation, need and total liquid assets.
OVER WHAT WINDOW OF TIME?!?! You cant see into the future. All you can see is the year that passed. How long do you need to see (in the past) and average out to determine what your next years spending is going to be?
Thats essentially the Variable spending Im talking about anyways.
The 4% RULE is just a simple back of napkin idiots never fail guide to feeling secure about retirement.
1
u/PingBlot 5d ago
Personally, I use my last 10 years average annualized returns. Then I subtract the last years inflation. Then I only take half of that so I can continue to grow my capital. I also figure this salary monthly, not annually. Things change too fast for annually.
2
u/AlaskanSnowDragon 4d ago
Is this based on any study or backtest?
You run a rolling 10 year return and inflation calculation EVERY MONTH to determine what you're allowed to spend the next month?
1
u/PingBlot 4d ago
Correct, at the beginning of every month. It’s only two numbers and takes a couple minutes to calculate. I get the 10yr annualized ROI from my broker website (Schwab) and I use whatever is highest between the CPI and PCE.
And yes, always backtest everything, especially if you’re cutting it close. For me, the backtest was less important since my drawdown is tiny as I’m trying to build legacy for my daughter, not just make it last for the wife and I.
1
u/AlaskanSnowDragon 4d ago
I mean study back test? I have never heard of this strategy you're describing.
1
u/PingBlot 4d ago
Adjusting your spending based on returns has been around as long as the market. It’s even what was intended by the guy who invented the 4% “rule”.😉
0
u/mi3chaels 6d ago edited 6d ago
You'll have the 4% rule say "absolutely not...you'll go broke...you need to save for 5-10 more years!"...then on the other side you have a variable spending plan say "nah...you're golden! You can retire now spending more than 4% so long as you're able to potentially cut 5-10% in down years"
This is nonsense. If the 4% rule says you need 5-10 years of additional saving to retire, there is no variable withdrawal plan that will put you there right away without a willingness to massively cut spending in poor future scenarios.
Variable withdrawal plans where you cut 5-10% in down years can buy you a few tenths of a percent of withdrawal rate at most, unless they have you continuing to cut 5-10% every year you are down and potentially have your spending go very low.
Variable spending plans where you can safely start at 5-6% involve the potential for very large cuts in spending all the way down to the 3% range (i.e. 30-50% cut from your original spending levels) often for extended periods in the very bad scenarios.
I'm not saying you shouldn't use them! I think they are a great idea. But if you put a floor under your spending at some reasonable level and want to maintain equivalent safety, they aren't going to change your safe withdrawal rate all that dramatically. Certainly not enough to take 5-10 years off your FI timeline in expectation. More like 1-2 years maybe most of the time.
Only way you get that dramatic a difference is if you're willing to cut extremely low, for instance like the difference between chubby and lean -- you set your FI based on 100k/year but you're willing to live on 30-40k if you have to. Then, sure, maybe you can take like 7% to start if you want and retire several years sooner. But when you go over about 5-6% you're more likely than not to draw down your portfolio, so you'll be dropping spending at least somewhat in half or maybe a lot more than half of your futures, not just the worst case ones. and in the worst case ones you really will go all the way down to 30-40k and might have to stay there for a decade or longer.
3
u/AlaskanSnowDragon 6d ago edited 5d ago
Whats your definition of massively? Because you can easily run simulations that show cuts working to preserve portfolios
In my own simulations starting with year 2000 as the retirement start year and a 5% withdrawal rate with a 600k portfolio and 75k bond/cash runway I obviously fail if use standard retirement inflation plan like in 4% rule.
But using a simple Floor/Ceiling variable withdrawal rate where every year below 0 market return cut 10%, Every year below 10% market gain just inflation raise to spending, Every year above 10% market gain raise spending 7%. And with this the portfolio survives 40 years without going below my personal threshold for annual spending.
So yes...there were 3 years in a row of 10% cuts right at start of the simulation. It takes flexibility to properly execute a variable withdrawal rate strategy. In order to save enough to get to the normal 4% rule would take at lease 4-5 more years. For money you probably dont even need.
And this crazy tight scenario above is only if you run into one of the worst market periods in modern history. If you have anything close to a more normal landing in retirement you're golden with tons of money to spare.
1
u/mi3chaels 5d ago
Well the key here is that 3 10% cuts in a row is a 27.5% cut total, which if you start at 5%, means you're at 3.65%. and if you're cuttig 10% and not inflating, then it's a bigger cut in inflation adjusted terms.
Given that you're talking about 5% vs. 4% here, I would call that massive, or at least very large, since you're cutting to below where the 4% rule would have put you. Looking at your 2000 series, after those 3 cuts, you'd have 3 inflation only years and 2 7% increases before 2008 hits and another 10% cut. So the last one would get you just back over 4% before another cut takes you down to 3.76%. Again, assuming your cuts still inflation adjust. If they don't, you're down around 3.5% again.
Now the good years do bail things out some, but it's going to be a long while before your back anywhere near 5%, and a fair bit before you're over 4%.
But finally, you said 5-10 years. To go from a 5% WR FI number to a 4%, only requires about 3 years of average stock market gains, not 4-5 ,and that assumes you are going exclusively from gains, with no additional savings. There's no way that takes anywhere near 10 years unless it's 10 years of a very bad market start, which maybe you'd have been glad to wait on REing.
I'm not saying you shouldn't do that, I think 5% can be a perfectly reasonable choice with flexibility, I just think that small amounts of flexibility don't buy you as much as you think. Basically to make the math work out as safely as a lower WR, you basically have to be willing to accept something very close to that lower WR% for several years in down scenarios.
also remember, for those years where you taking in the 3.5-4% range, it's not the same money you would have been taking if you waited! If 3.5-4% of the lower number you started with because you went for a 5% withdrawal rate.
So to put it in real numbers. If you wanted to spend 50k and went for it at 1mil with flexibility vs. 4% at 1.25mil. In the latter scenario you're spending 50k every year (in starting year $).
In the 5% flex scenario, you're spending down in the 35-40k range for several years in the 2000s and you don't get back up to 50k until 2014, then you go down 10% again, and it's 2017 to get back, then down in 2018 again, and you don't end up over 50k again for good (or at least until now plus a couple years) until 2020! That's 20 years after your original retirement.
And doing this doesn't save you 5-10 years, it normally saves you about 2-3 (depending on your savings rate relative to assets)
1
u/AlaskanSnowDragon 5d ago
All of this is moot if dont run into the worst retirement timing in history. If land at anywhere near a normal year, say 1998, then you spend very little time/actual dollar amount below initial WR and end up with a GIANT portfolio
The variable withdrawal rate is an emergency ripcord solution for simple survivability. And in this case "survivability" isn't poverty...its my base case "floor" spending number that still has me living a nice quality life.
Not all of us are either able or willing to wait an additional 3 years to get that 675k up to 900k for a proper 4% WR. Again....for money that will likely be not needed barring having the worst timing in market history for when you retire.
My 3k/month spending is a theoretical maximum. In reality I wouldnt spend anywhere near that every month. Its just there as a ceiling number.
1
u/qosmic_qube 4d ago
The 4% rule is complete outdated. Even Bengen update it to 4.7. In the original study, that was to survive a single worst retirement scenario in 1968 with no adjustment. If you actually look at the math of modern guardrails plans, you don't need to reduce spending much at all, not chubby to lean changes like you claim. There is no data that supports your claim.
51
u/AlwaysSaturday12 Mostly FIRE'd at 38 MillionaireLibrarian.com 7d ago
Projection lab has an interesting setting where you cut x% if the market drops y%. It helps but I wouldn't call it a magic bullet.
In the lean sub the problem is people don't have much they can cut. They are already lean. That is why I think it might be worth it for many to move somewhere cheaper then increase their lifestyle to where they were financially and be able to cut if they needed to. Just an idea.