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The 4% rule may not be entirely reliable. See: Ben Felix’s YouTube video on the topic. I’d be aiming for a 2% rule and holding some extra cash (call me paranoid

by conwy 5y ago

The 4% rule may not be entirely reliable. See: Ben Felix’s YouTube video on the topic. I’d be aiming for a 2% rule and holding some extra cash (call me paranoid).

nobodyandproud 5y ago
2% is awfully difficult to achieve without some radical lifestyle adjustments before and certainly after retirement. Nonetheless, it’s a good idea. Instead of cash, however, I would opt for paid part-time work if possible. A large cash reserve isn’t protected against inflation nor will it grow; the downsides are too big imho.
lotsofpulp 5y ago
I think it is warranted to have a conservative estimate given the aging of the population pyramid. There will be more demand for labor relative to supply than post WW2 decades which saw the opposite, increasing amounts of supply of labor relative to demand. Although, more than cash, a few loyal and useful kids would be a much better play to mitigate those risks.
throw0101a 5y ago
> The 4% rule may not be entirely reliable. See: Ben Felix’s YouTube video on the topic. Felix (and Cameron) recently interviewed Bengen (who came up with the rule) on their Rational Reminder podcast, and it may actually be 4.5% now: * https://rationalreminder.ca/podcast/135 https://rationalreminder.ca/podcast/135 * https://www.youtube.com/watch?v=_nYTrCxluaY https://www.youtube.com/watch?v=_nYTrCxluaY In 2006 he had it at 4.5% and in October 2020 at 5%: * https://www.fa-mag.com/news/choosing-the-highest-safe-withdrawal-rate-at-retirement-58132.html?issue=334 https://www.fa-mag.com/news/choosing-the-highest-safe-withdr... The reason being is inflation. The really high inflation of the 1970s (and 1980s) chewed up savings for retirees and brought down SAFEMAX down, but in the 1950s and '60s it was actually 5% per Bengen.
bryanlarsen 5y ago
Agreed. This may be what your video talks about, but the decrease in interest rate over the last 40 years has a lot to do with the increase in stock market valuations. Interest rates are E/P, the correspondence with a stock market P/E is straightforward. Interest rates are now at zero and can only go in the opposite direction. And probably will since everybody is now concerned about inflation.
- loeg 5y ago
  > Interest rates are now at zero and can only go in the opposite direction. Are you asserting interest rates can only go up from zero? Or only down? And for either direction, why?

by conwy 5y ago

The 4% rule may not be entirely reliable. See: Ben Felix’s YouTube video on the topic. I’d be aiming for a 2% rule and holding some extra cash (call me paranoid).

nobodyandproud 5y ago

2% is awfully difficult to achieve without some radical lifestyle adjustments before and certainly after retirement. Nonetheless, it’s a good idea. Instead of cash, however, I would opt for paid part-time work if possible. A large cash reserve isn’t protected against inflation nor will it grow; the downsides are too big imho.

lotsofpulp 5y ago

I think it is warranted to have a conservative estimate given the aging of the population pyramid. There will be more demand for labor relative to supply than post WW2 decades which saw the opposite, increasing amounts of supply of labor relative to demand. Although, more than cash, a few loyal and useful kids would be a much better play to mitigate those risks.

throw0101a 5y ago

> The 4% rule may not be entirely reliable. See: Ben Felix’s YouTube video on the topic. Felix (and Cameron) recently interviewed Bengen (who came up with the rule) on their Rational Reminder podcast, and it may actually be 4.5% now: * https://rationalreminder.ca/podcast/135 https://rationalreminder.ca/podcast/135 * https://www.youtube.com/watch?v=_nYTrCxluaY https://www.youtube.com/watch?v=_nYTrCxluaY In 2006 he had it at 4.5% and in October 2020 at 5%: * https://www.fa-mag.com/news/choosing-the-highest-safe-withdrawal-rate-at-retirement-58132.html?issue=334 https://www.fa-mag.com/news/choosing-the-highest-safe-withdr... The reason being is inflation. The really high inflation of the 1970s (and 1980s) chewed up savings for retirees and brought down SAFEMAX down, but in the 1950s and '60s it was actually 5% per Bengen.

bryanlarsen 5y ago

Agreed. This may be what your video talks about, but the decrease in interest rate over the last 40 years has a lot to do with the increase in stock market valuations. Interest rates are E/P, the correspondence with a stock market P/E is straightforward. Interest rates are now at zero and can only go in the opposite direction. And probably will since everybody is now concerned about inflation.

loeg 5y ago
> Interest rates are now at zero and can only go in the opposite direction. Are you asserting interest rates can only go up from zero? Or only down? And for either direction, why?