Does Anyone Follow The 4% Rule?

I think the 4% is a guideline but just that. Personally, as I have said before, I like a variable withdrawal plan that is buffered on the up and down sides. In this way, I will cut my spending a bit if the previous year's results for stocks and bonds were not very good and increase my spending a bit if the previous year's results were good. But, the buffer prevents me from having to cut drastically or from taking a windfall. In this way it protects me while keeping my overall spending level on a relatively descent path. Of course, if the market plummets down for a decade and then stays there, nothing will help much except cutting expenses drastically and maybe going back to work. :eek:
 

no one ever just spends like a robot ,spending 4% and inflation adjusting every year . we are all variable . we tend to spend more when markets are up and we tend to have no desire to over do things when they are down even though you likely could make no changes .

what you really want is a variable plan but one that keeps income in a tight range . you may not be able to take the pay cut dictated if markets fall 40% .

i set my max goal posts using bob clyatts simple variable plan . that has been back tested through the worst cases in the usa and never failed .

it rewards when markets are up put only cuts you slightly when markets are down .
 
I didn't know there was a 4% rule. What I did know was that when the company I worked for changed the pension plan from automatic this is what you will get to a self directed 401k with 6 options. I scrambled to find out what that would mean for me. Mutual funds with decent returns to build a retirement account made sense but along with that investing in stocks could be risky but have the desired effect of living well in retirement.

Beginning by purchasing company stock thru payroll deductions made it possible to avoid broker fees and at a 5% discount. Kraft stock during the early 1980's varied but my wife managed to accumulate 1600 shares before things got a little hairy. Kraft was taken over by a smaller company that cut the work force and benefits. Once operating more efficiently the stock doubled and that company parted ways with Kraft. The stock rose in price and split 2 for 1. Proud owners of 6400 shares now. Enter Phillip Morris tobacco company as the major stock holder and decision maker. Employees could sell at a 25% over market price or hold and get their shares doubled. Phillip Morris no minor league company we held and are new owners of 12,800 shares plus what was gained during the dividend reinvestment plan. Kraft was enjoying great market volume for their product. The stock rose to I think around $142.00 a share. That was higher than MO or Phillip Morris thought would generate stock purchase so they split the shares to 4 for 1 or $35.50 a share. Really tempting to sell but the thinking at that time was hold long term. Long term holding is no longer the thinking but I digress. Kraft stock rose to a little over $48.00 a share and we sold all 51200. shares. The tax on that was horrendous but considering the gain and wanting to retire early well worth the pain of giving that much in taxes to the gov.


Since then GE in Jan of 2009 10,000 shares at a little less than $6.00 was worth the risk. Sold that in Jan of this year and bought 15,000 shares of TLN in Jan for a little over $6.00. $13.00 + a share seems to be a stable price so were holding until we are taxed at the long term rate. Even so that will be a tax bite that is hard to take. Out of this our goal of not depending on Soc. Sec. or society we've achieved. Better than that is the inheritance our children will receive when they probably will need it most if the middle class population in America continues in my opinion to decline.


Explaining good fortune to people my own age might sound useless but maybe this kind of long term planning to have a nice retirement would be passed along to someone younger. What does the future hold for investing?
 

Near term i think investing for retirment is going to be tough. I think we have some very unconventional times and i think more and more insurance products coupled with our own investibg is going to be the norm
 
Thank you for the chart...very interesting. I can use this info to share with others. I'm hoping not to have to use the 4% rule with the following exception. In a little less than a year, I will start taking my RMDs and that will be about 4% of my very small traditional IRA. The RMDs will go directly to St. Jude's so that I can avoid paying taxes on the distributions. My income from SS & my pension is more than enough to cover my expenses and discretionary spending.
 
Thank you for the chart...very interesting and good info to share. I'm hoping not to have to use the 4% rule with the following exception. In a little less than a year, I will start taking my RMDs and that will be about 4% of my very small traditional IRA. The RMDs will go directly to St. Jude's so that I can avoid paying taxes on the distributions. My income from SS & my pension is more than enough to cover my expenses and discretionary spending.
 
the amount you start with does not matter . it is just 4% of a lower amount . but that 4% is based on certain allocation assumptions and the big assumption that the past wort case scenario's were so bad that we are unlikely to hit anything as bad . that remains to be seen

getting hit the first 5 years of retirement in an extended downturn can hurt . it does not matter on how steep as much as how long .

the first 15 years are the most crucial .and you live or die by the first 15 years .

once you have a decent run up the down turns have less of an effect .

the 4% swr is based on some pretty crappy outcomes .

they are based on had you started a 30 year retirement in 1907,1929,1937 or 1965/1966 . those were the nastiest time frames to have retired . all of them failed because the first 15 years were terrible .
 
Is this firecalc a good estimate? Under spending, is this all your spending for the amount of your time you will probably live?
I do not see how this can be accurately done, to project that much into the future----especially if you will be moving to
a different state or area where the variables will vary.

Also how reliable is this longevity rate?
 
it isn't firecalc that is not accurate . it is you guessing at your needs .

all firecalc does is take whatever amount you tell it you need , it subtracts out all the other sources of income you feed it other than your portfolio ,and then it simply stress tests your portfolio for that remaining amount .

it stress tests your portfolio to see how you would have done if you drew that amount , for how ever long you put it in , with the allocations and amount and see's of the nastiest time frames left you broke .

the idea is we have seen conditions for retirees in the past like those who retired in 1965,1966,1929,1937 , etc which have never been duplicated in 50 years .

if you survived retiring through those years you are at least getting to the gate with a decent plan .
 

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