The big problem with the FIRE Movement & the 4% Rule

[philistineau]

If you drop the withdrawal rate to 3%, the odds massively swing in your favor. Lastly, you can just about guarantee success if you drop your withdrawal rate even further in downturn years by working an extra six months and building a cash cushion.

[slayden]

Lmao the 4% is there as a conservative withdrawal rate so that your money will continue to GROW over time. It’s not going to zero lol in this case the 4% would actually be more and more over time.

[ncournault]

The problem is that past performance doesn't predict future performance.

[lifeforgod]

I agree. If you just drop the withdrawal rate about 4 points down to 0, you’ll probably never run out.

[Dividend-Shark]

4% rule is over 30 years outdated now. We have so many various higher yielding options from stocks, ETFs, split funds all the way to private credit and lending now. Diversification is always key but IMO you can get a lot farther with a higher yield strategy.

[jonathanbaker]

the is you can't predict the future! be a good human and adjust as you go, you can do it

[DragonSlayer]

What if you hold about 5 years basic living expenses in cash and bonds to weather out a bear market, and sell more of your stocks when the market is performing well

[giro]

Or you try to fully understand the 4% rule, what it's based on, and the various outcomes and probabilities. In general it's only the very edge cases that would result in ending a 30 year period with $0, and most times there is more than you started with. But that's also using bonds, which just haven't done well most of the last 30 years. If you modify your process to use just the S&P, it's also 4% but with slightly more volatility. But if you have any sort of flexibility in your spending (fewer people travel during a bad recession, and travel options were limited during Covid), you can also adjust to taking out a little less during a downturn. And really the failure points, if planning is otherwise decent, is if you retire right into a bad recession and take out your first few years of expenses while the market is down.

Understanding these failure cases, instead of just glossing over that a set 4% rule might not cover all cases if living off investments for 60 years, can make a huge difference.

[Daniyoyo]

Wrong .. you increase your YIELD and keep the same 4% withdrawal rate

[webbynater]

Yeah lower it to 3% and have way more money than you need when you die.