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Old Today, 12:50 PM
 
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Quote:
Originally Posted by k374 View Post
Came across this Reddit thread that has a lot of valuable info, it is a recent interview with Bengen himself.

https://www.reddit.com/r/financialin...ed_the_4_safe/

One of the points that frequently comes up is whether the 4% SWR will work today due to such low yields, however what is not taken into account is that we are also in a period of historically low inflation. So, to make a valid argument you have to take into account yields as well as inflation. Yes, in the 70s/80s you had high yields but also high inflation so what is the Net Real yield - that is the only thing that matters. Real yield is not different in those periods vs today.

Today we have 1.7% yields but < 2% inflation vs 10% yields but 12% inflation back then so the discussion on low yields affecting SWR is moot.
The actual math says you need at least a 2% real return over the first 10-15 years of a 30 year retirement for 4% to hold ...you may end with a dollar but it really does not take much to support it because the times it is based on were such awful outcomes we have not seen outcomes like this in more than 50 years
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Old Today, 12:55 PM
 
Location: SoCal
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I always count real yield, that’s why when I was planning for our retirement, I put 2%. None of this 6-7% that some people are counting on.

Last edited by NewbieHere; Today at 01:25 PM..
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Old Today, 01:13 PM
 
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Originally Posted by NewbieHere View Post
I always count real yield, that’s why when I was planning for our retirement, I put 2%. Nine of this 6-7% that some people are counting on.
As I keep trying to get across in these forums , average returns mean very little when spending down ..the exact same average return ranges from broke to 8x what you started with based on nothing more than the order of those gains and losses as they actually play out while you spend down yearly.

Peter Lynch believed a withdrawal rate should be 7% ...that was until he learned about the effect of those sequences, then he retracted that statement
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Old Today, 01:19 PM
 
Location: Olympus Mons, Mars
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Quote:
Originally Posted by mathjak107 View Post
The actual math says you need at least a 2% real return over the first 10-15 years of a 30 year retirement for 4% to hold ...you may end with a dollar but it really does not take much to support it because the times it is based on were such awful outcomes we have not seen outcomes like this in more than 50 years
I agree, but so many people are so fearful of 4% SWR without realizing just how conservative it really is.
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Old Today, 01:20 PM
 
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Quote:
Originally Posted by k374 View Post
I agree, but so many people are so fearful of 4% SWR without realizing just how conservative it really is.
The odds of it failing are the exact same odds of ending 30 years with 8x what you started with
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