If you ignore the worst-case, 30-yr payout period starting in 1965, you can take a 4.7% SWR.
https://www.investors.com/etfs-and-funds/retirement/social-s…
I don’t think that’s true, but the “big thinkers” at Investors Business Daily are elated.
intercst
Bengen did a good job mining the original data. And his “4% rule” has become a fantastic financial planning tool. But his own inability to stay the course, which is required for his work to be successful, dampens my enthusiasm any tweaking. Sort of falls into the category of “economists use decimal points to show that they actually have a sense of humor”. On top of “don’t just do something, stand there”.
"If you ignore the worst-case, 30-yr payout period starting in 1965, you can take a 4.7% SWR.
https://www.investors.com/etfs-and-funds/retirement/social-s……
I don’t think that’s true, but the “big thinkers” at Investors Business Daily are elated.
intercst "
If you ignore cases where systems fail you may live in the “best of all possible worlds!”
Howie52
Life is wonderful if you just do not look very closely all the time or do not look at all things.
Peace in our time is achievable if there are only minor incursions.
Lets see – If I ignore all the days the S&P goes down more than 0.5% will the SWR by 12%? If it is I can do all the items in my bucket list!
Some people seem to look at that 4% SWR as a natural law. It’s just a useful guide for when the next 30 years are as bad as the worst 30 year period previously. I see articles saying that lower bond interest rates means the 4% needs to be 3.7% or 3.5% or whatever. Well, the inflation rate was 2% for a long time rather than 5%, so the real bond yield wasn’t that much different than when interest rates were higher (especially after taxes).
The 4% SWR was really useful in correcting the thoughts of many that they could live off the 6% dividend stock payments and bond coupons while leaving the principal untouched. But all the discussion of what the SWR is going forward requires a prediction of stock returns, bond interest rates, and inflation rates for the next 30 years. And all that is IF the retiree can stick to the plan, which even Bengen himself couldn’t do (or at least didn’t do).
PLUS–it’s a moving target. Most of us won’t retire from a job and immediately start social security, a pension, and Medicare. Our income needs will change every few years as we switch from paying for private insurance (or company provided retiree health insurance [still exists?]) to Medicare, pay for all our expenses while delaying social security to maximize long term payout (maybe), etc.
Maybe it’s not bad being extra cautious and working/saving/investing for another year before beginning to draw down one’s portfolio. My thought was that I’d rather work a little longer during my peak earning years than to leave so early that when I noticed I needed more money that my professional skills were obsolete. But, being too conservative would have caused me to miss a rare chance–my company offered a lot of severance just ahead of my personal target date for putting in my two week notice.
I grabbed that chance thinking that if my portfolio went down, I could look for work, but as it turned out I didn’t need to. A retiree probably has some expenses that can be deferred if the market takes a turn down at the wrong time.
Maybe a philosophical point that was brought home because of several coworkers’ and former coworkers’ deaths in 2021–it’s nice to “not have to go to work,” but even more than that, having “enough to retire,” even if you continue working, really eases the pressure that seemed to drive others to stress-related illness. There were a couple heart attacks, but also some third and fourth heart attacks on retirees who had their first few while employed.
CuriousQ writes:
Most of us won’t retire from a job and immediately start social security, a pension, and Medicare. Our income needs will change every few years as we switch from paying for private insurance (or company provided retiree health insurance [still exists?]) to Medicare, pay for all our expenses while delaying social security to maximize long term payout (maybe), etc.
Good point.
I cannot answer for most of us, as plenty of things can and do jump in the way via health issues, layoffs, downsizing, need to care for elderly parent(s), and what not that could indeed prevent one from working until landing at a point of retiring and receiving part of, or some combination of that trio you mention —> pension + medicare + SS.
Regardless, I wouldn’t want to lump everyone under the “most of us” category as there exists a percentage of the population who do have the option to work until 65, not to mention a segment of the population who will immediately start a pension upon their retirement (which may also coincide with taking Medicare at 65). And of course, no names mentioned, but we do know there exists a segment of the population who do take SS immediately upon retirement whether they are age 62, 65, 67 (FRA for my generation), compared to those who choose to delay until 70. Not to mention, in a household with combined careers when you factor in both spouses/partners, there are ways of optimizing it all in terms of the timing of who retires and when - as well as who takes what and when.
It’s nice to have those options - at least for those who are combining the trio of pension/Medicare/SS into their plans with a SWR or VPW from the risk portfolio to fund the retirement years - not to mention how to best fund those bridge years between retiring and before taking SS at 70 if one is delaying. Or as you point out, even more bridge years to fund that includes those before Medicare, and before taking SS. Obviously, every household is unique and uses the combination that best works for their particular scenario.
There was a good thread about a year ago on this board entitled “Bridge to Social Security” that included links to some data and a variety of opinions that are still interesting to review.
https://discussion.fool.com/bridge-to-social-security-at-age-70-…
Maybe it’s not bad being extra cautious and working/saving/investing for another year before beginning to draw down one’s portfolio.
Ah, yes. Better known as the OMY scenario. Can be both a safety route as well as a circuitous route. The latter happens if one continually is being extra cautious and keeps extending the OMY into a string of OMYs that eats into another valuable asset in retirement that you don’t get back, and is known as time. 
My thought was that I’d rather work a little longer during my peak earning years than to leave so early that when I noticed I needed more money that my professional skills were obsolete. But, being too conservative would have caused me to miss a rare chance–my company offered a lot of severance just ahead of my personal target date for putting in my two week notice.
I grabbed that chance thinking that if my portfolio went down, I could look for work, but as it turned out I didn’t need to.
Sweet! Worked out great for you!
A retiree probably has some expenses that can be deferred if the market takes a turn down at the wrong time.
True. It seems that taking a good look at VPW (variable percentage withdrawal) is well worth the time to study and compare to SWR as it plays into your idea of deferring expenses that can be deferred if need be.
I would like to think that one has planned for some of the major expenses that could occur if SORR crops up early. In other words, AA has already been adjusted and is in place to make it through those years of a down market.
Needless to say, the journey is always interesting how we all arrive at the portion of the journey known as retirement. We’re certainly getting much closer to that phase in our house. It has been fun to read this board over the years. My spouse retires next year and begins her pension and Medicare at the same time - not to mention she is already signed up for her next endeavor with a major food bank organization starting in 2023.
BB