Generally this is the consensus of the many threads. I don't know if "foolish" is the right word.The original poster's question comes up every so often and has been discussed many times. I call what he is pro-posing "re-retiring". I raised the question maybe 10 years ago and Larry Swedroe convinced me that this increases risk to the point that it shouldn't be done. In the real world, I've concluded that, at least for me, "re-retiring" after every good year is not a good idea...BUT...that periodic "resets" should happen after multiple years of big portfolio changes (hopefully growth). If you have $1M to begin with, you take $40,000 the first year. If the portfolio grows to $1.3M in that first year, I'd still only take $40,000 plus inflation (hopefully just a few percent). But if, after 5 years, the portfolio is now $2M, it seems ok to do a reset. I might not take $80,000 (4% of $2M), but I might split the difference and take $60,000.
Similarly, if we enter into a bad period and your $1M is only worth $500,000 after five years, it might be prudent to re-evaluate the entire situation (move in with the adult kids, go back to work, keep the old car, etc).
Again, the bottom line is that the original poster makes a good point that it's foolish to just take 4 percent plus inflation blindly. My less-than-scientific method of doing periodic (every 3-5 years) "re-evaluations" helps stick to the formula while recognizing big market moves that can improve quality of life or perhaps require reality checks the other way.
I think it's actually a simple fact that in the past, you could start at any point in during retirement, withdraw 4% per year of your portfolio at that point in the past, inflation adjusted, and go 30 more years using the data sets and investments that worked for that in the past. That's really a fact. The only problem with it is that it happened in the past and only in the USA and we're spending in the future.
Statistics: Posted by firebirdparts — Wed Mar 20, 2024 10:11 am — Replies 14 — Views 796