Mathjak! Beyond The 4% Rule

General Discussion on the Permanent Portfolio Strategy

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vnatale
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Mathjak! Beyond The 4% Rule

Post by vnatale » Thu Apr 15, 2021 6:49 pm

From reading a lot of what Mathjak has written regarding retirement withdrawals I expect him to voice an opinion regarding the below.

Vinny

Beyond The 4% Rule

https://www.fa-mag.com/news/beyond-the- ... 44535.html


Bill Bengen himself, the author of the rule, has said on occasion that there are a variety of numbers that could work depending on when you retire. The 4% rule assumes you can take a safe annual withdrawal of 4% and then can adjust for inflation. He has adjusted that rule and called it SAFEMAX, 4.5%, when the allocation includes small-caps, and the rule was designed to cover the worst 30-year retirement periods, especially the era of high inflation that started in 1968.


What the Brightworth team found intriguing was what happened when the retirees took withdrawals monthly or quarterly, as most do, instead of taking the annual lump. Doing it that way often allowed the investors to take out 20 extra basis points a year. “So instead of 4% it might be more like 4.2%,” Wood says. “It might not sound like much, but that’s 5% more in spending,” he says. “So it could mean an extra vacation or a nicer car. Giving more to charity or something like that.
Above provided by: Vinny, who always says: "I only regret that I have but one lap to give to my cats."
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Re: Mathjak! Beyond The 4% Rule

Post by mathjak107 » Fri Apr 16, 2021 4:25 am

Meh ...

The 4% draw is really only good for figuring out the first year ..after that in real time draws vary ..some years are way over , some are under , it is just the way life works .

Sticking with a 4% inflation adjusted draw will likely leave way to much unspent and not enjoyed .

So I use bob clyatts method based on actual yearly balances ...so I do what’s easiest and that is fill up the checking account once a year .

90% of the time 4% left you with more than you started ..67% of the time it left you with 2x what you started
.

So trying to squeeze a bigger draw out of 4% by manipulating how you set the money up for drawing upon seems like an exercise in futility when the draws can be so much higher and even safer using other methods of draw.

Draws can go as high as 6% if you just missed the likes of 1965/1966 which is the worst time frame for starting out on record so sticking with a 4% inflation adjusted draw like a robot is not only unrealistic but silly
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