I don't know to what extent there are established precedents for when a topic is worthy of a mega-thread, but this decision seems like a big deal to me with a lot to discuss, so I'm putting this thread here as a place for discussion. If nobody agrees then I guess they just won't comment.
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Thats close to correct. I’ve seen 4% before but that is largely for permenent endowments like say Harvard etc. A financial advisor in his numbers might kill you off at some point.
5 maybe 6% though can fit with 2% inflation and last forever. Easier to get to when 30 year rates were 5% and then 8-9% on equities. With 30 year rates at 5% throw on some credit risks (mortgages were 8% then though that includes prepayment risks). You can make the math work for a 7% withdrawal rate for an individual. A 4% withdrawal would significantly lower risks.
A withdrawal rate of 4 %/a is recommended by r/financialindependence and by Vanguard for ordinary people who want to retire early, not for permanent endowments.
It depends on assumptions. And I do want to emphasize that you are seem to be using the number for people retiring early. So longer time frame. Based on historical returns 4% withdrawal rate would have your assets growing in real terms. The vanguard data you cite has a 10.3% historical equity returns, 5.3% bonds and 2.8% inflation roughly. Even 50-50 equity bonds would deliver 5% yearly real returns. Those returns are likely high going forward but Can shift some into equities.
If someone retires at 70 and you kill them off at 100 and is receiving social security checks you can model a higher withdrawal rate and they won’t run out of money.
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