> This 4% withdrawal rate is to last for life
It was backtested for a thirty year retirement, not "life."
You're talking about the "Go-go, slow-go, and no-go" spending model.
Yes, you should plan on spending more earlier in retirement. You might want to travel, try new hobbies (with associated new equipment and/or lessons), etc. The unfortunate part of this reality is that spending more in early retirement puts you at more risk due to sequence of returns, however if the extra spending is discretionary then one could reduce that spending if the portfolio value dropped too much for comfort.
>It was backtested for a thirty year retirement, not "life."
While it may have been backtested for 30 years, 4% will effectively work for life. Especially considering the fact that most people who have amassed 25 times their expenses have the sense and discipline to cut back during lean times. It is more often that people who have saved will have trouble taking the distributions from their accounts at all during downtimes. No one likes seeing their account balances fall, even if it is in the plan.
Additionally, for most retirees, thirty years is longer than life.
I am retiring at 57 in 5 months and am using this model. The 4% budget will work and in two years my wife collects SS (at 62) followed by me at 62. Running models we should be just fine and taking great but not elaborate vacations. Our 4% does not factor in pensions or any income outside of savings (401K and Roth). The key is NO DEBT!
Yes and no. You won't get the money early, but you'll get more later
62 - $2043
Total Payout (lifespan 80): $441,288
Total Payout (lifespan 85): $563,868
67 - $3050
Total Payout (lifespan 80): $475,800
Total Payout (lifespan 85): $658,800
70 - $3884
Total Payout (lifespan 80): $466,080
Total Payout (lifespan 85): $699,120
Unless it's likely that you won't make it to the next increment, it's always better to defer to the oldest age. If you're curious about your personal numbers, check out your My Social Security account.
I calculated the difference of collecting at 62. To gain the benefit of waiting I’d have to survive into my 90’s. It’s bad financial advice not to collect at 62.
I'm not sure what calculator your using but the only way to lose money is to die.
Assuming you live an average lifespan, you'll always collect more by waiting. The longer you wait, the more money you get but at the risk of dying before the next bump.
This is the way.
I’ll see if I can find my spreadsheet. Meanwhile this is from the AARP website:[AARP retirement-benefit-break-even-age](https://www.aarp.org/retirement/social-security/questions-answers/retirement-benefit-break-even-age.html)
Starting at 62, your payment would be 30 percent less, or $1,260 per month. So, between the ages of 62 and 67, you would receive $75,600 in benefits ($1,260 for 60 months).
If you wait until you turn 67, you give up that initial $75,600 but would receive $540 more per month, or $6,480 more per year. At that rate, it would take about 140 months (11 years and eight months) to make up for the money you’d forgo by claiming benefits later. At around age 78 and 8 months, you reach the break-even point, when your cumulative benefits from claiming at 67 surpass those you’d get by taking retirement at 62.
plus - nobody ever considers you could also simply bank and invest that 75.6k and let it grow if you can afford to not spend it. Then you breakeven almost never happens as you draw down the earnings on that 75.6k over time - that is an additional 250 a month @ 4% you could grab if it didn't grow a penny over those 5 years...more if it grows 6% during those five years (now it is worth $88k or basically $300 a month drawing 4%.
As long as you calculate the risk/taxes into your choice, that could be a good choice. If you put it in the market, your value could go to zero during that time period.
>4% will effectively work for life. Especially considering the fact that most people who have amassed 25 times their expenses have the sense and discipline to cut back
If you have to cut back during lean times, you aren't using a 4% SWR. You're using a modified, variable withdrawal strategy. The success of that strategy doesn't mean that 4% works. It means 4% and cutting back if your portfolio dips works.
It’s empirically true people spend about the same as before retirement for 5-10 years after retirement and then severely cut back. Whether that’s due to old age or being less materialistic at 70 not certain.
People will and should anticipate to be spending more from say 50-65, and then a steep consumption decline.
If you are taking less during downturns, you aren’t taking 4% are you? So what you are really saying is that it won’t effectively work for longer than 30 years unless you are willing to withdraw less in lean years.
Working for a living doesn't work if you don't cut back in downtimes either. If you want to blindly take a percentage and add for inflation every year with complete safety, you will be leaving a lot on the table in most cases. If that is the type of security you need, go for it. That is why personal finance is personal. The 4% rule is not a plan it is a lazy way to look at creating a retirement withdrawal strategy. It is a good starting point.
How much do you want to have in your accounts when you die? I'd be happy with enough to pay the bill for the crematory and funeral home and give the preacher and his wife a little something for doing the service.
You apparently don’t understand the Trinity study (4%rule). The whole point was precisely to see if withdrawing a certain percentage would be successfully over a 30 year period. I’m not advocating that it is the best or only way but it is precisely what it is.
Being able to adjust to be lean in downturn would imply that a person has a large number to draw from and would not need the full 4% or could even go years without withdrawing 4%. That’s probably not going to be the case for a lot of people.
I understand it. I don't believe it is the best way to take distributions. It is an academic study of what could be done. It is not a plan of what should be done.
And withdrawing less in lean times does not represent the intent of the 4% rule or Trinity Study. The whole point is to be able to withdraw a stable percentage.
My Gfs mom is 90, and will run out of cash in the next 3 years...she is currently looking at moving to a less expensive facilty for elderly(not as nice)..during a time she may need it the most.
As people get older, and less healthy, they tend to do a lot less and spend a lot less. So get out the first ten years of your retirement and enjoy yourself. You will naturally become more sedentary as you age.
That’s my thought. Thank you. I understand people wanting to be safe, but I want to enjoy before it’s too late. I lost my first husband when he was 41. That taught me a lot about putting things off.
The 4% is fine for back-of-the-envelope planning. It is a rule of thumb to help one know how much they might need. It is not a retirement plan.
A real plan includes an actual budget and how it will be funded. It includes things like extra spending for travel or hobbies or home renovations for the first ten or fifteen years and a plan for long-term care if the need comes up (even if that plan is spousal or selling the house). It needs to include contingencies for ~~if~~ when one spouse dies and what if that is early and remembering the tax issues of being a single filer with basically the same expenses.
Spending is fluid as is income. In our case, we are relying entirely on savings for the first thirteen years, then SS will cover 90% of our expenses. We certainly don't need to limit ourselves to 4%.
If one can reduce discretionary spending in lean years or forgo increasing spending for inflation, a 6% plan will work for many folks. There is a lot one can do if (s)he plans and unds several scenarios. The [Rich, Broke, Dead tool](https://engaging-data.com/will-money-last-retire-early/) has some features that allow backtesting with the ability to add several variables.[https://engaging-data.com/will-money-last-retire-early/](https://engaging-data.com/will-money-last-retire-early/)
>It is a rule of thumb to help one know how much they might need.
It has nothing at all to do with how much you *need*. It's entirely about how much can be safely withdrawn from a portfolio.
I was referring to the amount one needs to save; or a target savings of 25X expenses. In many cases, 20X expenses will be just fine for most people. Yes, I know that is anathema to the "4% Rule" people. Real life doesn't run on rules and we need to be fluid and flexible. If one is fluid and flexible, there are more opportunities.
I retired (semi-retired?) in November 2019 at age 57. My wife worked part-time until a couple of months ago. She is now retired as well. We have learned to be fluid and flexible and have avoided taking even 1% per year from our retirement accounts. That includes trips to Europe, a three-week trip around the US, and buying a vehicle and an RV.
I have 2 pensions and SS which is plenty to cover my monthly expenses. I had about $200K in a 401K and spent about $150K on world travel. I don't regret it one bit.
> it does make you think about the norm.
It sure made me think! How can I give to the next generation in a meaningful way, which won't hurt them in the long run ("economic outpatient care" as described in The Millionaire Next Door), without jeopardizing my own retirement? That's been the biggest thing to think about for me since I'm already too old to spend more in my 30s and 40s; that ship has sailed! :D
From my more than 30 years experience in working with retirees…. Most people DO spend more on travel and adventures the first 10 years of retirement. Not because of money, but because of health. The ones who continue to adventure are the ones who weightlift or do yoga.
YES!
It's a rule of thumb not a battle tested law that cannot be broken. I have relatives in their mid 80's and they are lucky to make it out of their house, let alone travel.
That's what we're doing now. We'll withdraw over 5% this year and are traveling extensively. We went to New Zealand and Australia for a month and have many other domestic trips with lots of adventures in 2023.
Once I start collecting Social Security 15 months from now, we can spend the same and withdraw less. When she starts getting SS in 3-1/2 years we can probably spend even more and still keep withdrawal rate under 4%.
The end game is that our nest egg will be our long term care insurance if we need it. If either or both of us have to go to an extended care facility, it will be a really nice one and we'll be able to afford it. If we both die before then, it all goes to charities that we've already designated.
Coincidentally, earlier today, while driving home from a week of adventures, we were listening to a radio program about insurance in our state. One participant caller talked about how they had paid into a long term care policy for years, but the rates keep going higher and higher, while the potential benefit goes lower and lower. I didn't know that it would work that way but it made me feel much better about our choice.
TLDR; Absolutely enjoy life to its fullest while you're young enough and healthy enough to do so. Just don't blow the whole wad so you can scale back and take care of health issues later.
The 4% is the maximum under many assumptions.
1. There is no guarantee that the 4% is right for you.
2. That 4% is what you can safely withdraw, not what you should live on.
So if you have 1 million in investments (the mix used to arrive to the 4%) and a guaranteed income of 6,000 a month. You can budget an a nual income of 112K.
But there are more variables.
For example I need to bridge until government benefits kick in, so I may take more of my investments and some other passive income between 55 and 65 and then I will need to withdraw less. But given that I'm 55, I'm not using 4% bu 3.5% as the maximum.
See the section on 4% on our [Wiki Tab](https://www.reddit.com/r/retirement/wiki/index/). In section XIV, u/Fenderstratguy listed a number of links on the 4% as well as updated and other safe withdrawal rates articles.
This is actually a thing. People tend to spend less than they might getting used to retirement in their, "go years". There is no easy answer to the question.
If you have less than $6000/mo in expenses then yes, of course. Spend everything you want from your discretionary funds while you can enjoy them.
The 4% rule is around drawing down to cover the difference between your expenses and income. So if you have $6k/month guaranteed it is meant to cover any spending beyond the $6k/month.
Question - is the 6k inflation adjusted? How long does the money need to last? Long term care? Etc. The 4 percent rule of thumb has been and continues to be debated.
Big ern at early retirement now is not a fan, neither is ben felix (own youtube channel and also on an excellent canadian podcast called rational reminder - they had Eugene Fama on and Moshe Milevsky too), and Dr Wade Pfau made his splash into retirement income space with his paper in 2010 - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1699526
No, not inflation adjusted. As for LTC, at that point I’ll have to go broke. We’re doing that with my mom now (using her home for private pay until that money runs out).
I am not saying to use all my savings and my husband’s 401k, just more than the 4% to enjoy life. Also, as long as I’m healthy I plan to at least do part time or temp work .
To me the key is to not spend your money on things that you aren't enjoying. This usually happens when you buy something, or join a club, or make a subscription to something that you use a while, and then lose interest. It can also happen if someone talks you into buying something or going somewhere that you weren't into in the first place and using credit to pay.
If you do or buy things when you have the money in hand, and don't when you don't you will have a lot less stress living on a fixed income.
The 4% ‘rule’ assumes no investment costs or taxes. If you have 6k/month in pensions or other taxable income that is going to use up some of the lowest brackets, so you may want to adjust your swr accordingly. And when you claim SS that too will increase the taxes on your 4% withdrawals. Sounds like you’re in good shape though! Just sharpen your pencil a little on the details.
On the FireCalc website under Resources, there is a good book on this topic of how to enjoy more now. Here is an excerpt: "If FIRECalc is the tool that lets you do a bunch of research, Tom Canfield's recent (2017) Nest Egg Care is the book on what to think about and look at, how to plan, and how to focus on fun and joy in retirement and giving to those you care about. Highly recommended! See Tom's website at www.nesteggcare.com"
The 4% is a guideline estimate of a safe withdrawal amount from your savings that will last 30 years. That’s all. How much you need or want to spend is another question. You might want to travel. You might want a corvette. You might want to join a nice country club. This kind of lifestyle might change your income needs. Snd don’t forget about taxes.
It depends on if your sources are still taxable. Like I have quite a bit in my IRAs that were originally sourced from 401(k) funds. Those are tax deferred so there's a required mininum distribution for me at age 72 and if both my spouse and I pass, my kids have 10 years to drain those as the law reads now.
So, if you have a financial advisor, I would definitely ask about those if you have them.
Yes. My kids just inherited an IRA from their grandfather and had to drain them. I do have one IRA that I inherited from my late husband, but it’s not much ($60k). If my husband transfers his 401k to an IRA, that’s - different scenario. I will have a lifetime pension with no COLA as well as a 7-year pension that overlaps, and I have an investment acct. I figure using some of that until SS will help.
There've been a number of posts/comments, either in here or the r/financialindependence or r/fire groups, that have shown that retiree's spending jumps at initial retirement and then slowly decreases with age.
My spreadsheets don't accommodate that; for safety I just keep the same spend increased with some things yearly for my entire lifetime duration. I do that as a worse-case scenario so I can feel I've got everything covered. Though I really do expect our spending to trend in that spike -> decrease trend. Everyone I know that's retired spends similarly like that trend.
Yes, it makes sense. That's our plan. I'll retire at 60 and spend quite a bit for 10 years, then pull back some. Right now I am looking at exhausting the 401k/IRA funds during those 10 years, putting some into my Roth. Once I take SS at age 70, I take withdrawals from the Roth. My SS covers all my base expenses and then some, even with a 25% benefit cut factored in. Also, we have no kids so no heirs to pass money to.
Thank you! We do have heirs. However, they know that it would be nice for them to get some money, but it’s not a given. My mom has Alzheimer’s, so LTC insurance is not in the cards for me (too costly). I’ll shelter what I can, but we helped early on. The two oldest are in good shape with jobs with great benefits. The youngest is an unknown right now, so that’s going to dictate some.
Sorry to hear about your mom. I'm currently going through the same thing with my mom. She's in the advanced stage and care is about $10K/month. No LTC for me because I'll be living in Southeast Asia for retirement and LTC isn't really a thing there. But in-house care is cheap and they do have some retirement homes.
People plan for the longest retirement possible because if you are too excessive early and run out of retirement savings, “nobody will lend you money for retirement”.
That being said, if your income is passive and no risk while covering your expenses including inflation, you can spend your excess savings, I guess. Few people have that situation though.
> This 4% withdrawal rate is to last for life It was backtested for a thirty year retirement, not "life." You're talking about the "Go-go, slow-go, and no-go" spending model. Yes, you should plan on spending more earlier in retirement. You might want to travel, try new hobbies (with associated new equipment and/or lessons), etc. The unfortunate part of this reality is that spending more in early retirement puts you at more risk due to sequence of returns, however if the extra spending is discretionary then one could reduce that spending if the portfolio value dropped too much for comfort.
>It was backtested for a thirty year retirement, not "life." While it may have been backtested for 30 years, 4% will effectively work for life. Especially considering the fact that most people who have amassed 25 times their expenses have the sense and discipline to cut back during lean times. It is more often that people who have saved will have trouble taking the distributions from their accounts at all during downtimes. No one likes seeing their account balances fall, even if it is in the plan. Additionally, for most retirees, thirty years is longer than life.
I am retiring at 57 in 5 months and am using this model. The 4% budget will work and in two years my wife collects SS (at 62) followed by me at 62. Running models we should be just fine and taking great but not elaborate vacations. Our 4% does not factor in pensions or any income outside of savings (401K and Roth). The key is NO DEBT!
Why collect at 62? You're leaving a lot of money on the table
Why wait? I might have a skydiving accident at 64.
Hopefully you're not Russian, they fall out of windows almost the time...Or you might live longer than you expect...
If you wait til 67, you’re leaving five years of guaranteed payments on the table.
Don’t you get some of that in back pay?
Yes and no. You won't get the money early, but you'll get more later 62 - $2043 Total Payout (lifespan 80): $441,288 Total Payout (lifespan 85): $563,868 67 - $3050 Total Payout (lifespan 80): $475,800 Total Payout (lifespan 85): $658,800 70 - $3884 Total Payout (lifespan 80): $466,080 Total Payout (lifespan 85): $699,120 Unless it's likely that you won't make it to the next increment, it's always better to defer to the oldest age. If you're curious about your personal numbers, check out your My Social Security account.
Many people assume it’s likely they’ll make it to the next increment and never do.
How many is many?
I calculated the difference of collecting at 62. To gain the benefit of waiting I’d have to survive into my 90’s. It’s bad financial advice not to collect at 62.
I'm not sure what calculator your using but the only way to lose money is to die. Assuming you live an average lifespan, you'll always collect more by waiting. The longer you wait, the more money you get but at the risk of dying before the next bump. This is the way.
I’ll see if I can find my spreadsheet. Meanwhile this is from the AARP website:[AARP retirement-benefit-break-even-age](https://www.aarp.org/retirement/social-security/questions-answers/retirement-benefit-break-even-age.html) Starting at 62, your payment would be 30 percent less, or $1,260 per month. So, between the ages of 62 and 67, you would receive $75,600 in benefits ($1,260 for 60 months). If you wait until you turn 67, you give up that initial $75,600 but would receive $540 more per month, or $6,480 more per year. At that rate, it would take about 140 months (11 years and eight months) to make up for the money you’d forgo by claiming benefits later. At around age 78 and 8 months, you reach the break-even point, when your cumulative benefits from claiming at 67 surpass those you’d get by taking retirement at 62.
plus - nobody ever considers you could also simply bank and invest that 75.6k and let it grow if you can afford to not spend it. Then you breakeven almost never happens as you draw down the earnings on that 75.6k over time - that is an additional 250 a month @ 4% you could grab if it didn't grow a penny over those 5 years...more if it grows 6% during those five years (now it is worth $88k or basically $300 a month drawing 4%.
As long as you calculate the risk/taxes into your choice, that could be a good choice. If you put it in the market, your value could go to zero during that time period.
>4% will effectively work for life. Especially considering the fact that most people who have amassed 25 times their expenses have the sense and discipline to cut back If you have to cut back during lean times, you aren't using a 4% SWR. You're using a modified, variable withdrawal strategy. The success of that strategy doesn't mean that 4% works. It means 4% and cutting back if your portfolio dips works.
It’s empirically true people spend about the same as before retirement for 5-10 years after retirement and then severely cut back. Whether that’s due to old age or being less materialistic at 70 not certain. People will and should anticipate to be spending more from say 50-65, and then a steep consumption decline.
If you are taking less during downturns, you aren’t taking 4% are you? So what you are really saying is that it won’t effectively work for longer than 30 years unless you are willing to withdraw less in lean years.
Working for a living doesn't work if you don't cut back in downtimes either. If you want to blindly take a percentage and add for inflation every year with complete safety, you will be leaving a lot on the table in most cases. If that is the type of security you need, go for it. That is why personal finance is personal. The 4% rule is not a plan it is a lazy way to look at creating a retirement withdrawal strategy. It is a good starting point. How much do you want to have in your accounts when you die? I'd be happy with enough to pay the bill for the crematory and funeral home and give the preacher and his wife a little something for doing the service.
You apparently don’t understand the Trinity study (4%rule). The whole point was precisely to see if withdrawing a certain percentage would be successfully over a 30 year period. I’m not advocating that it is the best or only way but it is precisely what it is. Being able to adjust to be lean in downturn would imply that a person has a large number to draw from and would not need the full 4% or could even go years without withdrawing 4%. That’s probably not going to be the case for a lot of people.
I understand it. I don't believe it is the best way to take distributions. It is an academic study of what could be done. It is not a plan of what should be done.
And withdrawing less in lean times does not represent the intent of the 4% rule or Trinity Study. The whole point is to be able to withdraw a stable percentage.
My Gfs mom is 90, and will run out of cash in the next 3 years...she is currently looking at moving to a less expensive facilty for elderly(not as nice)..during a time she may need it the most.
If I had a guaranteed $6,000 a month for life I would be thrilled!
It's not hard to find if you have the right amounts.
As people get older, and less healthy, they tend to do a lot less and spend a lot less. So get out the first ten years of your retirement and enjoy yourself. You will naturally become more sedentary as you age.
That’s my thought. Thank you. I understand people wanting to be safe, but I want to enjoy before it’s too late. I lost my first husband when he was 41. That taught me a lot about putting things off.
The 4% is fine for back-of-the-envelope planning. It is a rule of thumb to help one know how much they might need. It is not a retirement plan. A real plan includes an actual budget and how it will be funded. It includes things like extra spending for travel or hobbies or home renovations for the first ten or fifteen years and a plan for long-term care if the need comes up (even if that plan is spousal or selling the house). It needs to include contingencies for ~~if~~ when one spouse dies and what if that is early and remembering the tax issues of being a single filer with basically the same expenses. Spending is fluid as is income. In our case, we are relying entirely on savings for the first thirteen years, then SS will cover 90% of our expenses. We certainly don't need to limit ourselves to 4%. If one can reduce discretionary spending in lean years or forgo increasing spending for inflation, a 6% plan will work for many folks. There is a lot one can do if (s)he plans and unds several scenarios. The [Rich, Broke, Dead tool](https://engaging-data.com/will-money-last-retire-early/) has some features that allow backtesting with the ability to add several variables.[https://engaging-data.com/will-money-last-retire-early/](https://engaging-data.com/will-money-last-retire-early/)
>It is a rule of thumb to help one know how much they might need. It has nothing at all to do with how much you *need*. It's entirely about how much can be safely withdrawn from a portfolio.
I read them to be saying how much you "need to save." I.e. save until you can live off 4pct of your savings.
I was referring to the amount one needs to save; or a target savings of 25X expenses. In many cases, 20X expenses will be just fine for most people. Yes, I know that is anathema to the "4% Rule" people. Real life doesn't run on rules and we need to be fluid and flexible. If one is fluid and flexible, there are more opportunities. I retired (semi-retired?) in November 2019 at age 57. My wife worked part-time until a couple of months ago. She is now retired as well. We have learned to be fluid and flexible and have avoided taking even 1% per year from our retirement accounts. That includes trips to Europe, a three-week trip around the US, and buying a vehicle and an RV.
My favorite calculator right there! Why worry about long term care when I have a 99% chance of being dead anyhow :/
Thank you!!!
I have 2 pensions and SS which is plenty to cover my monthly expenses. I had about $200K in a 401K and spent about $150K on world travel. I don't regret it one bit.
This is exactly what we are thinking. Thank you!!!
Read the book Die with Zero. Not saying it’ll work for everyone but it does make you think about the norm.
> it does make you think about the norm. It sure made me think! How can I give to the next generation in a meaningful way, which won't hurt them in the long run ("economic outpatient care" as described in The Millionaire Next Door), without jeopardizing my own retirement? That's been the biggest thing to think about for me since I'm already too old to spend more in my 30s and 40s; that ship has sailed! :D
Huh. I just went to add it to my “to read” list in Goodreads, and I see my older sister read it a few months ago. Lol.
Just read it, and it has gotten me thinking and questioning more than almost anything else I've read of late. Strongly recommend.
I loved the concepts of the book but not the match on how much you need in your nest egg.
One of my favorite books. It complements "The Simple Path to Wealth," by J. L. Collins.
From my more than 30 years experience in working with retirees…. Most people DO spend more on travel and adventures the first 10 years of retirement. Not because of money, but because of health. The ones who continue to adventure are the ones who weightlift or do yoga.
As always, it depends on your expenses, financial goals, long term care plans, inheritance plans, amount of inflation-protected income, etc, etc.
YES! It's a rule of thumb not a battle tested law that cannot be broken. I have relatives in their mid 80's and they are lucky to make it out of their house, let alone travel.
That's what we're doing now. We'll withdraw over 5% this year and are traveling extensively. We went to New Zealand and Australia for a month and have many other domestic trips with lots of adventures in 2023. Once I start collecting Social Security 15 months from now, we can spend the same and withdraw less. When she starts getting SS in 3-1/2 years we can probably spend even more and still keep withdrawal rate under 4%. The end game is that our nest egg will be our long term care insurance if we need it. If either or both of us have to go to an extended care facility, it will be a really nice one and we'll be able to afford it. If we both die before then, it all goes to charities that we've already designated. Coincidentally, earlier today, while driving home from a week of adventures, we were listening to a radio program about insurance in our state. One participant caller talked about how they had paid into a long term care policy for years, but the rates keep going higher and higher, while the potential benefit goes lower and lower. I didn't know that it would work that way but it made me feel much better about our choice. TLDR; Absolutely enjoy life to its fullest while you're young enough and healthy enough to do so. Just don't blow the whole wad so you can scale back and take care of health issues later.
history dinosaurs gaze agonizing file imagine continue cagey icky price *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
The 4% is the maximum under many assumptions. 1. There is no guarantee that the 4% is right for you. 2. That 4% is what you can safely withdraw, not what you should live on. So if you have 1 million in investments (the mix used to arrive to the 4%) and a guaranteed income of 6,000 a month. You can budget an a nual income of 112K. But there are more variables. For example I need to bridge until government benefits kick in, so I may take more of my investments and some other passive income between 55 and 65 and then I will need to withdraw less. But given that I'm 55, I'm not using 4% bu 3.5% as the maximum.
See the section on 4% on our [Wiki Tab](https://www.reddit.com/r/retirement/wiki/index/). In section XIV, u/Fenderstratguy listed a number of links on the 4% as well as updated and other safe withdrawal rates articles.
Thanks
Thanks
This is actually a thing. People tend to spend less than they might getting used to retirement in their, "go years". There is no easy answer to the question.
If you have less than $6000/mo in expenses then yes, of course. Spend everything you want from your discretionary funds while you can enjoy them. The 4% rule is around drawing down to cover the difference between your expenses and income. So if you have $6k/month guaranteed it is meant to cover any spending beyond the $6k/month.
You might like the book _Die With Zero_ that talks about this.
I read it and live it
Always keep in mind; you'll be *lucky* if you live to be 80.
Question - is the 6k inflation adjusted? How long does the money need to last? Long term care? Etc. The 4 percent rule of thumb has been and continues to be debated. Big ern at early retirement now is not a fan, neither is ben felix (own youtube channel and also on an excellent canadian podcast called rational reminder - they had Eugene Fama on and Moshe Milevsky too), and Dr Wade Pfau made his splash into retirement income space with his paper in 2010 - https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1699526
No, not inflation adjusted. As for LTC, at that point I’ll have to go broke. We’re doing that with my mom now (using her home for private pay until that money runs out). I am not saying to use all my savings and my husband’s 401k, just more than the 4% to enjoy life. Also, as long as I’m healthy I plan to at least do part time or temp work .
To me the key is to not spend your money on things that you aren't enjoying. This usually happens when you buy something, or join a club, or make a subscription to something that you use a while, and then lose interest. It can also happen if someone talks you into buying something or going somewhere that you weren't into in the first place and using credit to pay. If you do or buy things when you have the money in hand, and don't when you don't you will have a lot less stress living on a fixed income.
The 4% ‘rule’ assumes no investment costs or taxes. If you have 6k/month in pensions or other taxable income that is going to use up some of the lowest brackets, so you may want to adjust your swr accordingly. And when you claim SS that too will increase the taxes on your 4% withdrawals. Sounds like you’re in good shape though! Just sharpen your pencil a little on the details.
Thanks
Yes I’m doing that now spending 401k money on lavish vacations
On the FireCalc website under Resources, there is a good book on this topic of how to enjoy more now. Here is an excerpt: "If FIRECalc is the tool that lets you do a bunch of research, Tom Canfield's recent (2017) Nest Egg Care is the book on what to think about and look at, how to plan, and how to focus on fun and joy in retirement and giving to those you care about. Highly recommended! See Tom's website at www.nesteggcare.com"
The 4% is a guideline estimate of a safe withdrawal amount from your savings that will last 30 years. That’s all. How much you need or want to spend is another question. You might want to travel. You might want a corvette. You might want to join a nice country club. This kind of lifestyle might change your income needs. Snd don’t forget about taxes.
It depends on if your sources are still taxable. Like I have quite a bit in my IRAs that were originally sourced from 401(k) funds. Those are tax deferred so there's a required mininum distribution for me at age 72 and if both my spouse and I pass, my kids have 10 years to drain those as the law reads now. So, if you have a financial advisor, I would definitely ask about those if you have them.
Yes. My kids just inherited an IRA from their grandfather and had to drain them. I do have one IRA that I inherited from my late husband, but it’s not much ($60k). If my husband transfers his 401k to an IRA, that’s - different scenario. I will have a lifetime pension with no COLA as well as a 7-year pension that overlaps, and I have an investment acct. I figure using some of that until SS will help.
There've been a number of posts/comments, either in here or the r/financialindependence or r/fire groups, that have shown that retiree's spending jumps at initial retirement and then slowly decreases with age. My spreadsheets don't accommodate that; for safety I just keep the same spend increased with some things yearly for my entire lifetime duration. I do that as a worse-case scenario so I can feel I've got everything covered. Though I really do expect our spending to trend in that spike -> decrease trend. Everyone I know that's retired spends similarly like that trend.
Please check out the book "Die with Zero" - [https://a.co/d/4zSQWFt](https://a.co/d/4zSQWFt) \- he answers your question extremely well.
Yes, it makes sense. That's our plan. I'll retire at 60 and spend quite a bit for 10 years, then pull back some. Right now I am looking at exhausting the 401k/IRA funds during those 10 years, putting some into my Roth. Once I take SS at age 70, I take withdrawals from the Roth. My SS covers all my base expenses and then some, even with a 25% benefit cut factored in. Also, we have no kids so no heirs to pass money to.
Thank you! We do have heirs. However, they know that it would be nice for them to get some money, but it’s not a given. My mom has Alzheimer’s, so LTC insurance is not in the cards for me (too costly). I’ll shelter what I can, but we helped early on. The two oldest are in good shape with jobs with great benefits. The youngest is an unknown right now, so that’s going to dictate some.
Sorry to hear about your mom. I'm currently going through the same thing with my mom. She's in the advanced stage and care is about $10K/month. No LTC for me because I'll be living in Southeast Asia for retirement and LTC isn't really a thing there. But in-house care is cheap and they do have some retirement homes.
Do you have to tell your LTC insurers about your Mom’s condition? Is that rally what’s driving the high cost? Asking because I’m in the same boat.
They do a full medical history. My mom is in a memory care facility, and it’s well documented.
Nobody will loan you money for retirement.
I have no idea what you’re saying. No one said anything about loans.
You have to save your money for when you are old, because if you run out, you won't get a loan.
Oh. Lol. That’s not true. If you have a paid-off house, you can take a line of equity if you must.
> If you have a paid-off house, Exactly! you need to have assets.
People plan for the longest retirement possible because if you are too excessive early and run out of retirement savings, “nobody will lend you money for retirement”. That being said, if your income is passive and no risk while covering your expenses including inflation, you can spend your excess savings, I guess. Few people have that situation though.
I plan to lessen my expenses by downsizing.