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Author: TheBreeze Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 5076  
Subject: Re: 8 years till ER Date: 10/12/2004 8:29 AM
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Investors can safely withdraw a maximum of 4% annually from a well-performing, well-balanced portfolio without cannibalizing their principal. Withdrawing less is better, and withdrawing much less is much better. Investors can withdraw more than 4% annually from their portfolios, but they will raise their vulnerability to outliving their money -- or they will find that the only way they can maintain their standard of living is to die early...I would suggest that as you approach five to seven years from retirement, you SLOWLY adjust your portfolio allocation so that at retirement you have a 50/50 mix of stocks and bonds

Just some thoughts--

1. The 4% withdrawal rate is based on a 75%/25% to 80%/20% mix of stocks/bonds, with the stock portion being a stock index like Total Stock Market or S&P500 (all US stocks). The withdrawal rate is less than 4% for other asset mixes. So 50-50 does NOT give a 4% withdrawal rate based on past performance.

2. Re: "withdrawing much less is much better": If you can withdraw your money at a miniscule rate, you may have worked too long! If you loved your job, no problem, but if retiring early is your goal (and calling yourself a "FIRE Wannabe" sure sounds like that category), then you worked longer than you needed to get to a "safe" withdrawal rate + a little headroom to account for unanticipated expenses.
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