No. of Recommendations: 2
The model usually indicates you can reset the withdrawal to the *new* 4%, but if one wanted to be more conservative and bulletproof, stick to increases pegged to inflation.

I don't think the model really indicates this.

To see why, we have to look at what are sometimes called second-order effects. A 4% withdrawal rate has a 95% chance of success. If you reset once, you are taking more than the original 4%, and you are starting over with another 95% chance of success. To me, that gives you a probablility of success of 0.95 x 0.95, which is just under 90%.

Every time you reset the withdrawal rate you decrease the probability of success. Sooner or later, you get to the point where failure is a pretty high probability.
Print the post  


The Retire Early Home Page
Discussion on accelerating retirement day.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.