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4% to 6% is the qreat question. It depends on how long you expect your capital to last, and what probablility of being pinched you are willing to live with.

My simulations show that starting with 4%, increasing it 3% every year for inflation (i.e. $1,000,000 capital; 40,000 first year; 41,200 the second year; etc.) will give you a 95% or better chance of never dipping into your capital. (Mrs. W plans to live forever.) As you increase that initial draw frow 4% to 5% or higher the likelyhood of not dipping into capital decreases to 90% or much less.

I assume a 1% per month return on stocks with a 3% standard deviation. That's about what the S&P500 have done over the past 25 or 30 years.

Here's the good news. If the assumptions hold, you will probably be able to increase your draw by more than 3% after 6-7 years, even if the first few are bummers. After all, on average you are using only 7% (4% to spend and 3% to grow your capital for inflation) that leaves 5% to take care of the bad years. After a while, say 5 to 10 years, that 5% wins the battle and you will have quite a cushion.

The real risk is that you have a couple of bad investment years as soon as you retire. Once you pass the first few years you are right in that you will have a very good cushion. You could safely increase your withdrawl rate at this point.

The problem is that its the first few years that I will be able (physicaly) to do a lot and I would like to "over spend" at the start of retirement.

I think I will set aside an "over spending" account for say the first five years. I will not count this money toward normal retirement expenses. This money would be for extended travel and entertainment.
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