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Couldn't you be "conservative" and use jumbo CDs to generate even higher fixed income preserving your capital?

You are right about the returns on jumbo CDs at the moment, but you may have slightly misunderstood what I was getting at.

I was referring to a very conservative way of estimating the value of a monthly income stream. I like to think of that stream as if it were the result of drawing from a portfolio that was invested on the Efficient Frontier (approx 75% equities, 25% fixed income). The 100% Safe Withdrawal Rate over all recorded periods while invested on the efficient frontier is about 4%. This allows the withdrawal to be increased by the rate of inflation each year and never deplete the principle.

It is also true that in a high percentage of the portfolios studied under these circumstances, they grow to incredible values over extended periods of time. However, in a very few starting years (like 1929) the portfolio will be about the same at the end of an extended period due to the high percentage withdrawn right after the market crashed by about 90%.

In todays market, there is no doubt that you can earn more than 4% on jumbo CDs or bonds. However, the 4% figure comes from statistics generated over the history of recorded market conditions (see the Trinity Study referenced from the Retire Early Website). 4% is just an ultra-conservative way of looking at it.

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