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Hi MarkR -

I’ve long felt the 4% rule was a better planning guide than a retirement spending guide. As in “a good target to save for is 25x the annual spending you need your portfolio to cover.”

The whole 50/50 stocks/bonds allocation piece and “only increase your withdrawal in line with inflation” piece seem more in line with the rule’s design around “worst case scenario” planning, rather than a guide on how to actually operate in ‘normal conditions’.

Heck, even the rule’s creator now thinks the number can be boosted to 4.5% or so and still hit the worst case scenario 30-year design criteria with a high enough success probability… On a $1,000,000 portfolio, that’s an extra $5,000 a year. Or said differently, in the original 4% rule, there was apparently already a 12.5% buffer built in…

The key is flexibility and cost control. In my original post, I mentioned that the $2,500 spend rate at the time would have kept us at a comparable lifestyle in a substantially cheaper area. If we were really forced to cut back, we could have gotten away with less. In addition, other than the lousy job market at the time, there was nothing keeping one or both of us from working. And even then, there were jobs available, just not the types of jobs where our training, skills, and experience would be valued sufficiently to command a large salary.

Regards,
-Chuck
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