Skip to main content
No. of Recommendations: 3
I seem to recall the studies show the safe rate is an inflation-adjusted 4%. So the OP is fortunate that their needs are achievable.

IIRC, the 4% rate takes inflation into account when adjusting (increasing) the withdrawals in subsequent years. I *think* that's that same as what you said.

But, IIRC, they used something like Monte-Carlo, and used the actual historical inflation rates. They didn't use an arbitrary fixed rate like the 1.5% the OP assumed.

FWIW, I think that assuming 1.5% is much too low and completely unwarranted. The SSA annual Cola rate, averaged 1975 thru 2010 is 4.2%. 'course that included the Carter years of double-digit inflation (1980/81). The average of 1982-2010 is 2.9%. And that includes two years of zero (2009/10) which will likely never occur again.

I recall reading somewhere that the SSA rule-of-thumb is 2.2% inflation rate.

I prefer for my finanical surprises to be of the "Wow! We can go to the French Riviera this year." category rather than "We'd better learn to like Alpo."

All it takes is one 11.2% year (like 1981) when you are depending on 1.5% and you are well and truly screwed.
Print the post  


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.
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.