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sportfool asks,

First of all I am an newbie to this board. I may be forced into an early retirement next year, though it's not what I want it may come to pass anyway. I given some look at retirement calcuators and how much could be withdrawn for life. It seems that 3 to 4% is what's recommended. My question is, if stocks can reasonably be expected to appreciate 10% per year and inflation is roughly 3% or less why couldn't I withdraw say 7.5% per year and still have some appreciation and a margin of safety? Any comments will be greatly appreciated.

Ah, the age old question.

The reason you can't take 7% and retire happily ever after is volatility. The stock market goes up and down, and there have beem several extended down periods where a 7% withdrawal would have depleted your retirement portfolio past the point of no return.

If you haven't see it already, check of the Retire Early Study on Safe Withdrawal Rates,

Your not the first person that thought he could withdraw 7% from a retirement portfolio. No less a light than Fidelity's Peter Lynch thought so as recently as 1995 (Lynch, Peter, “Fear of Crashing” Worth Magazine, September 1995), but quickly withdrew the article after being presented with evidence to the contrary.


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