Safe Withdrawal Rate - Why it Doesn't Matter

bee

Interesting take on the SWR and why it probably doesn't matter if you know what it is.

The people most concerned about outliving their money tend to be the least likely to actually do so. They stack conservative assumption upon conservative assumption—projecting higher-than-expected inflation, worst-case market returns, maximum sequence-of-return risk—and then underspend out of fear. They end up dying with too much money and too many unfulfilled dreams.

Yes, the 4% rule might give us a loose framework. Yes, financial models have value. But they were never meant to become shackles.

The truth is, you can’t predict the future. Black swan events, long-term care needs, unexpected medical expenses—these things happen. But the bigger danger for this audience isn’t overspending.
It’s under-living.

Link to Article:
why-youre-wasting-time-worrying-about?

also,

A discussion from Reddit regarding SWR and how it is just a rough calculation and not a fine tuned retirement spending strategy:
DIYRetirement/comments/safe_withdrawal_rates_and_variable_cash_flows

Mark

Guilty as charged but it's a struggle to break the habit of caring for family members at my own expense. To be fair they don't ask for anything but it is satisfying to assist them when I know they are struggling. I do try to find a balance as best as I can.

sfnative

FWIW William Bengen's new book does a deep dive into this topic -- based on what is obviously an enormous amount of thoughtful research -- and is a worthwhile read.

hank

”It takes money to make money … ” - Old cliche. So true. So the cost of drawing down may be greater than it seems.

All kinds of factors to weigh -

Is the money coming out of a Taxable account, Traditional IRA, Roth IRA?

Are you sitting on a 3% mortgage? If so, let the music play on. Do you own a home? Rent?

Costs of living rise with age. Not just medical costs. How about all the home maintenance you used to do yourself? Climbing ladders gets harder at 80 than when you were 50 or 60.

Observant1

Thanks—I've enjoyed reading this article!
The so-called 4% rule is a good starting point for determining withdrawal rates
but it is not written in stone and may not be applicable in many situations.
Supposedly, financial advisors often have to encourage their clients to spend more.
Worrying about withdrawal rates is a waste of time for these people.
However, contemplating withdrawal rates is not an "academic exercise" or "distraction"
for many people with less financial security.

I broadly agree with the author's stated beliefs:

Instead of spending hours tweaking your safe withdrawal spreadsheet,
you should spend that time figuring out what matters to you.

What experiences light you up?
What do you want to say yes to before your time is up?
Where are you holding back out of habit, fear, or spreadsheet-based anxiety?
Then spend.
Pivot when needed.
Adjust along the way.

Because your retirement spending isn’t a fixed equation—it’s a living, breathing process.
It should evolve with your life, your priorities, and yes, even the market.

BTW, the benchmark withdrawal rate was raised in Bill Bengen's new book.
https://www.mutualfundobserver.com/discuss/discussion/64438/safe-withdrawal-rates-bengen#latest

Crash

Mark said:

Guilty as charged but it's a struggle to break the habit of caring for family members at my own expense. To be fair they don't ask for anything but it is satisfying to assist them when I know they are struggling. I do try to find a balance as best as I can.

You are to be commended!

Sven

@Mark, you set an example for all of us in helping your family.

hank

Sven said:

@Mark, you set an example for all of us in helping your family.

+1