Hi, I’ve emailed you a couple of times in the past on other issues, but just read your latest article on “fear” of retirement.
This question is for both of you, but I know Billy handles a lot of the investment ideas etc. Our fear being under 50 years old, but with enough invested to handle the traditional idea of 4% withdrawals, is that the investment climate is so different than when you guys retired in the early 90’s.
We have markets at new highs and bonds at all time low yields and CD’s and money market instruments basically pay nothing. I’m wondering if you could imagine yourselves making that decision now based on today’s investment horizon, would you have saved more to account for what might be a much smaller SWR like 2-3% instead of 4%, or anything else different you might have done?
Thanks so much.
Thanks for taking the time to write. We appreciate it.
The fact is that in January of 1991 we had no idea of what the market was going to return in the future. All we could do was base our best guess on past returns. And honestly I cannot tell you what it’s going to do from here. However we have faith in ourselves and a strong will to succeed.
The S&P 500 has had a compound annual growth rate of better than 10% over the last 70 years. So pulling out 4% leaves you 6% for inflation and growth. Sure, if you can get your withdrawal rate lower than 4% all the better. There have been years when we went above it, however on average we have stayed below.
Flexibility is key, tracking your expenses and knowing what percentage of your net worth you are spending at any point in time is valuable.
If you are concerned for the next few years you could also have a larger than normal cash position.
At some point you have to have faith in yourselves and know that you can manage accordingly.
Would we do it again? Heck yes!