Beyond the 4% Rule--Conversation with Bill Bengen | Live Q&A

[@philruehlen]

Can't believe Bill is a market timer! Great interview Rob!

[@zekeboz5533]

Lol… I was excited to see Bill on as a guest! Ended up being floored with his own approach to investing that was the exact opposite of what he came out with in 94! You ended up having a deer in the headlights look Rob when he started explaining the moves he made an 09 and today. I think you should get for your next interview Big Ern of early retirement now. The spreadsheet he has for safe withdrawal rates and consumption rate is killer!

[@tn-music]

I stopped at user questions but wanted to comment. While I disagree with Mr. Bengen's personal methods (subscribing to a market timing service?), you have to appreciate the honesty. His thoughts seem authentic. To be fair, he may have introduced the "4% rule", but that doesn't mean he (or we) must follow it. It's simply a guideline worth considering along with everything else. Nice interview Rob and thank you.

[@joeburns3302]

Thanks Rob another great video. I love that no matter how educated and knowledgeable a person is they still doubt themselves. It shows we are all human and it is very difficult to take fear and greed out of investing for retirement. Thank you sir for reminding us everybody is nervous and needs sounding boards.

[@rralphymiller3115]

Hey Rob. I soooo! Enjoyed you chat with Bill Bengen. As it turns out accumulating is much easier that spending you life savings. Well said.

[@markmorris2517]

My mind is blown... the "Father of the 4% Rule" is writing prescriptions but not taking his own medicine! Worse than that he's going against his own requirements to survive long term in retirement (i.e. 50-75% stocks). Thanks as always Rob for great info and logical advice.

[@HamiltonRb]

I wondered about that as well. How do you withdraw 4.7% when you have moved most of your portfolio to cash? Also, if your portfolio is set up properly, you shouldn't have to touch it in good times & bad, other than rebalance once a year.

[@zekeboz5533]

Yeah it would be really interesting to use Bill‘s approach as a scenario with The next guest rob has. What would the bucket guy think of going 50% cash and 20% CDs or a 30/70 scenario 30% equities 70% cash.

[@brucehazen8982]

The 'rule' probably doesn't apply to him -- he may have millions socked away, and be spending (who knows) 1-2% or less of his stash. The 4% rule is more aimed at people like me, with only a few hundred thousand.

[@ReesesPieces81]

He's very old. He's only got so many years to go and he doesn't need to take the risk of stocks, he won't run out of money.

[@celtosaxon]

@@ReesesPieces81 shouldn’t lack of fear spur one to take more risk?

[@roadmapmoney]

Great watch Rob (and Bill!). As someone assisting in managing withdrawals for a retiree, these thoughts are helpful. As we planned for 10 years at just above 5%, then down below 3% once withdrawing Social Security, I like having a framework to think about this current market. Thanks for sharing!

[@markevans6201]

Thank You for ALL Your Help Rob ! Always Great Information !!

[@Xillasun]

Outstanding questions, Rob! Fantastic episode. Thank you!

[@johnpawlak7484]

This is your best show yet!

[@ksgtokgo]

Thank you for having Mr. Bergen on. Good conversation.

[@xporkrind]

This is totally awesome. Great video.

[@michaelnitake2534]

Fascinating discussion

[@JR49300]

@RobBerger Great discussion 👍

[@Andformerthingshavepassedaway]

Another great épisode.

[@boricua_in_wa]

Great interview thanks!

[@bobdrawbaugh4207]

Very informative show Rob!

[@ksgtokgo]

So Mr. Bengen’s research found 4% (etc) to be a safe withdrawal rate. That’s great. The fact that he now personally chooses a different approach does not in itself invalidate the research or diminish the 4% “rule” as a guideline or a good starting point for retirees. He will do what is best for him, just as we all should. (If, for instance, you have a ton of money and want to preserve it for children - why muck around with a “4% rule”?)

[@dadsgoogleacc259]

Great job Rob...loved the content and your humour!

[@JR49300]

@RobBerger I think what I learned about your guest and overall investing strategies are- I think you can have a plan but age and the market may make you implement some changes along the way.

[@donald-ig5sj]

Very interesting video, thank you!

[@modernfinancialplanning]

I emailed Bill about the portfolio withdrawal assumptions. His initial research has the portfolio being withdrawn once at the end of the year. Having portfolio withdrawals at the beginning vs. end of the year makes a slight difference in terms of portfolio longevity.

[@joefalconer9625]

So, what you all seem to be missing is that although Bill is not attempting to catch the actual bottom or top of the market, he is following trend (or his advisors are). So, when you can't imagine he's doing better than "just hold", you're ignoring what he's told you. He's currently only down 5% versus say the market down 20%. He will be sitting with his cash ready to re-invest on the uptrend. Its a bit more complicated because he's shorting as well. The benefits of following the trend is that in times of serious bear territory (with no idea how long it will last) he is out in cash. And, if large (maybe unexpected) expenses arise, they can be met from a pot down only 5%. Plenty of research that trend following beats just holding the market. The key however is catching the trend which is why he pays someone with a credible history of doing this to tell him. He's telling you that he can do better than just employing a passive 4% withdrawal and he can do it with less risk. This does not undermine his 4% rule for passive investors.

[@pamschroeder6037]

You mention using a “lower safe withdrawal rate” (4-4.2%) when pulling from a taxable account vs. pulling from a tax deferred account (Traditional, 401k, etc. of around 4.7%). Wouldn’t withdrawals from a taxable account result in less taxes since you have a certain amount of basis vs. no basis in the tax deferred account? Big fan of the show!

[@sweethomechicago]

Great question! It actually depends on how much you are withdrawing. Remember you have a $25,000 a year standard deduction. So when you retire and you're no longer working. The first 25,000 a year that comes out of a traditional account whether that's a traditional 401k or traditional IRA is completely untaxed. Depending on how much you need to support your lifestyle, especially if your home is paid off you may be off in a better situation to empty that traditional and leave the Roth accounts to compound

[@rjpg]

If I was new to the 4% rule and heard this interview, I'd be wary of following it if the author doesn't follow what he wrote. I think Rob gave Bill plenty of chances to explain his cash strategy and Bill was like "oh well". I can live with 2% (luckily) but no way would I'd go to 4.7%. I think the 4% rule is valid but Bill wasn't exactly helping his famous study.

[@Ytsejamguru]

One point of discussion that you all were talking about near the beginning. You all discussed trying to incorporate CAPE ratio-based dynamic withdrawal rates in a methodical fashion. I wanted to mention that Karsten Jeske at the Early Retirement Now blog made a linear function as a modification of the Constant % Rule that takes into account the current market CAPE ratio to try and smooth out the withdrawal percentage as the market gets "cheaper" or "more expensive." This is his Safe Withdrawal Rate series, Part 18 if you all were interested in doing an analysis of this. I'd be curious to get your opinions.

[@rob_berger]

I'm reading through his SWR series now.

[@danhanson9101]

Great interview. There was a comment by Bill inferring you could take out a higher percentage from a taxable account, compared to an IRA. I didn't follow that at all and it wasn't discussed. Anyone understand why?

[@mj1961christian]

I think it comes down to knowing what works for you. I take everyone’s advice with a grain of salt. My plan is to try to withdrawal as little as possible as long as I can when I retire. Again that’s my plan but not for everyone. No one knows the future. All we can do is plan the best we can and put it in Gods hands.

[@joelfranco9451]

Hi Rob, hope you are well. I have a question I've seen a few of your 4% withdrawal videos however, idk if you've answered this. Say the stock market is on a down turn and didn't want to take the inflation adjustment in that year or for the years until the market recovers. When I return to adjusting my withdrawals to the inflation rate what number would I apply the inflation rate too? Say my first withdrawal was 40k off a one million dollar portfolio and this down turn occurs in a later year of retirement. Can you please provide an article where I can further understand this concept. Thank you in advance.

[@johnbirman5840]

While it IS surprising that Mr Bengen has such a large Cash position, in a high Risk environment, which we experiencing NOW vs what MIGHT be in the next few years, Is it THAT surprising? No hard or fast rule applies to cover ALL financial realities (or possibilities) that one can just merrily apply. Except perhaps lowering your level of expectation. It is a much more pleasant experience to lower your level of expected returns and be surprised that one has received more, than to expect a much higher return and receive much less. Rather obvious - duh! - but greed never lets you down - negatively that is. I hate that expression: “Be Greedy when others are Fearful”. No. Be Wise when others are Foolish. And don’t Invest at the Roulette Wheel.

[@luisoncpp]

An issue with the 4% rule is that we don't know the safe withdrawal rate of the last 29 years, so, we don't know if it has gone down. It may seem unlikely to retire in a new lowest-than-ever year, however, that's not necesarily the case today, safe withdrawal rates may have been already in a bad rap through several years and we don't know yet.

[@pat-orl]

This really took a weird turn with this idea that he pays a hedge fund of some kind of manage his money.

[@zenfishbike]

Need to know the size of his portfolio to evaluate the sanity of a 50% cash allocation. $10 million, could work. 1 million, not so much.

[@divertiti]

Why wouldn't it work for 1m

[@randolphh8005]

The issue that is not well described and I’m not sure on research, is for whom does the 4% rule provide the best outcome. If I have 100k? If I have $10 million. Is it just for passive investors? He said that the 4% rule is in isolation, no consideration of fees or other income streams. He also intimated that there may be some active high end investors with better data that can do better. That doesn’t shock me, but is not the same as me trying to predict the market.

[@joemicklow8966]

Good show. I look forward to the 3 bucket show.

[@slovokia]

It is not practical to advise large numbers of investors to allocate 10% of their equities to microcap stocks because that amount of investment demand would swamp the capitalization of that market segment. Whatever factor returns one would hope to harvest would probably disappear.

[@swingitjack]

31:49 for Bengen's own Portfolio

[@lubokanev7436]

Thanks! Been looking for that for half an hour

[@CD-ql9hz]

I believe Mr. Bengen lost a lot of credibility. This is like finding out the person trying to sell you whole life insurance actually buys term and invests the difference. I don’t agree with everything Dave Ramsey says but at least he follows his advice of 100% stocks and paid for real estate. In any event, Rob thanks for providing great content!!

[@JaredHoutsma]

Bengen created a "rule" that said take out 4% a year for the next 30 yrs adjusted for inflation & there are good odds you wont run out of money. Have you ever met someone that followed the rule in its exactness in retirement? No; the rule is used for those leading up to retirement; it's a guidepost for planning.

[@bobjbkbob3305]

He mentioned a paid risk assessment service which I couldn’t comprehend. Can you clear it up for us

[@bobjbkbob3305]

Nevermind, I jumped the gun

[@ltmsimply]

Little disappointed with Bill. It sounded like he tapped out of investing and not minding of paying an account manager…

[@pat-orl]

Baseball cards are collapsing, oh no! lol

[@jeffsim4191]

No idea why Bill suggests just splitting a portfolio equal weight into funds based on company size rather than address factor tilts. Small cap profitable value has done far better than just small cap for example.

[@favjr]

Sounds like he may have some data limitations if he is just using just those datasets and doing all his work on spreadsheets. The real lesson to draw from his efforts is that you can attain higher safe withdrawal rates with better diversification. So factor tilt away! But yeah, a simple 50/50 large cap growth/small cap value mix is going to be better than what he proposes.

[@nonionbeezness]

I’ll add in my grumble about Bengen not dogfooding. He isn’t following his own presented plan if something around 60/40-90/20. He’s not even on the field. So he is now one of those that thinks they can do better enough to justify the work - or is he just bored in retirement and needs the challenge to keep him busy. In the end the question comes up - if he’s not following his own strategy why should any of us do so? His discarding it for a paid risk management service and resulting huge cash position make it feel like there is a huge flaw in the 4% rule philosophy and he’s not sharing it but just doubled down with a 2020 paper. Given his articles , what is called “papers” a lot, are any of them peer reviewed by academia that can validate the data, approaches , conclusions ? What adds merit to papers in science is the peer review process. Is thing this also is done in papers in finance and economics.

[@rob_berger]

I was surprised as well to learn just how much he's deviated from his own plan. It's not just asset allocation. He said he would cut back spending after just a few years of high inflation, even though the 4% rule survived more than a decade of high inflation. And his use of technical analysis to generate a portfolio of nearly 100% cash was very surprising to me on a lot of levels. All of that said, we each have to make our own decisions. I wouldn't let his choices (or mine for that matter) affect what you decide is best for you.

[@alexgonzaga3438]

Your pauses are too long. And you’re talking just stories not informative.