Flexible Spending Rules for Early Retiree's With Michael Kitces

Saving and investing are incredibly important if you want to retire early, but the flip side of that is how you choose to spend your hard earned money too.
How and what you spend on will determine your entire retirement trajectory, so let's jump into the numbers and uncomplicate things.
Michael Kitces:
kitces.com
169 A purple life:
choosefi.com/169
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[@timelston4260]

One of my favorite episodes ever. This guy knows his stuff. Super helpful and articulate.

[@elsacordova260]

This was so useful I feel like I will have to rewatch to fully understand

[@thepigwillfly5869]

I actually like listening to the Podcast on KZbin more so than my iPhone. Good content guys!

[@Pieter2360]

What an excellent episode! For folks who are interested in this topic, I also recommend the research paper published by Vanguard in June 2021 where they explain that 4% still holds for early retirees, even based on their low expected returns and a 50/50 portfolio, provided that you diversify internationally, have a low expense ratio and implement a flexible spending system.

[@METVWETV]

Yes a "Low Expense Ratio!!" Fees are NOT factored into the 4% Rule. We need to be aware of this before sitting back and wondering what's going on with our dwindling accounts....

[@litterbugger]

Such good info and very encouraging.

[@figo7405]

Once again: good stuff!

[@slimdawgwoof]

Michael is my superhero.

[@Jeff321]

Great episode! Kitces is one of the best.

[@SD-co9xe]

Great info.

[@seanwoodworth8247]

Wow, thanks for the episode. Impressive interview! Appreciate the discussion on safe withdrawal rates under different portfolio return scenarios.

[@70qq]

thanks

[@grasmi]

Kitces for president!

[@Vedette-sa]

Brilliant episode!

[@ChooseFI]

Aww, thanks! I read his blog all the time. ~Jen, Community Manager

[@christinab9133]

Wow!

[@jamesmorris913]

Just one possible "fly-in-the-ointment" to maintaining a withdrawal rate of approx. four pct, adjusting for inflation annually: R.M.D.s will eventually FORCE you into taking a larger withdrawal percentage.

[@METVWETV]

You reinvest beyond the 4% is all

[@dmoon9037]

Concur with the interviewee here: case study subject should strive to get the blog etc. income (and pay the 15.3% FICA on it) at the very least to the 1st bend point for another 25 years to flesh out her 35 years of indexed earnings.

[@rootedrotor525]

Great video. One question regarding the guardrails. If you start at 5% and the market stays within guardrails, do you give yourself an inflation adjustment during those years? Thanks

[@jhaybiebasco8529]

How does Michael's withdrawal adjustment strategy differ from the guardrails under the Guyton Klinger rule?

[@arianamora101]

Please bring A Purple Life back for an update on her retirement 😎

[@ChooseFI]

She's pretty cool. If you have a Twitter account, Purple is totally active on Twitter.

[@vanguardvaluist2614]

Michael Kitces is my FI binky.

[@erinaustin9968]

Investing in yourself is not often echoed in the FI community when it comes to formal education as a trade off to investing.

[@dmoon9037]

Whoa whoa whoa, time hack 1:02:00, bonds go up when the market crashes? Asterisk that for March 2020. When was this episode recorded?

[@vanguardvaluist2614]

Interesting call out. As it turns out having a percentage of bonds in your portfolio, not going up and earning nothing would still be a blessing. You could live off the bonds if you had to and avoid selling stocks in a 40% decline. Also the option to put a little back in to stocks because you could sell a small percentage of the bonds and try to catch a discount on stocks. Since market timing is impossible, you can set a buy in point for any market crash ahead of time. For example say 20% decline before you buy with a small percentage of your bonds that you sold. As it turns out the market had a V recovery since the RONA crash. Since there was no way of knowing that you simply have to commit to going LONG with your new buy in. Have an actionable plan with the bond bucket AHEAD of time for the inevitable crash that's coming.

[@dmoon9037]

@@vanguardvaluist2614 “bonds...not going up and earning nothing...” we call that “cash” in these here parts. Concur on stock market crash rebalancing (buy). It works at the other extreme, too (stock market bubble rebalancing). I prefer limit orders as well.

[@jdoniger22]

Patrick o’shaughnessy

[@susanneowens7616]

Thank God for a NON- COVID19 podcast. I am a healthcare worker and need a break from its 100% bad news!!!!

[@METVWETV]

Boy did II come to the party late! When I read your "Covid" remark, I glanced up at the date.....Lol! Hope all is well?!

[@johnyjsl9219]

Very good brothers. No corona scenario?

[@malinullberg]

Probably recorded prior to the corona madness!

[@malinullberg]

1:00:17 the 4% might work, but the actual amount you can withdraw with 4% when your portfolio dropped with 80% is gonna be very, very small tho?

[@jackmasden244]

True but that's why you have at least a years worth liquid so you don't need to touch anything in the market.

[@SynThenergy]

That's why you have bonds to draw from, preventing you from touching the stocks during bad times

[@vanguardvaluist2614]

@@SynThenergy The bonds can also provide a buying opportunity by using a small percentage of them to buy back in while stocks are tanking. Just know ahead of time what you will do. EX: At 20% down I put 10% of the bond allocation into an all market index. You just have to commit to a LONG holding strategy.

[@rayzerot]

Oh boy. That's not how the 4% rule works guys. The yearly withdrawal is not 4% of your current retirement investments. The yearly withdrawal is 4% of your year one retirement portfolio adjusted got inflation every year after that. So if the market drops 50% your withdrawal does not also drop 50%

[@amafid]

😀

[@amafid]

Sorry Purple

[@amafid]

1:19:33 like now!!!

[@davidfolts5893]

Adaptive spending = Spending slack.

[@MN-wg8qd]

Kitces seems to be ignoring the fact that one is much more likely to hit their number when the market is high, increasing failure risk. 9x the money? Well, anyone that had enough money to retire in 2002 had like 1.5x their FIRE number in 1999 and 2000. And having to work 8 years down the road for 4 years at $20/hr for 500-1000 hours per year sounds a lot worse to me than working one more year at $80/hr etc. Good topic though I just am not as optimistic. I do think that getting 75% there and then cutting down to half time in the same high earning field is the way to go as you start shaping your retired life.

[@serialmigrant]

I stumbled on FIRE 10 years ago in my early thirties. Wasn't a word then, but I opted to work contracts as an engineer, take mini retirements and regularly check if I was still COAST FI Along the way. When you do that young enough, you accidentally start getting closer to LEAN FI, my next goal post. But for me its more for piece of mind if I get sick and can't work in my 40s and 50s for a year or 2. At first, my number of worked hours per year would creep downwards, then I changed type of work contracts where I do site work (so do 12 hr days over 3-4 weeks periods, then get 2-4 weeks off), and spend less... Now I'm about at flamingo FI (50%) in liquid assets and it's dawning on me that I can go back to letting the hours per year creep downwards again.

[@amafid]

54:05 not gonna happen!!!