Larry Swedroe, Retirement Planning Expert: The 3% Rule is the New 4% Rule | Afford Anything (Audio)

[@dimitrijmaslov1209]

.thanks!

[@ariefraiser140]

So many people keep trying to use one small period in time to claim a study that looked at a 100 years of market return is no longer correct and I find that a bit concerning. While planning for a 30 year retirement I see no reason why you would withdraw 3% instead of 4%. People don't know what the financial markets will look like in a years time much less 10 years or 15 years later. But we do have a decent idea of what the markets over time should look like based on its history. In fact the researcher who created the 4% rule not too long ago came out and revised his rule and stated if you include about 10% small stocks in your portfolio a person could draw 4.5% from their portfolio.

[@raymondnoya5653]

Larry knows what he's talking about !

[@stevemichelson]

Awesome interview! This is easily one of the best interviews on the subject of retirement I’ve ever heard.

[@sbkpilot1]

I agree with Larry totally, he points out the classic mistakes hordes of people are making - recency bias, home country bias, large cap bias (tip - do not put everything in VTSAX which is essentially a Large Cap Blend fund and has very little Mid and Small caps) etc.

[@harrycheng8175]

I would love to hear Big ERN’s thoughts on this. 🤔

[@WorldWideRide2012]

Great interview and excellent recap! Thank you

[@harrycheng8175]

I think a safe route is to withdraw only the actual yield of your portfolio which in my case is 2.6%. Plus I think you need a further hedge of 50%. That is to say if your expenses are say $100,000 per year then you should only retire when you have $150,000 in portfolio yield. You need to have the ability to absorb bad outcomes. I do not count on social security being there at all in my calculations but view it as a windfall.

[@buildyouup838]

Paula, This guy was fabulous. I had never heard of him until this podcast and now I am scouring KZbin to listen to more of him. He is so well spoken and so articulate and knowledgeable about the markets and about the economy. I agree with another poster that we do not need to use a wooden adherence to the 3% rule being the new 4%, I think you could take out more in the months or years the economy is doing well and then draw on savings or bonds during the down times. You could also draw on the dividends in the portfolio even in the parts of the portfolio that are down.

[@QuesttoFIRE]

I would love to hear Big ERN’s thoughts on this. 🤔

[@stevehoward210]

This turned out to be totally wrong.

[@tomahawk581]

This guy is fantastic. 10/10.

[@ntulimanda6278]

Very informative podcast..thanks Paul..from EAST AFRICA,TANZANIA

[@vanguardvaluist2614]

As far as 3% vs 4% withdrawal rate goes.....In my mind flexibility should rule the day..No? For example, if the market is having a crappy year then you take nothing and live off cash reserves or maybe work for income for a little bit. One can trip over 15k in America. If the market is doing great, say its up 10% for example, why wouldn't you "sell high" and take 4-5% as needed? Am I missing something?

[@LoveMyAbeshaWomen]

johnjustis very good point. I’ve always wondered the same. People that talk about this 4% withdrawal rate never talk about what to do in a down market. I feel like most are simply regurgitating what they heard

[@wannabeaznufcfighter]

Or you can live in an area where the USD goes further. Geoarbitrage (SP?). Now if you just want to live in your area of the world or don't want to move then yea, withdraw less.

[@KS-cl8br]

@@LoveMyAbeshaWomen Three bucket approach to deal with down market. Bucket 1 over 10 years 100% Stocks with some in emerging markets, and small cap growth etc Bucket 2 also in 100% stocks but less risky because you plan to use in the next 5 to 10 years. Bucket 3, 100% in 0 interest account all cash ... this is 5 years worth of withdrawal so you don't have to sell stocks in a market downturn. For a retired person and yes a 3% rate of withdrawal is appropriate.

[@LoveMyAbeshaWomen]

K S that makes perfect sense. I guess I would need to save an additional X amount of dollars in Bucket 3 in addition to my overall target retirement $ amount. In other words if I need $500,000 to retire on, that $500,000 would be invested in Buckets 1 and 2 and bucket 3 would have an additional X amount to live on .. if I understood you correctly

[@KS-cl8br]

@@LoveMyAbeshaWomen Sure or you could have from ages 16 to 50 invest 25% of your income into bucket 1 then at age 50 to 55 rebalance some of bucket 1 into bucket 2 so you have buckets 1 and 2. Then start putting cash into Bucket 3 and if stock market not at bottom of market start selling some so that by the time you are 60 you have 5 years of withdraws in cash with the overwellming amount in buckets 1 and 2 which is 100% stocks. Whether you need 500k or 3.2 million for retirement deppends. Let's say you and your spouse make 100 a year. You should have 25k per year in retirement. So what you live on is 100k - 25k retirement contributions - 7.65k social security - 15k taxes so you live on 52,350 per year. By retirement then multiply that salary by 37.5 and you need 1,963,125 to retire with the same take home amount. If you have a reliable well funded pension you can subtract that from the 52,350 or if social security multiple ss by 0.70 and then you could subtract that amount f r om the 52k which when you multiply that amount by 37.5 the 1.96 million balance you need would be less. Of course you may not want to subtract the pension amount and ss amount because on that 1.9 million has a yearly zakat that f irst year of 49,078 so even less for you to live on etc. You can run these simulations in excel

[@clicgear100]

Well this was depressing.

[@jorgeferreiro9783]

I think a safe route is to withdraw only the actual yield of your portfolio which in my case is 2.6%. Plus I think you need a further hedge of 50%. That is to say if your expenses are say $100,000 per year then you should only retire when you have $150,000 in portfolio yield. You need to have the ability to absorb bad outcomes. I do not count on social security being there at all in my calculations but view it as a windfall.

[@xaldath4265]

SS is excluded from all of my calculations, as well. Glad I'm not alone.

[@RiskyMath]

Plan to withdraw 0.04% instead of 4.00%. Lol

[@brentshuffler1234]

Part 1: The good news is that the Social Security Trustees' annual reports show that, at worst, if the reserve-funds were exhausted (decades from now), the system would still continue to pay at least 78% of your benefits. So we must be concerned but not panic. It is far from being a case of all or nothing.

[@brentshuffler1234]

Part 2: Positive factors and trends include these: [1] Increases in the number of contributors (e.g., unemployment-rate in the U.S.A. has dropped over 60% in the past 8 years), [2] increases in contributions (e.g., from rising wages and growth of existing companies and employees), [3] future increments in the contribution-ceiling (currently well over U.S$100,000 p.a. per contributor), [4] likely future increments in the rates of contributions, as well as [5] gradual increments in the standard age of retirement, are all helping to improve the prospects of Social Security (also called National Insurance in many other countries) worldwide.

[@davidfoust9767]

That is certainly a safe option, however, I wouldn't be able to retire till 75 following it.