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Comment by tempestn | Hacker News Reader

Good advice. Just one nitpick: The 4% rule, which states you can as a rule of thumb safely withdraw 4% of the starting capital per year in real dollars (IE increase it each year to account for inflation), is intended for a standard retirement period (65+) and does expect the principal to decrease.

There's more debate as to what would be a safe withdrawal rate over the long term without depleting principal, but I expect 3% would be a bit on the high side, although not unreasonable if one has a backup like part-time work.

Of course, that's assuming you withdraw 3% of the initial amount each year and adjust for inflation. Obviously if you only withdraw 3% of the current amount each year you'll never run out, by definition, but you might end up with shrinking spending money.

Still, just a nitpick. I agree with you in principle for sure.

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That's a bit incorrect. Returns from a typical investment portfolio have been over 4% for the last 10-20 years, so that's the amount you can withdraw without depleting any principal. If you're looking to consume your whole principal by the time you die you can go way ahead of 4%, easily double that.

> Returns from a typical investment portfolio have been over 4% for the last 10-20 years, so that's the amount you can withdraw without depleting any principal.

Past results do not guarantee future performance. People in the FIRE community generally look at market performance since the final decades of the XIX century. For many, even these numbers do not guarantee anything, as the growth during these days reflected USA entering its golden age. Who knows if it will last through XXI century.

> even these numbers do not guarantee anything

at this point a reasonable response is "there are no guarantees". If the 4% rule was back-tested through the great depression and generally came out fine, it's probably in the right ballpark.

As another FIRE blogger puts it, "3% or less is a near sure bet as anything in this life can be"

https://jlcollinsnh.com/2012/12/07/stocks-part-xiii-withdraw...

We've basically been in a continuous bull market over the past 11 years; it's not a representative sample. Nor is any period of 10-20 years nearly long enough to tell you much about long term stock market returns. Plus, valuations (ie P/E or P/B) are significantly inflated currently compared to the past. Since valuations can't inflate forever, future market gains over the long term are expected to be lower than past.

In addition, we're talking about a real withdrawal rate; a 4% real rate of withdrawal will be approximately a 6% nominal rate assuming inflation sticks around 2%. It's very unlikely you're going to maintain that from a balanced portfolio over the long term without depleting principle at all. Might be possible with an all-stock portfolio if you get lucky, but significant chance of failure if you get a poor sequence of returns.

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