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Comment by gmanis | Hacker News Reader

Very well done. The best part is that a modest 4% return on net worth/investments will yield about 100k a year which is a very good amount for most people.

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Living off 4% works in retirement because you can in part live off principle. In early retirement it’s not going to work out nearly as well because you get the reverse of dollar cost averaging, removing money in down markets is more expensive than in good ones. You need either dramatically reduce spending when your portfolio is down or to live well below the expected returns.

Agreed completely. I meant in the sense of having this 100k once you retire and to continue to work on this high paying job for a few more years assuming you do a proper asset allocation.

I’m not sure I understand. Is it really true that you can’t extract 4% cash money per year off of a million dollars, even in a down market, without shrinking the principal?

$100k should be enough to live comfortably off of in the Midwest.

I'm confused by your question. If you take 4% of the principal and the market does not return at least 4%, your principle has shrunk. This does not account for inflation either.

The Trinity study that the 4% rule comes from is based on having some assets left after 30 years, not the original principle being intact.

Trinity study: https://en.wikipedia.org/wiki/Trinity_study

But in the Us, you are currently free of 7.5% payroll tax and your income tax caps to 15%. Plus, you no longer need to save 15% of your income for retirement.

The most expensive early retirement tax in the us is health insurance.

Saving on payroll tax is a benefit, but it’s also a significant risk for early retirement. Up to 50k/ year for a single person is a real cushion if you start to run out of money. Retire at say 35 and you can probably still get something from SS, but you need to be significantly more cautious.

Similarly saving 15% for retirement is critical, but saving enough to cover inflation is just as important with an early retirement.

The straightforward 4% analysis is a simplification. It’s pretty easy (and pleasant, even) to do independent contracting for a couple months of the year and cover almost all your living expenses - so no or very little withdrawal. Since you have lots of leisure time to explore your interests, you can also get lucrative niche-of-niche contracts in your specialty.

You can also live comfortably in most of the US on 30k per year assuming you have no dependents or disabilities. It’s simply a comment about spending not the ability to retire.

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