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Comment by ryandrake | Hacker News Reader

$1M in investments, drawing down at a moderate rate of 4% per year, gives you $40k/year income. Not poverty level in the USA (unless you’re in a high COL city), but not fabulously comfortable either. And only 10% of retirees have even that? Ouch.

Back in the ‘80s, “retiring a millionaire” was awesome: you won. Not so much, today. People are living longer now, too. $1M is not going to stretch as far as many would believe. I’m planning to significantly dial down my lifestyle when I retire—most of us will have to.

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40k/year + SS income. So probably closer to 60k a year and most retirees have a paid off house. So, the biggest monthly expense is gone.

4% is the rule of thumb for indefinite withdrawal including correcting for inflation right? That's not necessary for a pensioner

The 4% rule is from the Trinity Study, which was based on a 15-30 year retirement:

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

For an indefinite time period you'd need a 3-3.5% inflation-adjusted withdrawal rate depending on how many 9s you want in the portfolio survival rate.

It's also based on having the money continually invested in the stock market, which becomes more nerve-wracking in retirement I'd imagine since you can't easily weather the storm of a half-decade downturn.

Yea, I don’t think 4% is all that conservative, either. Unless you have some reliable insider knowledge about when you’re going to die, you kind of have to plan for indefinite withdrawal, or at least until age 120 or something. Ideally, we are at exactly zero when we kick the bucket. Having money left over when you die is fine and let’s you leave a little bit to kin. Running out before you die is kind of catastrophic, no?

Then you leech off kin if you have any? We invented old people long before we discovered pensions and tax-advantaged retirement savings accounts.

The range of plausible return rates is hilariously wide, so nearly any withdrawal scheme that can provide a reasonable baseline standard of living with a low chance of going bust is extremely likely to grow faster than you spend it down and leave you with large amounts of money left over. Portfolio survival rate is a very artificial metric that does not accord with how people actually concretely plan their retirements outside a particular band of upper-middles who are weirdly allergic to the fact that they have social ties (and rich enough to avoid them).

Most of the increased average life expectancy during the 20th century came from lower mortality rates for kids. Life expectancies for the over-20 crowd hardly budged (and might even be decreasing in the US).

Money markets and CDs are paying ~5% so that would only be if you want to not draw down.

If you want you income to increase with inflation you can't spend the entire rate of return. So If you are using a 5% return you should really only spend 2%, if you go with the current inflation rate.

Sure but that too is to die with a million inflation adjusted, not to draw down. Are you saying retirees should need to be able to live only on ongoing gains?

Seems like a better plan then deciding when I am going to die. What if I plan on living to my 80s, but make it to my 100s?

If you have accurate records for several ancestors who died of natural causes then you can put a reasonable upper bound on your lifespan. Do you have anyone in the previous few generations who lived to near 100? Lifespans haven't increased much for people who make it to adulthood.

Plan on 100s or buy an annuity

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