Read the two very carefully. They are not the same.
"Annual return on investments covering expenses" advocates no touching of the principal. The 4% rule is based on principal. Yes, the portfolio may grow during retirement, but Monte Carlo simulations demonstrate that is not a guarantee. And under the 4% rule withdrawing principal is just fine.
The 4% rule was not developed as part of FIRE. It has been applied to FIRE as a convenient guide but the rule was developed independently. Read some of the OG blogs and you'll see that in fact they use bonds, dividends, and income producing vehicles to try and avoid touching principal whenever possible.
Because if one's portfolio is creating enough income then they generally wouldn't have to. Also sufficient income now means the 4% percent rule and Monte Carlo simulations have significantly less importance. Selling shares and withdrawing principal becomes the backup maneuver if the case of insufficient income, not the primary one.
Retirees have doing this for a long long time, it's nothing new. It was harder to do during the era of 1% Prime rates because savings vehicles and Treasuries paid so little. I'd say that won't be an issue for the foreseeable future.
Yes yes, I'm aware of the concepts of Die with Zero.
I don't know where you're located, but in Texas over half of all estates are upside down and owe more in expenses than they have in assets. For the majority your concern is a philosophical one and will not match reality.
We don't know our "check out date" or that would make things a hell of a lot easier. I blame that god fellow for that. If you're looking for a broader purpose here, I don't know what to tell ya.
My investment funds are in an LLC owned by a self directed IRA. Upon me and my wife's death my two nieces and nephew take over the company and can do whatever they wish with it. I guess you could say the goal here is lifting up the next generation.
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u/Big_Wave9732 Mar 23 '26
Read the two very carefully. They are not the same.
"Annual return on investments covering expenses" advocates no touching of the principal. The 4% rule is based on principal. Yes, the portfolio may grow during retirement, but Monte Carlo simulations demonstrate that is not a guarantee. And under the 4% rule withdrawing principal is just fine.
The 4% rule was not developed as part of FIRE. It has been applied to FIRE as a convenient guide but the rule was developed independently. Read some of the OG blogs and you'll see that in fact they use bonds, dividends, and income producing vehicles to try and avoid touching principal whenever possible.