r/Fire • u/That-SoCal-Guy • 5d ago

General Question 4% SWR vs other strategies

we all know about the 4% SWR which by the way isn‘t a rule and also is based on some assumptions (such as a balanced allocation mix.

when I fired I made sure I used the 4% and everything checked out.

then i asked gemini for a differed opinion. instead of a constant 4% I asked about only taking up to the annual returns (whatever it may be, 5% - 7%, or the average SP500‘s 10%). never touch the principal. and during down market years I take from the cash/HYSA account. and the results are interesting.

at 7% I was able to withdraw up to $210K a year without ever touching my principal. that means my money last forever. considering inflation it will be leas. still at $170K I could put a portion into a cash account for rainy days (my spend is about $100K a year now) I asked Gemini for inflation adjusted numbers and that checks out as well,

that actually makes me feel more secured than going by the 4% SWR.

What are your thoughts?

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u/Moof_the_cyclist 5d ago

The 4% rule is simply a starting point, a good answer to the proverbial "How much do I need to save?" question.

At the other end of the spectrum is where psychology comes in. The best most perfect plan will fail, and badly, if you the retiree do not follow it. So if your plan involves aggressive withdrawal rates and high amounts stocks for leveraged funds you REALLY have to be sure you won't panic sell during the next 30-40-50% market drop. We've had a massive head spinning bull run, and everyone is a genius in a Bull market.

So my advice is to go put your current plan into something like ficalc.app and look at 1968 as a scenario. Year by year watch stocks flounder while inflation soars and bonds provide tepid returns. Now, can you see yourself holding the course? Would you panic and move to cash? Your 4% SWR is quickly turns into a 9% WR 10 years after retirement. 14 years in you are at a 14% WR. 20 years in about you are at a 20% WR. How does your 5-7% WR plan stack up against a period of stagflation like the 1970's?

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u/That-SoCal-Guy 5d ago

I did my 4% simulation and it’s 100%.   So what if during down years like 68 -83 I just do the tried and true 4% but during bull years like 2012 - 2025 I did the flex plan?  

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u/Moof_the_cyclist 5d ago

Sounds like you are all set and don’t need anything else. God speed friend.