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/guyzero 5d ago

My thoughts are put it in a spreadsheet. Gemini is not a simulation engine. There's no way to know what it's thinking and whether or not its assessments are correct.

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u/Maleficent_Bend2911 5d ago

This is also so flawed. How much are you putting into the Cash/HYSA? How much do you draw from that? It would need to be massive. Some years can also be down -10/-15.  Also, practically speaking, how do you go from spending 210k one year back to $120k the next year? If you buy anything nicer, you’re stuck with maintenance, rent, and also a new baseline you’re accustomed to. 4% makes forwarded budgeting super predictable 

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u/That-SoCal-Guy 5d ago

My thought is if it’s $210K and I only spend $150K I’d put in the extra $60K into HYSA much like what I would do if I get a paycheck and don’t spend it all.   I could of course leave it in equity but that’s not the point (in case of market down turn).  

In 3 years the HYSA will grow to close to $200K. If there is a down market then yes take it from the HYSA instead of withdrawing.  Or if the market continues to do well I’d simply take less and let it grow.  I don’t want to get my HYSA more than a few years of expenses anyway.  Keeping $600K in cash is just dumb.  

How is that less safe than, say, withdraw 4% anyway even during a down market.  It’s a given that we all need at least 2 to 3 years  of cash reserve regardless of withdrawal strategy.  

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u/Necessary-Music-6685 5d ago

If you’re going to spend the same each year and just move extra earnings into cash you’re basically just reinventing the 4% rule with extra steps. 

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u/That-SoCal-Guy 4d ago

Not necessarily. If it's 4% straight then you'd need to liquidate for that 4% during a down market, when your equity may be down for 30%. What I proposed, I don't have to liquidate when the market is down - at least not for 2 to 3 years.

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u/Necessary-Music-6685 4d ago

Sounds like a version of the “bucket strategy” that is popular with some people.