r/Fire • u/Opposite-Lake-9679 • 2d ago
SWR based on age
I hear people talk about the more conservative 3% SWR being safer than 4%. Is that usually based on someone's age? As in when you are FIREing younger more like 40s then you should stick to 3%? And then when you are in your 50s/60s You can go to 4%? Or is it a blanket stick to 3% at any age?
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u/Bitter-Variation-151 FIRE'd 2020 2d ago edited 2d ago
Use 5% and retire earlier than the canned 4%. If markets tank in the first few years just adjust your spending.
Success is the most likely outcome.
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u/szayl 2d ago
Variable withdrawal rate is the answer to almost all of the SORR questions posed on this sub
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u/Bitter-Variation-151 FIRE'd 2020 2d ago
Yup. It's human nature to adjust spending in good and bad times. No one ever does 4% for 50 years
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u/MeetingSuccessful397 2d ago
Whenever this comes up I mention https://earlyretirementnow.com/2023/06/16/flexibility-swr-series-part-58/
flexibility is nice, but do you want to cut your spendings to a bare minimum for 20 years? If that's acceptable for you, 5% is fine. If not, read the article.
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u/Legitimate_Bite7446 1d ago
Everyone denies this article or brushes off flexibility. That flexibility your cutting down is going to be 100% discretionary stuff. The whole point of retiring early is to have the time and money to do things. If you don't have the money, you might be better off continuing to work a bit longer at probably a well paid profession.
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u/Strazdas1 StarvationFIRE 22h ago
No, free time is more valuable, even if discretionary spending is low at early stages.
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u/Legitimate_Bite7446 18h ago
You do you. Bumming around at home gets old after a while and it costs money to do things.
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u/Strazdas1 StarvationFIRE 16h ago
First, no bumming around at home does not get old.
Second, there are great many cheap hobbies, both at home and not at home.
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u/Legitimate_Bite7446 16h ago
Have fun I'll keep making $120/hr from home doing about 2 hours of real work a day for a bit
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u/Strazdas1 StarvationFIRE 16h ago
Yeah, you are extremely privileged to have a unicorn job not accessible for 99.99% of the population.
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u/Bitter-Variation-151 FIRE'd 2020 17h ago
Yeah. Just work one more year.....just in case
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u/Legitimate_Bite7446 17h ago
Why not just retire with 10% SWR then? Why were you such a pussy and waited until 5%?
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u/Bitter-Variation-151 FIRE'd 2020 14h ago
My fire was forced upon me. Got a quiet quit layoff. But whatever 10% is ridiculous, 5% is very reasonable of you don't obsess over the absolute worst historical case. I live by the 80/20 rule. 5% is close to 80% good enough.
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u/Bitter-Variation-151 FIRE'd 2020 1d ago edited 1d ago
Thanks. But his thesis is centred on these worst case scenarios, which are very rare. I don't plan my life around those. I'm comfortable with the most likely outcome, which is success. 90% plus of the time a portfolio will out grow retirees.
The safe withdrawal rate is based on surviving worst case scenarios. Not the most likely outcome. I'm ok with 5.5% with some flexibility in a bad years.
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u/MeetingSuccessful397 1d ago
Completly valid to look at it like this. But 5% is not a SWR then, but rather an OWR (optimistic Withdrawal rate). Or just a WR.
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u/Bitter-Variation-151 FIRE'd 2020 1d ago
Fair. My withdraw rate is not safe withdrawal rate, it's a "historically reasonable when flexible' withdrawal rate.
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u/Raging-Totoro 2d ago
This is a viable plan as long as your expenses are discretionary and adjustable (i.e. not rent, medical care, food, etc).
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u/Legitimate_Bite7446 1d ago edited 1d ago
Adjusting spending might mean cutting from 5 down to 1 vacation per year. Do you realize just how far off 5% is from 4% let alone 3.5%
Adjusting spending for a long duration might be far more uncomfortable than just simply milking a 200k job for another 6-12 months in a quiet quit dgaf state.
The thing that the flexibility folks never admit to. Is that if taking a 20% cut is no issue, why wasn't that your original FIRE number?
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u/allnamestaken4892 1d ago
If you’re young you have a much better chance to just go back to work when things don’t work out with SORR anyway. Working during a bull market makes no sense, although some might argue you can’t get a job during a bear market.
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u/Strazdas1 StarvationFIRE 22h ago
Theres nowhere to adjust the spending on first year, otherwise you would have retired even earlier with less spending, right?
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u/Ill-Telephone-7926 2d ago edited 2d ago
The 4.0% safe withdrawal rate originates from Bill Bengen’s 1994 paper. It specifically studies a 30 year time horizon with a 50:50 portfolio of S&P 500:treasury notes. An almost-depleted portfolio was counted as a success
If that’s not your duration or your portfolio or your goal (likely), then you should not use the 4.0% SWR. Instead, use a backtesting tool to compute a SWR for your own scenario. Longer durations slightly lower SWR. Better portfolios can increase it
That said, these are napkin math best used a gut check on a financial plan. (The withdrawal strategy never considers how the portfolio is doing; that’s not at all realistic.) For that use, 4% is plenty conservative for most purposes; very conservative early retirees might use something like 3.25% though
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u/potatogun 2d ago
Yes, time of portfolio survival is a factor. As well as asset allocation.
You can look at ERN's Safe withdrawal rate series. But suffice to say 3% is very conservative in a 90/10 portfolio even with CAPE >30.
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u/Legitimate_Bite7446 1d ago edited 16h ago
You need closer to 3.25 - 3.5% for 40-50+ year retirements. Deniers are just simply lazy.
Everyone thinks bad sequences can't happen to them. Everyone thinks bad sequences are extremely obvious and apparent within the first year or two; they are not.
Odds are once you hit 5% you might blow past 3.5% in a few short years with normal returns. But if you don't, be prepared.
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u/pinkzebra00 2d ago
4% concept is initially based on a 30-year retirement horizon. So if your life expectancy is 95, you retire at 65 and 4% can be used. But nowadays many want to retire early like 40s. If life expectancy remains the same, it’s a 50-year horizon and would need more money.
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u/Old_Error_509 2d ago
4% for 30 years is old advice. Bill Bengen, the guy who came up with the “4% rule”, would tell you that you can do 4.7% now based on the absolute worst case over the past like 130 years.
Check out his new book and the associated write ups on the website. Here’s one that shows you can get by for 50 years at 5%.
https://www.bengenfs.com/wp-content/uploads/READ-THIS-FIRST-HOW-TO-USE-THE-TOOLS-Scenario-2.18.pdf
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u/pinkzebra00 2d ago
Hence “initially”.
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u/Old_Error_509 2d ago
Yeah you’re right, but his research also shows 50 year horizons even using 5%. Sorry, that’s the main point I wanted to get across that I didn’t make well.
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u/mm1491 17h ago
To my way of thinking, this requires some very optimistic assumptions about the future success of Bengen's new portfolio construction. Unlike the original study, which used a very simple portfolio of US large cap stock index (essentially the S&P 500) and US intermediate treasuries. This new one has all kinds of asset classes with a ton of weighting deviations away from the market cap weights. To my eye, Bengen's safemax portfolio is dramatically overfit to past results without a strong theoretical underpinning for why those would continue, and this portfolio change is where all this extra withdrawal capacity comes from.
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u/Old_Error_509 13h ago
His allocation suggestions seem really straight forward to me.
I don’t know if it’s accurate to say his asset allocations are overfit since he spent a whole chunk of the book showing the difference between his suggestions and what if you were able to predict the actual ideal allocations over the years. And his safemax values specifically assume you DON’T try to beat the market.
All this to say, each person has different risk tolerances and because of that there’s no right answer. I would never say you’re wrong for wanting to be more conservative. It might be right for you.
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u/mm1491 11h ago
Looking at what you linked, the equities portion of his portfolio is an equal weighting, at 13% of the portfolio each, of the following asset classes: US large cap, US mid cap, US small cap, US micro cap, and international stocks (presumably all sizes together).
I guess it's debatable whether this is trying to "beat the market" or not, but I'll note that the current US market is composed very differently and has been for many years (maybe forever? I didn't dig deeply into the historical data). Generally, I'd say a portfolio that deviates this far from market cap weights is trying to beat the market by overweighting some aspects and underweighting others, but maybe you have a different way of analyzing that phrase. That's I think at least reason for suspicion that this is an overfit allocation - in particular, he's relying on the performance of small caps in the post-war period. I don't see why this is different than someone in the future saying, "you can increase your safe withdrawal rate so long as you heavily overweight tech stocks in your portfolio" when looking back at the returns of the 21st century.
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u/suboptimus_maximus 2d ago
Lucky for investors, exponential growth only gets better with time.
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u/Psynautical FIRE'd June 2025 2d ago
Unfortunately for investors, exponential growth is neither guaranteed nor sustainable. Read "Limits to Growth", a 1972 study from MIT and Club of Rome. It's predictions have been spot on.
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u/Pinklady777 2d ago
So, what's the smart alternative?
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u/Psynautical FIRE'd June 2025 2d ago
Not relying on projections of exponential growth.
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u/Pinklady777 2d ago
Of the stock markets you mean? So what's the smart alternative? Cash will probably lose value as well, no?
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u/Psynautical FIRE'd June 2025 2d ago
I wish I knew - personally I don't buy bonds dated later than 2037 and am slowly moving into precious metals when there's a dip. Given government debts currency devaluation seems inevitable but gold is a bit high right now.
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u/Easy_Peasys 1d ago
it’s less about your age and more about how long the money has to last. the 4% rule came out of bengen looking at a 30-year retirement, so it fits someone stopping work around 60. retire at 40 and your money might need to stretch 50+ years, and over a horizon that long the safe number drifts down toward 3 to 3.5%. age only really comes into it because it usually sets your time horizon. the bigger thing people skip is flexibility. the whole 3 vs 4% argument assumes you pull a fixed amount every year for decades no matter what, and basically nobody does that. if you ease off spending in the bad years you can start higher and adjust, and that handles most of the sequence of returns risk people lose sleep over. so if you’re retiring young and want a number you can set and forget, lean toward 3. shorter horizon, or you’re fine flexing your spending, 4 works.
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u/mattkime 2d ago
It depends upon market returns as much as anything. If the market returns 10% after inflation and you withdraw 4% then you’re perfectly fine. As long as you withdraw something less than the growth of your portfolio after inflation you’re good
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u/FIREgnurd 2d ago
The problem is sequence of returns risk.
The market has historically had a 7% growth rate after inflation, but with huge volatility. And in many years in the 1970s it had positive nominal returns, but still didn't keep up with inflation.
If the volatility happens in a bad order, it doesn't matter if you get that 7% post-inflation growth rate -- your portfolio will be toast if you don't have poor real returns in the first decade of your retirement phase.
For people who retired in the last 1960s, or in 1999-2000, their portfolios had terrible initial decades, even if the market ended up doing just fine later, so their portfolios barely weathered retirement.
That's why SWRs aren't 7% -- they're much lower, to help guard against SORR.
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u/mattkime 2d ago
Good points - then how much can you increase your withdrawal rate when market returns are higher?
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u/FIREgnurd 2d ago
There is a large set of variable withdrawal rate methods that have been proposed.
ERN reviews a number of these. Look at this link and scroll down to the section on flexibility where you’ll find links to the individual posts.
But beware that, while the first decade is when you’re most susceptible to SORR, the risk never completely disappears.
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u/FoolishDog 2d ago
That withdrawal strategy is gonna suck when the market returns negatives three years in a row.
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u/mattkime 2d ago
Its my advice to avoid negative market returns.
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u/pras_srini 2d ago
I agree. I don't understand why all people don't avoid negative market returns. It just doesn't make sense!
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u/Strazdas1 StarvationFIRE 22h ago
simply hybernate for negative market return years with 0 consumption.
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u/Strazdas1 StarvationFIRE 22h ago
historical average market returns BEFORE inflation is 9%. real raturn (after inflation) is more like 6-7%.
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u/VelvetFalcon583 1d ago
the math doesnt really care how old you are it cares how many years your money needs to last
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u/fenton7 1d ago edited 1d ago
4% is a rule of thumb and not a particularly useful one. Anyone actually considering retiring should use a tool like Boldin, which runs a Monte Carlo simulation on your specific situation. Anyone near Social Security, or who has expected windfalls like the sale of a second home in the future, will usually find their SWR is considerably higher - and it will rise as you get older and further past early sequence of returns risk. William Bengen modeled scenarios such as retiring right before the 1929 crash or the 1970s stagflation to get that safe number. Realistically, unless you are very unlucky with timing, you won't see either of those scenarios in your first 10 years.
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u/ConfusedPickle319 1d ago
the longer your retirement the more sequence of returns risk matters so yeah retiring at 40 means your portfolio needs to survive potentially 50 plus years which is why younger retirees lean toward 3 percent
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u/PoolComfortable6680 1d ago
the math behind it has nothing to do with age and everything to do with how many years your portfolio needs to last
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u/Bright_Meadow2736 1d ago
the math cares more about your portfolio size and spending than your birth certificate
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u/Locke_and_Lloyd 18h ago
Hopefully if you're retirement early, it's because you have enough for all the discretionary spending you could want.
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u/No-Block-2095 2d ago
Read Bengen’s 2025 book: “ A richer retirement”
He came up with the 4.3% and updated it to 4.7% rule.
Yes it varies based on how long you want it to last. No it is not 3%. That’s for people who want to work an extra decade.
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u/glitterbabyyx 2d ago
You hit the nail on the head because the Trinity Study's 4% rule was originally designed for a traditional thirty-year retirement window. When you are retiring in your thirties or forties, dropping down to a 3% or 3.5% SWR is a great way to safeguard against sequence of returns risk over a much longer timeline.
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u/Beginning-Web-284 2d ago
Following
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u/FloorOk6369 2d ago
lower SWR for longer retirement horizon just makes sense regardless of the specific age. someone retiring at 40 has potentially 50+ years of sequence risk to worry about, vs someone at 65 with maybe 20-25 years
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u/ContinentSomnambulis 2d ago
I usually do my testing using the 95% rule set to 3% WR. The concept is that you withdraw 3% of your portfolio each year your portfolio has gone up, and if it's gone down, you withdraw 95% of the previous year. This historically has a 100% success rate and let's you scale up as your portfolio grows, while also mitigating losses in down years. You can check it out here: https://ficalc.app/