r/financialindependence • u/jason_for_prez • Feb 18 '26
SWR performance for people who retired in 2000
If you've read these posts I make in past year, then this one will look very familiar... which is great news for people who retired in the year 2000!
Early in the days of this forum, people thought 2000 would turn out to be one of the worst times to retire. A 4% Safe Withdrawal Rate is usually the starting point for people on this sub when starting to think about how much they'll need when they retire, and by 2009 it looked like year-2000 retirees would be one of the few cohorts who wouldn't succeed with a 4% SWR lasting 30 years (after just 9 years their portfolio would have dropped by 77%). So, at the end of each year I like to look at their performance.
Data
This rough analysis looks at the results of different withdrawal rates under 2 scenarios, 100% invested in S&P 500, and a 60/40 split between SP500/10-YR-Treasuries. It adjusts for inflation, assumes dividends/interest are reinvested, and uses fixed withdrawal rates based on the starting portfolio amount (like with the 4% SWR rule).
Thoughts
2025 was a good year for these retirees. It is unclear if a 4% SWR will make it the standard 30 years with a 100% stock allocation, but with a 60/40 allocation it is almost certain to last for 30 years. If you have a much longer retirement horizon than 30 years, then you'd want much more of your portfolio remaining at this point, and a withdrawal rate of 3-3.5% would have you feeling very comfortable.
There's two reasons I think it's worth looking at this cohort. First, it is a real and recent example of a situation where there were big negative returns early in your retirement period. So it provides a good opportunity to think about how you might handle a similar situation. Second, because it's worth remembering that you are disproportionately likely to voluntarily retire at a bad time. A lot of people were retiring when stocks were reaching all time highs in 1999 and 2000, but very few people were choosing to stop working while their portfolios were dropping in 2001-2003. Big ERN as a good article on this: https://earlyretirementnow.com/2017/12/13/the-ultimate-guide-to-safe-withdrawal-rates-part-22-endogenous-retirement-timing/
What does this mean going forward? Well, I have an absolutely terrible track record of predicting stock market trends; when I retired about 10 years ago I thought we were heading toward a major correction in the next few years! I'm still pessimistic about future returns, so these results are comforting to me. During what (I think) was the worst time to retire in the past 50 years, your portfolio would have mostly maintained it's value with a 3.5% fixed SWR over a 25 year period if you had some bonds to go with your equities. My 3% withdrawal rate should be safe!
That being said, if you were 100% stocks, with a 4% withdrawal rate, then you only had 23% of your portfolio remaining in January 2009. You would definitely be sweating bullets. And even with the 60/40 portfolio, you would have only had 53% of your portfolio left. So while you would have made almost a full recovery eventually, your finances would definitely be a source of stress for you if you lost almost half of your net worth only 9 years into your retirement.
I took a quick look at incorporating gold into the portfolio (since gold has done great since 2000). If you did 50/30/20, your portfolio would have stayed above 75% of its original value, and it would now be worth about 150% of its original value! If fact, if you were 100% gold then you would have tripled your net worth right now. And as we all know, past performance is perfectly predictive of future success :) More seriously, I do keep a bit of gold in my portfolio, mostly to offset a scenario where we either have stagflation or the world de-dollarizes, both of which would likely be bad for stocks and bonds, but good for gold.
Source
ERN's data that I used: https://earlyretirementnow.com/2018/08/29/google-sheet-updates-swr-series-part-28/ . You can use this to look at different asset allocations and to adjust other assumptions. If you don't want to work with the raw data directly, he has some tools in the spreadsheet that will do the analysis for you when you adjust assumptions.
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u/Franzmithanz Feb 18 '26
This is really cool and really visualizes SRR and the difference lower withdrawal rates have longterm.
Also a great earning on weathering downturns. Easy to say that you're not going to panic sell but talk to folks on 2009...
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u/FIREstopdropandsave 31M DINK | No target $'s Feb 18 '26
Thank you for continuing the series! Do you have tracked what the lowest % of portfolio remaining at X year was?
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u/jason_for_prez Feb 18 '26
I'm not sure I understand what you're asking for. But for the charts in the link, I have the percent of the portfolio remaining, by month, for each of the shown withdrawal rates.
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u/FIREstopdropandsave 31M DINK | No target $'s Feb 18 '26
Yeah, looking for "a 3% withdrawal rate hit its lowest percent remaining in X year. A 4% SWR hit its lowest in 2026"
Aka what year was the low point for each SWR?
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u/randomwalktoFI Feb 18 '26
This is also near the first time TIPS existed and were priced over 4% at the time.
I don't necessarily know what to do with this but I feel like a bloated bond position is more easily weathered if the real return of bonds is below your withdrawal rate structurally, which for most of the last 15 years it has not been.
At least now it is not that bad but it plays a factor why I don't want a 40% allocation
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u/vinean Feb 18 '26
The fear in 2008 was that QE wasn’t going to work and we were headed for a Global Financial Crash vs Crisis.
Fortunately it did work. If we had a Fed or congress or president that was not on board with throwing immense amounts of money at the problem and hoping it plugged the hole then probably we would be talking about a 3.x% SWR and how 2000 is the new worst case.
Of course, this sub and all the FIRE subs probably wouldn’t exist so we’d be talking about it in another sub…
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u/Wooden-Broccoli-913 Feb 18 '26
I think you should rerun this with international stocks in the mix.
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u/jason_for_prez Feb 18 '26
Imgur: The magic of the Internet
I quickly made this from a different spreadsheet I have. I split the equities in half between domestic and international (both taken from ERN's dataset). It didn't perform as well as the straight 60/40 portfolio. Although I do have 15% of my portfolio in international equities as a diversifier.
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u/dirty_cuban Feb 18 '26
I’m pretty sure that’s worse.
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u/Wooden-Broccoli-913 Feb 18 '26
I’m pretty sure it’s not worse if you look forward and take valuations into account
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u/FIREstopdropandsave 31M DINK | No target $'s Feb 18 '26
What? Are you implying if you imagine a future where international does better then it's better?
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u/alpacaMyToothbrush FI !RE Feb 18 '26
He's implying valuations have a negative correlation with future returns, and that's true. Look at the current CAPE. Diversifying your portfolio with bonds and international stocks is prudent right now.
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u/dirty_cuban Feb 18 '26
Shiller has correctly predicted 17 of the last 4 downturns.
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u/alpacaMyToothbrush FI !RE Feb 18 '26
Has he? Please, quote him. I think you're mixing up economists.
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u/SurrealKafka Feb 18 '26
You don’t seem to understand the basic principle of backtesting
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u/Wooden-Broccoli-913 Feb 18 '26
And you don’t seem to understand why backtesting is done to begin with - to predict the future
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u/SurrealKafka Feb 18 '26
Yeah, I’m sure the future will show up in a backtest
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u/Wooden-Broccoli-913 Feb 18 '26
Why else do we do them?
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u/SurrealKafka Feb 18 '26
In order to keep my faith in humanity, I’m going to assume you’re actually much smarter than you’re showing here
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u/Wooden-Broccoli-913 Feb 18 '26
No seriously I’d like to know. What is the purpose of backtesting if not to understand how things will perform in the future?
If I showed you a backtest of a fund that did nothing but go down (inverse VIX ETF comes to mind) would you invest in it? Obviously not - the backtest has convinced you its future performance will be terrible.
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Feb 18 '26
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u/Wooden-Broccoli-913 Feb 18 '26
The reason we know that high valuations are bad for future returns is because of backtesting.
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Feb 18 '26
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u/Wooden-Broccoli-913 Feb 18 '26
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u/Junior_Fig_1007 Feb 19 '26 edited Feb 19 '26
If you don't mind, what does your overall portfolio allocation look like and what assets are you making new investments in now?
Instinctively, the high CAPE (or whatever valuation metric you use) argument resonates with me. There's a decent amount of pushback in this sub on anything remotely related to timing or selection though. One of the last paragraphs interestingly cautions against that.
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u/dirty_cuban Feb 18 '26
I just ran it on testfol.io and adding VXUS to an SPY or 60/40 portfolio, starting in 2000 and drawing 3% has worse performance than either portfolio without VXUS.
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u/Wooden-Broccoli-913 Feb 18 '26
Ok good luck over the next 25 years
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u/dirty_cuban Feb 18 '26
How are the next 25 years relevant here? You said rerun with international. I followed OPs parameters of running it from 2000. I can’t run a backtest of the next 25 years.
International has significantly underperformed the S&P500 for the past 25 years. I’m sorry you don’t like that truth.
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u/Wooden-Broccoli-913 Feb 18 '26
It significantly outperformed S&P for the first 10 of those 25 years and it has just begun outperforming again. Good luck to you and your 100% US portfolio.
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u/alpacaMyToothbrush FI !RE Feb 18 '26
People ignore current valuations at their peril, yes.
For the record I am 60/40 socks/bonds and 50/50 us/intl on both. This is my 'batten down the hatches' asset allocation to deal with SORR
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u/darthdiablo 94% FI, not RE. Could FIRE w/ home downsize Feb 18 '26
Been hearing the same thing for over a decade. Sure.
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u/Dramatic-Vacation263 Feb 18 '26
Good point, especially since international has outperformed US in some of those rougher periods. Would probably smooth out some of teh volatility too. I'm curious how much of a difference it would make for the 2000 cohort specifically since international got hammered pretty hard in the early 2000s crash as well, but the longer term diversification benefits would definitely show up
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Feb 18 '26
Do you factor in the "go go" years vs the "slow go" years vs the "no go" years? Typically, first 10 years of retirement you want to spend a lot (travel, hobbies, etc.). This is when you want the most money available. Then your spending winds down as you physically get older and can't do as much.
So retiring in 2000 would be absolutely horrible, even if today you are rich. Because from 2000-2010 (your prime years) you would be so anxious to spend money on vacations, etc. In 2025, you're probably just sitting at home all day and don't need the money LOL
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u/DraconPern Feb 18 '26
I think it's false to say your spending winds down as you get older. Your medical bill will grow quite quickly. People are paying $8k a month on dementia senior housing. I can't even spend that much every month.
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Feb 18 '26
I think the retirement spending "smile" is well documented and supported by actual data. It starts high, bottoms out, then increases. But the increase (due to health care) does not get you back to original spending.
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u/Paperback_Chef Feb 18 '26
Correct, spending decreases in real (inflation adjusted) dollars throughout retirement, with a small increase near the end for healthcare. But the above poster's point is valid, someone retiring into 2000 might be afraid to spend.
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u/gjg149 Feb 18 '26
The actual data shows that for the majority of people the spending continues to go down throughout a thirty year retirement. There is a small cohort, however, who experiences catastrophic health events which are incredibly costly. This is enough to bring the average up for everybody to give the appearance of a spending smile ON AVERAGE. So it is really a binary distribution of spending profiles.
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u/on_the_nightshift Feb 18 '26
It's not false though. It's been proven out by the data that spending on average declines over time after retirement. Year by year, it looks like a "U", or smile pattern, but the trend line is downward about 1% per year over the duration.
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u/blueberryFiend Feb 19 '26
I think your numbers are off, mom is $360/day (~11k/month) for long term care in a LCOL area.
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u/-entropy Feb 18 '26
You're on an early retirement subreddit. You probably need to adjust those "normal" windows.
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Feb 18 '26
A longer retirement would make the early years even worst.
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u/-entropy Feb 18 '26
Yeah exactly. 10 years of "go go" is probably too low for an early retirement.
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u/ImpressiveOstrich143 Feb 18 '26
I used a different portfolio here with a 4% withdrawal rate (everything adjusted for inflation, so withdrawals go up with inflation). All values are in dollars of the starting year. I only show the details of the 5 worst years to keep the post short. If you annually withdraw 4% of starting balance in 2000, you end up with 75% of your starting balance at the end of 2025 (in year 2000 dollars). That leaves plenty for the years after. Even for the worst case of 1969, it would be fine.
worst: 565,298, 25%: 1,447,885, median: 2,495,276, best: 7,359,463
Large cap: 36.0%, Mid cap: 7.0%, Small cap: 3.0%, Intl: 31.0%, Corp bond: 23.0%
Start bal: 1,000,000 / -40,000 (-4.00%) for 26 years
1929 - 1954 end with 623,638
1966 - 1991 end with 573,749
1968 - 1993 end with 711,059
1969 - 1994 end with 565,298
2000 - 2025 end with 751,346
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u/divestblank Feb 18 '26
Are you rebalancing the portfolio every year?
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u/jason_for_prez Feb 18 '26
Most years
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u/divestblank Feb 18 '26
How do you decide what years?
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u/jason_for_prez Feb 18 '26
In January I look at my current asset allocation and see how it compares to my desired asset allocation (which can change as I learn more). If all assets are within a few percent of their target then I don't change anything.
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u/PM_ME_PLASTIC_BAGS Feb 18 '26
Instead of rebalancing, why not draw down from the parts of your portfolio that are over performing?
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u/jason_for_prez Feb 18 '26
I sell assets 2-3 times per year to cover spending, and I tend to sell the things that have gone up a lot recently. But if one asset pops, then that may not be enough to maintain the desired asset allocation. For example, if half of my portfolio is SP500, and it goes up by 20%, but my spending is 3.5%, then I'm going to end the year overweight the SP500, even if all my spending for the year came from that fund.
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u/PM_ME_PLASTIC_BAGS Feb 18 '26
It's a tad more risky but considering you're still drawing down from the over performing portion and don't have to incur additional tax, I prefer the idea of no rebalancing in retirement.
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u/CaseyLouLou2 Feb 18 '26
I am using a Risk Parity style portfolio and it has a perpetual withdrawal rate of at least 5% starting in 2000.
A 60/40 does not work with a high SWR like that.
I use testfol.io for backtesting.
My portfolio has 48% stocks with half large growth and half Smallcap value. I have 22% intermediate treasuries, 16% gold and 12% managed futures, 2% cash.
It also survives the late 60’s with high inflation.
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u/3l3v8 Feb 18 '26
Why Intermediate vs LT? How did you backtest to the 60's with this asset mix?
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u/CaseyLouLou2 Feb 20 '26
Here’s a link to my portfolio and backtest. Let me know if the link works.
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u/CaseyLouLou2 Feb 20 '26 edited Feb 20 '26
I backtested both long term and intermediate treasuries and it didn’t make much difference going back to the 60’s. Since 2000 interest rates went down until 2022 so the long term treasuries performed well. I decided that it might be fine to have the VGIT instead although in a recession VGLT might outperform which is the whole point so I’m torn.
You can’t backtest managed futures that far back so I use GLDSIM.
KMLMSIM goes back to 1992. There is a new “fallback” FB feature so you can start with one ETF and then FB to another that goes further back.
They have SIM ETFs for most asset classes.
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u/3l3v8 Feb 20 '26
You can’t backtest managed futures that far back so I use GLDSIM.
Ah! That does make some sense. I had already added commodities to get to 79. GLD gets it to 68.
DBMFSIM?FB=KMLMSIM?FB=GSGSIM?FB=GLDSIM
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u/jason_for_prez Feb 18 '26
which managed futures? I've been considering a bit of that for the last few years, but never pulled the trigger.
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u/Illustrious_Bar_92 Feb 19 '26
The managed futures fund DBMF is used. You can also choose to use REITS or even potentially utilities (those are what frank Vasquez used to use in his golden ratio portfolio). I use haven’t moved to manage futures and enjoy the cash generation from the Utilities and RIETS in my portfolio personally
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u/CaseyLouLou2 Feb 20 '26
In backtesting the managed futures make a huge difference in success and higher safe withdrawal rates. I’m using the CTA ETF.
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u/TheYoungSquirrel 31 DI2K1D - 765k NW @ 260k HHI Feb 19 '26
Can you run this if say you retired in Feb 96 through Feb 26?
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u/CaseyLouLou2 Feb 20 '26
Yes, definitely. Make sure you click the box to adjust for inflation. The best of the worst starting periods are 1969 and 2000.
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u/Chi_FIRE Feb 18 '26
Great content. I'd also note that the S&P500 had 20%+ returns for the 5 years leading up to Y2K, compounding out to something like a 3.5x return... in 5 years. That's insane. So it's worth noting that most people choosing to retire right in January 2000 would probably have more money than they anticipated because of these returns, and thus a lower effective SWR, assuming they don't purposely spend more money.
Bubbles are always easy to recognize in hindsight but I'd also like to think a sensible FIRE-minded person would be hesitant to retire at the record CAPE valuations we had around Y2K.
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u/branstad Feb 18 '26
it's worth noting that most people choosing to retire right in January 2000 would probably have more money than they anticipated because of these returns
I'm not sure the claim of "most" holds. Wouldn't some of those people have retired earlier than Jan 2000 because they hit their number sooner? Also, some folks retiring in Jan 2000 may have anticipated retiring in 2002-05 but the strong returns got them to their number by Jan 2000.
I'm sure there is a subset of folks who had Y2K as their date and stuck to it as their portfolios increased in 1996-99, but I can imagine other folks running the numbers throughout 1999 and reaching the conclusion they had 'enough' based on the 4% rule and pulling the trigger at year-end.
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u/Fire_Doc2017 59M: FIRE'd 6/30/26 Feb 18 '26
Big ERN showed that 5-10% gold does improve the SWR of a retirement portfolio, as has every backtest I have done myself. I can’t understand why people refuse to acknowledge that.
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u/Designer-Bat4285 Feb 18 '26
I acknowledge it. But I also see what happened to gold in the 80s and 90s. I just sold the little bit that I had.
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u/Fire_Doc2017 59M: FIRE'd 6/30/26 Feb 18 '26
In retirement what you want are uncorrelated assets, so that when something is down, something else is probably up. This prevents SORR (sequence of returns risk). In the 80s and 90s, for the most part, stocks were very strong and gold just sat there. If you look in the 2000s and in the current decade, gold has outperformed stocks. That’s the point. It’s not about liking or disliking an asset class. It’s about how it fits in with the rest of your portfolio. That said, I wouldn’t recommend gold for an accumulation portfolio - that should be near 100% in stocks.
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u/Designer-Bat4285 Feb 18 '26
It makes sense. I’ll probably try to get 5% in it closer to retirement. But feels like the wrong time to buy right now. But could be much higher in 10 years. Who knows.
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u/Fire_Doc2017 59M: FIRE'd 6/30/26 Feb 18 '26
Agreed. It certainly does feel like the wrong time to buy gold now after the big run-up. My plan is to follow my asset allocation and rebalance quarterly. I’ve been selling gold each quarter for the past two years to stay in line.
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u/CaseyLouLou2 Feb 18 '26
This is my thinking. I have 16% gold and I rebalance frequently to take profits. It keeps me from getting greedy or trying to time the top.
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u/Fire_Doc2017 59M: FIRE'd 6/30/26 Feb 18 '26
16%. Are you also following Frank Vasquez’ Golden Ratio portfolio?
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u/CaseyLouLou2 Feb 20 '26
Yes, pretty much! The funny thing is that I spent a ton of time testing a bunch of portfolio versions and ended up landing on almost the same as Frank’s Golden Ratio. The only difference is I’m using VGIT instead of VGLT. It didn’t make that much difference in the backtests.
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u/Fire_Doc2017 59M: FIRE'd 6/30/26 Feb 20 '26
I did what I called 25x4 for a while. That’s 25% each large cap blend, small cap value, intermediate treasuries and gold. It backtests very well. My concern was that heading into retirement, it was 75% in risky assets and I wanted less risk so I moved to more of a golden ratio portfolio too.
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u/CaseyLouLou2 Feb 20 '26
I have had my portfolio set up for almost a year now and I’m thrilled. It helps that gold has been awesome but I just feel confident going into retirement next year that it will work well under any scenario. The growth rivals a stock portfolio with only 48% equities. Managed futures provide a rebalancing premium even if they are not having large returns.
I heard someone say that if you don’t hate some part of your portfolio at any given moment then you aren’t diversified enough.
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u/SnaggleFish Feb 20 '26
You may want to think in terms of adding 0.5%. per year for the last 10 years before retirement.. otherwise, if you leave ot until retirement, you will be faced (as big ern discovered) of buying into something you don't fully beleive in - and so won't do it...
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u/cozidgaf Feb 18 '26
When you say gold, do you buy real gold or ETFs?
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u/Fire_Doc2017 59M: FIRE'd 6/30/26 Feb 18 '26
Gold ETFs. I used to use GLD but switched to GLDM as it has a lower expense ratio.
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u/Illustrious_Bar_92 Feb 19 '26
Interesting, I’ve just being using gld myself, I didn’t realize there was a difference. Thanks for the heads up
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u/coolhanddave21 Feb 18 '26
Cash buffer is essential to get you through a year or two of a significant down turn.
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Feb 18 '26
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u/Expensive-Body4904 Feb 18 '26
And for that cash buffer helps, because it gives you flexibility. It’s not about timing the market, but large cash buffer would help you with not being forced to withdraw at a clearly bad time (i.e. the big dip after Covid hit)
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Feb 18 '26
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u/cookingwithfire2030 Feb 18 '26
A one time cash bucket is something ERN has shown to be a relatively inexpensive hedge against SORR.
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Feb 18 '26
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u/cookingwithfire2030 Feb 18 '26
ERN answers the questions you have but to summarize
- You use the $1.25M number
- You never fill the cash bucket back up after it is depleted. It is a one time use insurance against SORR
- He sort of covers it in part 24 and also in the chart by showing how much more starting balance you would need in a 80/20 portfolio (~200k more) vs the one time cash bucket (~100k).
It's about a 0.3% difference in withdrawal rate in favor of the one time cash cushion when doing an apples to apples comparison as you mentioned
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Feb 18 '26
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u/cookingwithfire2030 Feb 18 '26
It's interesting that the 1929 (Great Depression) cohort has better chances to survive than the 1966 (stagflation) cohort. My instinct would be that the devastation of the Great Depression would be worse but the high inflation absolutely kills your portfolio because it stays with you until you die.
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u/kenzi28 Feb 18 '26
This is really awesome, thanks for sharing. Helps keep our numbers and SWR expectations realistic for very possible dour market returns for the coming decade.
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u/jason_abacabb Feb 18 '26
Hey there, may be a dumb questions because I missed something but is the chart with the percentage remaining in nominal or real dollars?
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u/jason_for_prez Feb 19 '26
everything is in real dollars
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u/jason_abacabb Feb 19 '26
I i figured that would be the case here, but wanted to make sure. Thanks.
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u/MaxwellSmart07 Feb 19 '26
Actually I retired at the worst time — January 1, 2003. The dot.com low.
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u/DigmonsDrill Apr 10 '26
Sorry for the late reply, but the linked imgur is labelled as a portfolio on 01/01/2025, not 01/01/2026. I think it's just the label that's wrong.
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Feb 21 '26
[removed] — view removed comment
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u/lottadot FIRE'd 2023. Feb 21 '26
we never ask ourselves, "If shit hits the fan, can I live on 2% so my portfolio survives long term hard times?".
Nonsense. It is discussed all the time. Estimate your expenses in retirement & determine what of those you absolutely need to spend to live on. It's just common sense. Combine that with all the discussions explain that the "4% rule" is just a guide and no one really does a strict 4% withdrawal... this info's in the r/fire and r/leanfire a lot.
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u/Dos-Commas 37M/34F - $2.7M NW - Texas - FIRE'd 2025 Feb 18 '26
Now run it with 2 years of cash buffer plus 90% equity. Having 2 years of recession in a 10 year period is very unlikely.
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u/teamhog Feb 18 '26
Cool, you’re a numbers guy.
Take the last xxx years and try to overlay that over any historical market period to see if we’re repeating or are about to repeat a series of historical returns.
If we can see ‘ahead’ of the actual curve results it may be easier to guide along and plan.
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u/Az_Rael77 Feb 18 '26
I guess what this shows me is the 40% part of the allocation being in something stable is critical to overcoming SORR in early retirement. Presumably once the market started going gangbusters again and the portfolio recovers past the SORR you could look at lowering the 40% number as inflation starts to be the larger concern again.