Bill Bengen, the godfather / creator of the 4% safe withdrawal rate (SWR), or rule, has just published a new book available on Amazon: A Richer Retirement: Supercharging the 4% Rule to Spend More and Enjoy More.
I have not read the book, however, he has done a number of interviews on YouTube. The gist is that with a more diversified portfolio, as compared to that used to generate the original 4% rule, the new SWR should be raised to at least 4.7 %.
1) the original 4% SWR was not what his original study showed – it really was determined to be 4.15%. It was rounded down to 4% for unclear reasons.
2) per Michael Kitces, using a 4% SWR, 2/3 of retirees portfolios will grow to be greater than 2.5 x what they started retirement with, by the time they pass.
3) real world data has shown that retiree spending declines by around 1% per year, meaning that spending will go down by 30% over a 3- year retirement (compunding effect disregarded)
Are we vastly underspending our financial resources? Keep in mind that an increase from 4% to 4.7 % is a very large increase in “permissible ” spending. On a $2.5 million portfolio, spending would increase from $100,000 a year to $117,500 a year, which is a highly significant bump up in annual spending.
Did you just log in? If you don't see the commenting form, please refresh the page.
The SWR goal is to have sufficient money each year in retirement to fund our lifestyle. The SWR makes assumptions about stock gains and interest rates. That has nothing to do with inflation, per se. Inflation decreases the value of money. It erodes purchasing power and can also reduce bond yields. Since 1982, the value of investments would have to double to keep up with inflation. If I put $100 into an investment account in 1982 I would have to remove $200 to buy the same goods and services today.
If an investment nest egg is increasing in value 2% per year, it cannot keep up with modest withdrawals if we consider the erosion in purchasing power. After all, those withdrawals are used to buy the necessities of retirement.
If average inflation is about 3.0% per year, that reduces the value (purchasing power) of a nest egg. If that nest egg appreciates each year by an amount equal to inflation, then purchasing power is maintained. This is before taking any withdrawals. Withdrawals reduce the value of the nest egg.
While the average inflation for the period 2000-2024 has been 2.53%, the actual annual inflation has been as low as 0.1% (2015) and as high as 9.1% (2022).
I’ve run the numbers with 3.0% inflation. The long-term average real return for the S&P 500 is about 7.0%. Considering inflation the real return is 4.35%. The long term real return for 10-year U.S. Treasury bonds is 0.96%. If we combine these, then the real return for a 60/40 portfolio is about 2.99%.
If I begin with a $1 million portfolio invested at 3% real returns and I withdraw at 4.7% of the balance each year, my portfolio will be depleted in about 38 years. However, inflation would erode my purchasing power and I might not be able to maintain my lifestyle at a constant withdrawal rate of $47,000 each year.
If I do the same but increase my withdrawals by 3.0% to accommodate inflation this will maintain my purchasing power ($47,000 withdrawn at the end of year one, $48,410 year two, etc.) Using this approach the portfolio will be depleted in about 30 years.
Reality doesn’t provide constant returns or constant inflation. This is why some suggest a “guardrail” approach to withdrawals. If gains are lower in any given year, then the actual withdrawal is reduced. In better years the withdrawal can be increased. Of course, if there were a “lost decade” this could pose great difficulty for a retiree. Keeping some additional cash and saving more are methods to deal with this.
RMDs dictate under IRS rules how much we must withdraw from certain retirement accounts each year. However, that money may be more, or less than our calculated SWR. As noted by others here, any excess withdrawn and unspent can be re-invested in a taxable account, or saved via bonds or a high interest savings account, etc.
With 20-year Treasuries paying 4.93%, the path to a higher SWR than 4.0% is easily obtainable.
The much bigger question is not about SWR, but rather why to continue with a robust stock allocation when retirees can safely earn 5% for the long term.
John, this is worth its own new post. I’d love to see your thoughts developed. I’d like to review and comment.
Ben – you are 45 with a potential 60-year time horizon, so you must maintain a robust stock allocation to counter the risk of high future inflation. When working, my wife and I maintained a 100% stock allocation, and we’ve advised our kids to do the same – folks having an income stream can afford the risk of a high stock allocation for the decades of working.
I am 70 with a likely 15-year time horizon, so a 5% return should cover my wife’s and my needs sufficiently – and it easily beats the 4% SWR. Having said that, our allocation is ~80% stocks which has served us well with every tick up of stock indices but also causes me to question my sanity with every up-tick.
I have come to believe that long term Asset Allocation is the biggest financial decision we all make – not SWR, social security claiming, Rothing, treasuries versus corporate bonds, funds versus individual stocks and bonds, etc. This is summarized in my nearly last HD article with a title tribute to Jonathan: Getting Going – HumbleDollar
Since stock valuations are stretched by nearly all measures (P/E, Shiller, Buffett), I do think it may be time to reconsider stock allocations especially for retirees who can lock in 5+% with a mix of treasury and corporate bonds. Vanguard has even recently recommended a very conservative 30% stock and 70% bond allocation. At some point, today’s mini-bubble will burst, but it could be years and 2000 points on the S&P 500 from now.
You’ve made me feel much better about our nearly 98% stock allocation. Also, I like that I’m living to 105! Thanks for the vote of confidence!
Frankly, I probably won’t end up doing anything drastic, but I share your concerns entirely. I’m wondering why we’re taking so much risk in the inflated stock market when bonds are offering a decent return.
The one thing that would give me pause for conventional bonds is high inflation.
Also some (including many on this site) believe that rates are heading higher due to the high national debt load. They could be right, but I’ve offered the contrary view which is that it seems like the Fed usually lowers rates whenever the government gets in trouble. Also, see Japan for enormous debt load and very low rates. This should have been a new post!
I’m remembering that I sort of tried to get this conversation kicked off with this post back in July, but it didn’t really take off:
Is now the time to go long in bonds? – HumbleDollar
Re 2), I wonder what the 2.5 x growth actually is after adjusting for inflation?
According to the BLS Inflation Calculator, $1 in July 1995 equates to $2.12 in July 2025.
The discussion of SWR is confusing to me because the role and impact of the required minimum distribution is rarely noted as a problem or one of the factors that must be considered. Could someone explain why it might not be relevant?. What if the RMDD exceeds what you would need or want to withdraw? (It occurred to me that if I were a disciplined planner I could bank in a taxable account funds from the RMD.). What might be the effect on the sustainability of the portfolio if the market has a long sustained period of loss or very low returns. Would not high withdrawal rates required by RMD early on threaten one’s ability to withdraw what is needed to live on in long term down markets? Would that not be a problem?
.
Depending on your age/circumstances converting some of your traditional IRA to a Roth would decrease the RMD from your traditional, and there are no RMDs for Roths.
SWR and RMD are not necessarily related. I have been taking RMDs for several years and have yet to spend any of the money. I simply reinvest it in similar funds in a taxable account. SWR is how much you could safely spend from your portfolio if you need the money. If you withdraw 4% it might or might not come from the RMD. It might be less or it might be more, or it might be the same but if you have a cash cushion or a CD or TIPs ladder you might use that money instead.
The assumption on SWR is that you spend it. You are not required to spend your RMD – you can pay the taxes and invest it in a taxable account.
What is safe is the amount needs to allow for life’s ups and downs. Remember it is a guide, not a “for sure”, and by the way who is this average person. I say if 4% or 5% just make sure you push the numbers in a spreadsheet. Will we live to 90 or 100 or 82? We do not know. My calculations are conservative and I use 100, the age I would like to reach. And in my retirement since 60 years old, expenses seem to increase, no matter what my age, at least so far, now 79. We all have different circumstances, but we need to plan, and then hope the plan works. The fact that you planned will for sure make your situation better.
I can’t quite drink the Bengen Kool-Aid. Basically, I setup a spreadsheet for my income/expenses each year until “end of plan” at age 95 – includes inflation factors, house selling/buying, Social Security, etc. It becomes painfully obvious when I see it all laid out, that life gets in the way of systemic withdrawal rates; there’s just too many hits that spike expenses up or down. My exercise can give me a warm fuzzy for overall plan sustainability, but life will refuse to be made linear.
I think this is an important topic, but is similar to the question when to claim SS. It’s personal and varies from person to person. If you consistently earn say 9% on your nest egg year in and year out, then 6% is a safe withdrawal rate because the remaining 3% is consistently being reinvested. By retirement age, most of us have figured out our standard of living. So relax and enjoy some (or a lot), of your hard earned money. After all you can’t take it with you.
My mother just died after living to 9, of which 6.5 years of that was in assisted living and then a nursing home. She has hospice for 3 weeks. Fortunately she had 6.5 years of long term care insurance. I look at that, and that I have failed medical underwriting for decades such that I can’t get long term care insurance. As a result I need to plan for that worst case.
What percent I can safely spend depends on what I assets I have, their fluctuating value, planning for worst case and what the economy will do. We boomers break everything we touch, our retirement will be no different, including the stock market (remember a bit over 50% of that is made up of money invested by retirement accounts and when we have to take money out the generations below us aren’t going to replace it at the rate we are taking it out).
And of course that is also influenced by health (I have an indolent cancer with no cure so the odds are against me living until 97 but the odds of high medical expenses are certainly there (medicare D comes to mind, as does sky rocketing deductibles with B, premiums with D and supplements…as boomers age and become sicker and sicker…).
I don’t have an answer but I have plans to make sure I have a good cushion, I’d rather under spend and leave money on the table than over spend and end up on medicaid and in a medicaid nursing home.
I had always planned to wait till 70 to start collecting Social Security. But I turned 62 just before Covid lockdown started and had already been laid off over a year earlier so I did not qualify for all the unemployment that those who lost their jobs during Covid got (I only got 6 months and it was long gone). So my choice was, do I take Social Security at 62, or do I start pulling money from my retirement savings (which had cratered with the Covid/trump stock market)?? Because I had read about the difference in outcomes for people who have to start making withdrawls in a down market, I chose Social Security. There really was no good choice. Plans are great, but more people than are acknowledged don’t get to execute their best laid plans. Age discrimination, unemployment and other garbage get in the way. Now that I am full retirement age I sometimes ponder the difference being able to wait would have made to my monthly check, but I also know that my retirement savings would not have rebounded the way they have had I used them instead.
Dot, thanks for sharing your story. That must have been a very difficult situation to navigate. When faced with no good choices, we just have to make the best choice we can. Your comment that more people than are acknowledged don’t get to execute their best laid plans resonated with me. I’ve encountered a number of people in similar situations as yours doing volunteer tax returns with AARP TaxAide. These clients face challenging financial issues stemming from health issues, layoffs, divorce, or bad choices. We are only permitted to provide tax preparation, not financial planing advice. But we sneak some in where we can.
Based on my finance readings you made the tough, but correct choice. Especially if the decision was made during the COVID dip in the market. Per AI the S and P has increased 189% since the. Even assuming you were not 100% invested in the S and P most likely your portfolio has gained way more than the 8% and inflation adjustments per annum. You are also right that had you taken all your expenses from your retirement accounts you would have a much lower balance now. So give yourself a pat on the back for picking the best option in a tough situation.
Flexibility is often the best ability
Appreciate the summary, super helpful. I’m glad Bengen is pushing the conversation forward. I see SWR as a planning starting point, not a verdict. The “right” rate lives at the intersection of portfolio mix, sequence risk, retirement age, non-portfolio income (Social Security/pensions), taxes, longevity expectations, bequest goals, and—maybe most important—our willingness to adjust spending when markets get rough.
Your points about underspending resonate. A very low withdrawal rate can look prudent on paper but sometimes reflects hidden trade-offs: extra years worked, deferred experiences, or chronic underspending in retirement. On the flip side, diversification and a flexible plan (guardrails/variable spending, cash buffers, delaying SS, etc.) can make a higher initial rate like 4.7% or even 5% reasonable for some households. Averages about spending declines are useful, but they’re just that—averages; health costs and personal preferences vary a lot.
For me, it’s less about proving which single number “wins” and more about right-sizing spending to the life we want and keeping room to adjust. Whether it’s 4% or 4.7%, I’d pick the rate that fits our goals, income sources, and comfort level—and revisit it as life (and markets) change. Curious how others are calibrating that balance.
If I were running a marathon (and I have no such intentions,) I would definitely try to pace myself. But I would also reassess my pace every so often, maybe each mile but definitely every few miles. When I reassess, someone might say that shows you were wrong last time and you’ll probably be wrong again this time, so what’s the point?
I would say the point is to keep running.
To apply this metaphor, I might say such things as:
1) If you can spend 4.7% and you’re spending less, then you’re not running full out. That’s okay, for sure. And if you always spend less, perhaps as some have said, this exercise is not that personally relevant.
2) If you spent 4.7% but you made 14.7% last year, you could probably up your spending pace a bit this year without unnecessary angst. This would be more true if it happens several years in a row.
3) If it was the other way around–you made 4.7% but spent 14.7%, it might be a good idea for the long term to slow down a bit ;-).
A decline of 1% per year compounded for 30 years is about 26%.
One thing that I see missing in retirement articles is the situation we are in. We have been retired for 5 and 6 years and are living off our portfolio until we reach 70 in 2 1/2 and 3 1/2 years. As I have written before we don’t have a budget, but are frugal in every expense but travel. I have no idea what our withdrawl rate is but our portfolio is slightly higher since we retired so I’m not worried. But what about others who have a smaller asset base? What percentage of their assets can they spend knowing as we do that after claiming their maximum benefits their withdrawl rate will be significantly reduced?
David, this is an interesting question. i’ve thought about it for a few minutes and here is how I would handle. I would segregate the amount of money needed to cover the deferred SS benefits for the bridge period. I would then use the SWR for the remainder.
To illustrate the idea, here’s a very simplified example using easy numbers. Assume the person is 66 and has 4 years before claiming SS. Their benefit is $25,000. They have $1,000,000 in savings. They could put $100,000 in a safe spot and withdrawal $25,000 per year for the 4 year SS bridge. They could then apply the 4% rule to the remaining $900,000 to get $36,000 per year. That would give them $61,000 per year, 40% of the total is inflation protected. This is obviously an over-simplification, but demonstrates one approach.
This is similar to what we did. I retired at age 63 and set aside funds (CD ladder) to my FRA of 66. However, I decided to wait to age 70 to claim my SS benefits. During that time, I added to that ladder so that the income was predictable. One key difference was that we partially annuitized our 401k portfolio (after rolling over to an IRA) using immediate annuities to create lifetime income. We used 1/3rd of the portfolio like a self-funded pension. If I claim SS at FRA (which was postponed four more years), that lifetime income was to cover our essential expenses. Two things that helped me was a part-time job (working one day per week) and getting spousal benefits at my FRA. That significantly reduced the withdrawal rate (for essential spending, at least). Because I was able to wait to age 70, that lifetime income covers almost all our expenses, except for major travel. After claiming SS, all IRA withdrawals would then be for discretionary spending and could be variable. I then used a guardrail approach to withdrawals, which allowed us to average 5.8% withdrawals for the first seven years of retirement. Part of this withdrawal also included Roth conversion taxes for roughly 40% of our portfolio. Once I started my SS at age 70, our withdrawal “needs” dropped to 3%. This spending level still covers about three major international trips each year. Since retiring 12 years ago, our portfolio (invested at 70/30 asset allocation) has grown beyond what we had at retirement (after annuitization). We did have a reasonably good sequence of return, though. We spend what we want (within reason) but have used the 4% rule as a gauge along with our guardrail criteria.
Hmmm, I have asked Jeff Ptak at Morningstar if they could address the question.
I often hear it argued that the 4% (now 4.7%) rule is too simplistic, not optimal etc. But I really like the fact that Bengen’s advice is based upon actual historical data, and has a rational basis. And it is sufficiently simple that basically everyone can consider it as part of their financial planning. This at least gives people a simple guide for their accumulation phase, and a starting point for the de-accumulation phase.
A more complex and more sophisticated approach may well give a better technical result, but if the complexity overwhelms the “average Joe” then it is all for nothing.
That’s is exactly my philosophy in all this, less sophistication and more practical thinking for 90% of people trying to make it work. Be careful though, you may encounter those dreaded red 🔻
At ages 71 and 67, we have yet to spend any of our retirement accounts. We do plan on increasing our travel, both here and abroad since we recently lost our beloved border/ heeler of 14 years. Even with increased travel, I don’t see spending our retirement money until RMD’s kick in. Even then, we may just use the RMD as our guide, pay the taxes and reinvest. We don’t have or desire a lavish lifestyle and we definitely want to keep our powder dry in case we need additional care as we age. We don’t have LTC insurance and don’t want to burden our kids either. So any suggested spending percentage just seems irrelevant.
Begs the question what are you living on if not retirement accounts? Indeed as you describe it, it is irrelevant.
Pension and SS more than covers our lifestyle, at least for now.
Warning- I am going to ruffle some feathers here:
Mike says:.So any suggested spending percentage just seems irrelevant.
RDQ says : Indeed as you describe it, it is irrelevant
I say baloney. If the 4% rule did not exist, how would you know how much you could safely spend without going broke ? Perhaps only 1 or 2 % is the right number ? Would that have affected your retirement lifestyle ?
Do you know what retirees were spending prior to Bengen’s seminal 4% paper in 1993 or 1994 ? In interviews with him about his original study he relates how NOBODY knew what a SWR was, and advisors where commonly telling clients to spend 6,7,8,9, even 10 % annually, based on absolutely no data or evidence.
Nobody’s spending choice has come from a vacuum of “what the hell, this is what I feel like spending, and whatever happens, happens”
So while you might not adhere closely to a 4% SWR, there is no one on this blog who isn’t aware of it, and hasn’t in some fashion used it as a guideline, however tangentially they have chosen to spend their assets.
I was replying to Mike who said they were not using retirement accounts. In his situation as he described it seems the percent withdrawal is irrelevant. Maybe someday it will be for him.
After rereading more closely, I agree.
Consider my diatribe a small snapshot of the history of his study and its profound impact on personal finance and retiree spending.
In reality one can and most do adjust their withdrawal amounts each year. Any withdrawal unspent can be saved to cover shortfalls in future years.
A withdrawal scheme is only half of the plan. Our experience is we can live well on 3.5% withdrawal per year. This rate has allowed for our expenses for the care of an elder parent, and travel, too.
Note that we do have a well diversified portfolio.
Doesn’t it all hinge on the amount of the portfolio being used?
Bought this on Kindle last night and am part-way through it. Glad to see he’s using a more diversified portfolio than his original book. He takes a methodical approach to this question of what the draw rate should be to maximize portfolio income but I still believe he’s working hard to answer the wrong question.
A better approach is, IMHO, Bill Bernstein’s steps from chapter 16 in his Four Pillars of Investing (2nd Ed.). Or Jonathan’s approach which you can read about in the Guide here.
Trying to stretch a portfolio for every last cent of income is like reaching for yield with bonds: it works until suddenly, at the worst possible moment, it doesn’t.
Excellent point :
Trying to stretch a portfolio for every last cent of income is like reaching for yield with bonds: it works until suddenly, at the worst possible moment, it doesn’t.”
Counterpoint: If one decides that 4% is an appropriate ballpark number based on the data, but feels a little skittish and wants to be conservative, they may choose to target around 3.5%.
But, if 4.7% is now deemed to be the most appropriate number based on Bengens incorporation of broader diversification, etc, but one again is feeling skittish and conservative, they may choose 4.25%. Net result, increasing their withdrawal rate from 3.5 to 4.25%. As I noted below, this small percentage change can result in a substantial increase in annual spending.
For the record, I/we spend quite a bit less than 4%, which I blame on my wife who is a VERY reluctant traveler !
Agree. One other point worth factoring into this: regardless of what draw rate you choose, if you have the budget flexibility to get by with less during tough years, when markets or inflation sour, your odds of long-term success go up.
Unfortunately for us, both love travel. It’s the biggest single item in our retirement spending. Years ago, with three busy kids, and insane work hours, our pre-retirement trips were mostly limited to North America. So many places and cultures left to experience.
I’m currently reading “How to Travel the World on $75 a Day”. Not possible everywhere, and more for the younger set, but certainly worth a look if you want to travel on a budget. As is “Europe Through the Back Door”.
When I backpacked across Europe for 3 months when I was 27 I carried, and used extensively, “Let’s Go Europe”. Written by Harvard students sent to scout areas the guide was my bible. And the writing was quite good, too! On packing I still follow this gem, “Pack as light as you can, then when you are done, cut it in half and bring more money”.
Mark, thanks again for this interesting post, and the link to the JP Morgan presentation. It contains some very good information (beyond the spending data you reference), and some excellent graphics the depict important financial planning topics.
The 2 charts on longevity were especially interesting. The data presented makes me wonder why our wives put up with us.
The spending data is also interesting. The biggest thing I noted was it does not include late life LTC costs. I absolutely agree with the charts assessment that retirees (me anyway) spend much less on apparel in retirement.
My first retirement party was in 2001. I’ve had a few paid assignments here and there since then. Our portfolio is up about 60% over the last 24 years. With another 12-14 years to go, we imagine we’re going to be OK even with the added CCRC expense starting in ‘26. Our LTC insurance company staying solvent is always a concern. With six grandchildren who we helped with tuition, we couldn’t follow the 4% rule — plus we took one big trip virtually every year. Our big trip in 2024 was our last. Only 3 more have college coming up.
I could be in retirement 8 years longer than I worked. I never imagined that would have been possible especially when I spent way too much money before I was 40. Staying put in the same house for over 40 years was our smartest decision.
Dick and Kathy wonder who or where are these old folk who spend less as they age. It’s a good question, with Kathy paying for her CCRC and Dick maintaining two expensive homes. But I don’t think they are the rule.
I observed several hundred tax clients as they grew older. I have to say these folks did indeed spend less through the years. Sure, some expenses increased, but others like vacations and day trips slowed or ceased. Their passion for shopping waned. Car ownership halved or was totally eliminated. Eating out slowed to a crawl as well.
My parents spent practically nothing in their 80s, unless you count generous gifts to family or the church.
Like Dick, I like having a financial cushion. I don’t think I’d ever be comfortable spending 4, let alone 4.7%. Spending less than that keeps me in my happy place.
Dan, if you looked at my taxes you would have no idea what we spend, except QCDs.
i am 82 and Connie 86 and if our spending declined overall, it seems we would have more of our fixed income to save. That is not the case, in fact the opposite.
When I refer to spending I include all giving money out, not just actual expenses. Our insurance of different types, HOA and property taxes increase every year.
In addition to your QCDs, I would also be aware of state deductions for your gifts to the grand-kids 529 accounts. And because of our warm relationship, we may know things about each other’s life that have nothing to do with your tax return. I may know about your winter trips to Florida, and your summer trips to your place in Cape Cod, and you’d likely know much about me as well.
Dick, you and Connie have earned an extraordinary retirement. I have no doubt that your spending has not decreased. I just think you guys are outliers in this regard.
I wish I could deduct 529 plans. Not in NJ.
Dick you need to move to Ohio… The Heart of it All! Whatever that means.
Tax deductible 529s and a new flat 2.75% income tax rate.
(The old max rate was 3.125%)
Another link to show that spending declines with age:
https://www.rand.org/news/press/2022/12/07/index1.html
In addition, lets not forget the work by David Blanchett and the retirement spending smile.
I recently checked the book out of our local library. I started reading it and it was way over my head. I am hoping some of the engineers here will read it and maybe explain in plain English for the rest of us. Looking at you, Rick Connor. 😂 Chris
Not having to deal with this, what do I know, but I sure wouldn’t bet my future on my spending decreasing by any percentage a year.
Fifteen years into retirement and while our spending has shifted, it has not decreased.
If spending decreases a net 1% why is anyone concerned about inflation especially if a big chunk of retirement income is SS?
We may get to the no go years, but not the no higher bills years.
Every time I read about a new study based on assumptions and some average person, I wonder who that person is and where they live.
if you want to increase to 4.7% I’d stick that extra .7% into a money market for a few years and see how it goes. Do your own study so to speak. 🤑
I suspect these studies are talking about “elective spending” vs “total spending/expenses”
Please see above or below depending on how you scroll.
And to emphasis, this is not a new find/observation.
“ real world date has shown that retiree spending declines by ~ 1 % per year”
Wonder how anyone came up with that. Certainly not true for me as my CCRC monthly fee will go UP every year with inflation. People with Medigap plans will see those costs go up every year, sometimes by a lot.
See slides 26 and 27.
https://am.jpmorgan.com/content/dam/jpm-am-aem/global/en/insights/retirement-insights/guide-to-retirement-us.pdf
BTW ; This is not a new finding / observation.
Those are averages. I also note that the following slide indicates that there is significant variability from year to year.
Great share Mark. Very interesting to see the spending of the 250k-750k cohort drop 32% from age 60 to 95+ and the spending of the 1M-3M cohort drop 26% in the same time interval (age 60-95).
Makes perfect sense to me that HOW much your spending drops is based on how much you start with. Start with less…expect steeper reductions in spending.
Also of interest to note are a few drop-off points. The wealthier cohort MAYBE had a few extra years of some travel expenses but otherwise, it really looks like both cohorts drop off with discretionary spending around age 80 (little travel, clothes, entertainment, transportation).
It also looks like there is a sizable reduction in food for both cohorts between ages 65 and 80….I would assume this is because of increased difficulty traveling to a restaurant and reduced eating out options because of medically necessary diets. That, and I have heard appetites reduced with age.
Personally, I don’t pay much attention to the 4% SWR. It’s really just a yardstick to set a target for the accumulation phase, as for drawdown, it’s far too simplistic a metric for that phase.
Re. It’s really just a yardstick to set a target for the accumulation phase,
Correct. And a very important one. As pointed out in one or more of the YouTube interviews, it means that people “could” choose to retire earlier using 4.7 %. If we round 4.7% to 5%, it means whereas you need to ROUGHLY accumulate 25 x your expected expenses with the 4% rule, then one needs to accumulate 20 x expected expenses with the 4.7/5.0 % rule.
I’m confused. How can you have a higher spending level and save a lower multiple of your expenses?
I haven’t read the book yet, but i have read a few articles and a few interviews with Bengen and I think the answer to your question is he updated the portfolio he used to do the analysis. The original analysis was a very simple portfolio. His more recent analysis used a portfolio that was more diversified, which provides more downside protection. Recall that 4% was the minimum SWR for a 50/50 portfolio.
I guess that’s a possibility. Personally, I wouldn’t be comfortable with such high initial drawdown rates and wouldn’t advocate for anyone else to do so, regardless of what the updated data suggests.
I’m tripping at the threshold of Bengen’s new book title. Spending more does not = enjoying more. To me the greatest joy comes from being financially unbreakable, so I will always have the joy of spending my time as I choose.