Hi Karma,
The whammy might be, if the market was down 50% for 10 years straight, how would you handle things and does your asset allocation hold up? In the UK we've just seen 5 years where we're down and the indexes in the UK, US and Europe are all on nil return, less investment fees, so effectively negative. That in itself is a good test as I see that possibility more frequent that a 10-20 year downturn.
That would be a good real world test, I plan to do the last five years when I've selected a testbed bunch of funds to match my planned asset allocation and have all the data. It may not be so easy to change the asset allocation later if you find it doesn't hold up well in a downmarket. These are good things to consider and backtest on before committing large sums I think. I have several years with other matters to attend to before I will be investing, so I have the time to start investing better prepared and hopefully make fewer mistakes along the way.
The average person gets it completely wrong. They tend to have far too high estimates of long term performance, picking 10% with no margin of error. American investors invest almost entirely in US stocks and bonds, no diversification into real estate or international investing. No consideration of valuations at the time of FIRE to appreciate that their portfolio was in a bubble, they FIREd, it burst and then they're down 40% permanently scratching their heads complaining about the market. The average person hasn't saved enough to begin with which only compounds the above problems and gives them absolutely no margin of safety. As Dave Ramsey often says, most people are normal and broke, I'd rather be weird! A work in progress..
Petey
karma wrote: but the question [SWR] is important. Not so much as a one-size-fits-all number but as a starting point and then later as a reality check.
Absolutely. How would the average person even know where to start? And I use various SWR (by various "gurus") as reality checks - for a "just in case" or "what if" situation.
I think once I get a handle on Chips utility theory, I'll realize how personal SWR are. Until then, it's good to know where to start.
I am particularly interested in the "reality check" situation since it changes over time. Would that there would be a "whammy" to apply to any present day withdrawal. Where's Shakespeare when we need him? (probably drinking - wine, not beer!!).
karma