ataloss wrote: Try 10 percent instead of 4. In practice, he personally feels more comfortable with a limit of about 8 percent.
OOOUUFFF! I wonder what that 8% inflation adjusted withdrawal starting in 2000 would be now? Interesting article though.
To demonstrate, Mr. Jones demonstrated six different ways of investing $1 million beginning in 1964--- the start of the worst post war 10-year investing period. He asked the spreadsheet to solve for a withdrawal rate that would rise with inflation and leave an inflation-adjusted $1 million by the end of 1999.
The results are surprising. If you have invested in large cap growth stocks, you portfolio would hit bottom at a calamitous $279,000 and your withdrawal rate (to maintain constant purchasing power) would have been only 3.4 percent or $2,840 a month.
A mixed portfolio, however, would never have fallen below $504,000 and would have allowed a 6.7 percent withdrawal rate or $5,561 a month--- nearly twice as much. The full results are shown below in the rank ordered table.
While ignoring the 1929 start is questionable, at best, 6.7% for a 35 year withdrawal period starting in 1964 with no loss of portfolio purchasing power at the end is pretty darn impressive. I wish the article detailed the breakdown of his 'mixed portfolio'.
Brings to mind raddr's findings that the SWR goes up to about 5% when drawing from a diversified slice and dice portfolio. Big difference between 5% WR and 4% WR.
If you could live on $25,000 a year then at 5% WR you only need a $500,000 stash. If you didn't need to live in a hotspot, then 25k a year is very easily doable. Especially if you owned your own 100k house for total capital required of 600k. Hmm. Maybe I'm closer than I thought.
"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things only hoped for." - Epicurus