120: Early Retirement: Asset Allocation and Safe Withdrawal Rates with Michael Kitces
Michael Kitces joins us today to talk about Early Retirement - and how the recent stock market movement affects the FIRE Community and the 4% rule. We spend a lot of time on the 4% rule - including this graph which illustrates what Michael discusses - basically, there is an ultra-high probability that you will come to the end of 30 years with MORE money than you started out with, and an extremely LOW chance you’ll spend it all. In fact, only one time does the retirement fund hit zero - and even that isn’t until year 31! Since the FIRE Movement is based on the 4% rule, we wanted to hear from Michael, the Research Nerd Supreme, what he feels about it. “...historical safe withdrawal rates aren’t based on historical averages. They’re based on historical worst case scenarios.” Yes, we’re seeing some pretty big movement in the market, and yes, it can make you think. This episode provides some pretty powerful reassurance that “every little thing, is gonna be all right.” If you are worrying about your financial future, if you have money or want more, this powerful episode is a can’t miss, absolutely-must-listen edition of BiggerPockets Money. In This Episode We Cover:The origin of 4% ruleThree different time periods that trigger the 4% numberSafe withdrawal ratesDifferent 4% rule scenarioBucket strategyKey assumptions that start crapping up on modeling or evaluating the short term cash bucketThe right time to start looking at bonds Constant mid-course adjustmentsWhat a retirement red zone isBond tent strategySafe withdrawal rate researchGuardrail strategySmart money moves during this marketDollar cost averagingAnd SO much more! Links from the ShowFinConDetermining Withdrawal Rates Using Historical DataSoftware Solutions To Calculate Safe Withdrawal RatesOnline Data - Robert ShillerThe Ratcheting Safe Withdrawal Rate – A More Dominant Version Of The 4% Rule?Yield Shield - Millennial RevolutionHow Has The 4% Rule Held Up Since The Tech Bubble And The 2008 Financial Crisis?Mr. Money MustacheBiggerPockets Money Facebook Page