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    Financial Independence Daily FI discussion thread - Sunday, February 13, 2022

    February 13, 2022

    Financial Independence Daily FI discussion thread - Sunday, February 13, 2022

    Daily FI discussion thread - Sunday, February 13, 2022

    Posted: 13 Feb 2022 02:02 AM PST

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply!

    Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked.

    Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

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    Daily FI discussion thread - Saturday, February 12, 2022

    Posted: 12 Feb 2022 02:02 AM PST

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply!

    Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked.

    Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

    submitted by /u/AutoModerator
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    Daily FI discussion thread - Friday, February 11, 2022

    Posted: 11 Feb 2022 02:02 AM PST

    Please use this thread to have discussions which you don't feel warrant a new post to the sub. While the Rules for posting questions on the basics of personal finance/investing topics are relaxed a little bit here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply!

    Have a look at the FAQ for this subreddit before posting to see if your question is frequently asked.

    Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

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    Weekly FI Frugal Friday thread - February 11, 2022

    Posted: 11 Feb 2022 02:00 AM PST

    Please use this thread to discuss how amazingly cheap you are. How do you keep your costs low? How do become frugal without taking it to the extremes of frupidity? What costs have you realized could be cut from your life without pain? Use this weekly post to discuss Frugality in general. While the Rules for posting questions on the basics of personal finance/investing topics are more relaxed here, the rules against memes/spam/self-promotion/excessive rudeness/politics still apply!

    Since this post does tend to get busy, consider sorting the comments by "new" (instead of "best" or "top") to see the newest posts.

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    A few thoughts on the 4% SWR

    Posted: 11 Feb 2022 02:49 AM PST

    I put some points together for a financial planning session with a friend and then decided to convert them into a Reddit post, given the amount of (mis) information on SWRs floating around. I hope some of you will find these helpful. Please note that some of these points (eg. taxation) are written from a FATfire perspective.

    • historically, the SWR which had a 0 percent failure rate (1871-1981) for a 30-year retirement was around 3.75%. For a 60-year retirement it was around 3.25%. For 40 years, it was closer to 3.3%, the SWR function is not linear.

    • you may have your own views on whether the stock market of the future is going to resemble the stock market of the past, but as equity valuations are close to their historical peak, the bond yields are low and the inflation is high, assuming a higher SWR and hoping for the best may be not so prudent

    • portfolio withdrawals (capital gains and dividends) will be taxed. The exact tax rate will depend on a multitude of factors. For my own (US-centric) planning I use 15% effective tax rate, YMMV. Whichever rate you use, your "disposable income SWR" is going to be lower than "gross SWRs" mentioned above

    • the numbers above do not take into account portfolio management and trading fees which will drag the SWR down

    • real incomes usually grow by ~2% annually, but the numbers above assume constant purchasing power, i.e. only compensating for CPI inflation. Your personal inflation rate might be higher than CPI (eg. more healthcare in later years) or you may want to maintain you relative purchasing power i.e. keep up with the Joneses and not go down from a top 1percenter to a top 10 percenter in terms of lifestyle. If you want to grow your withdrawals 1-1.5% faster than CPI, you will need to target 2.5-2.75% SWR based on historical numbers.

    • earlyretirementnow.com has a wonderful series on SWRs, including a deep analysis of flexible spending in retirement. A must read imho. According to his analysis, spending flexibility does not help much, if equities underperform for decades, as it happened in 1929 and 1966. You might need to cut your consumption by 30-50% for 15-20 years, if you start with a high SWR at a wrong time.

    submitted by /u/Kimball_Cho_CBI
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