Reply to Live off returns of 401(k)?

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I plan to spend 4% of it a year.  If it's returns, good.  If it's principle, good too.  Likely I'll end up with a lot left.  Maybe not, but who cares, I'll be dead.  [/quote]

Same. With 4% withdrawal in the first year, and then indexed to inflation, the Monte Carlo simulators say it’s very likely not to run out. [/quote]

The simulators say you likely won’t run out of money at 4% withdrawal rate, but it does *not* assume you never touch principal. It says you have high odds of not spending all your money in 30 years if you retire at 65. You might, or might not, have much money left at the end of 30 years. If you retire before 65, your safe withdrawal rate is lower. [/quote]

Yes and no.  4% is likley much too low.  The right number is likely 5 or 5.5 or some would say 6.  So if you go with 4 and be smart about things it should last.  How to be smart?  Take 3 or lower if you can in down market years.  put in small but meaningful reductions in spend at some point when older -- like reduce spend 2% per year for 5 years from 75-80.  Run the numbers and see what this does to your chances of making it.  It is amazing.  If you retire at 65 ---- take some time off but do some compensated work if you can from 67-73ish.  Not a lot and not full time but every dollar you make --- take less from stash.  You need to do something in any event.

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So then the pp is correct — you can’t assume that you can take a steady 4% withdrawal and not touch principal. There will always be downturns, and a lot depends on when those downturns occur. If it’s early in your retirement, it’s much more damaging if you dip into principal and not get the benefit of compounding on the money that was withdrawn (even if your long term return is well over 4%). [/quote]

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