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Comment by JMTQp8lwXL | Hacker News Reader

The withdrawal rate isn't a fixed $40k. It's $40k, adjusted for inflation, annually. Year 1 is $40k, Year 2 is $41.2k (assuming 3% inflation). Purchasing power stays constant over time.

Though I didn't specify the portfolio composition, most of my holding are US Large Cap, which are the 2nd best performing asset class below small cap: https://www.compoundvalue.com/wp-content/uploads/2013/10/IR_..., but both classes are significantly above the others (Bonds & T bills), so I'm not sure what's meant by low returns. If you mean sequence of returns risk, most people use a bond tent to mitigate the risk.

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Taking out more than $40k/year erodes your principal though, I thought that was pertymcpert's point?

Like, if you've got $800k and can reliably earn 5%, as long as you're withdrawing only $40k you're good. But if you withdraw $41k one year, your principal is now only $799k. Next year if you need $42k, the return from your $799k is only $39,950, so your principal goes down to $796,950, etc.

From a quick spreadsheet, if inflation is 2% annually and you can get 5% on your principal, you deplete your $800k in ~32 years.

Doesn't seem too hard to fix with some supplemental income here and there?

He is not trying to live off the dividend (as far as I understand), he is trying to live off the principal and the dividend. At the end of the day, if his expected life span is something like 85 years and he accounts for 110 years in savings he would be left with very little principal, but who cares at that point. It is true however that getting that right may be very tricky, because if you miscalculate you have no savings left.

Yeah I guess this is fine as long as you account for it. Starting with $800k, $40k expenses, 2% inflation and 5% return, retiring at 35 you end deplete your money at 67, but starting with $1M takes you to 83.

Not taking a piss, could you share your spreadsheet?

https://docs.google.com/spreadsheets/d/1RTa0rnMdk8VSPpK7qgkl...

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