Frequently Raised Objections

alpha · Post by **alpha** » Sun Nov 25, 2012 4:28 am

SWR= Safe Withdrawal Rate.

But that would entail knowing what the "real" rate of inflation is. How do you calculate that? Or should there be an "average" inflation rate of say 5% to 10%?

And then, would you take that 5% to 10%? inflation rate and multiply it by your SWR and then add it back into your SWR and come up with a total.

On 300k with a 3% SWR would be $9000. Plus an extra $900 for inflation makes $9900. Or would that be 10% of the 300K i.e. 30K? That would require an additional 300k in investment capital at 10% return if you could get that...so what's the scoop?

secretwealth · Post by **secretwealth** » Sun Nov 25, 2012 5:54 am

You have to make your assumption of what you think inflation will be. I think most go with 3%; I am a bit riskier, so I use 2.5%.

m741 · Post by **m741** » Sun Nov 25, 2012 7:53 am

Yes. It's the rate at which you can withdraw money from your savings indefinitely without running out.

Post by **jacob** » Sun Nov 25, 2012 6:04 pm

SWR is essentially the projected/future _real_ return rate corrected for volatility "over the long run". Historically, meaning over the past couple of thousands of years, it's been 3%. The only exception has been the period known as the Dark Ages, where trade and finance broke down completely.
Keep in mind that this requires a certain level of flexibility. You have to be able to go where those 3% are available. For example, if your country erupts in civil war, you can leave and get 3% elsewhere. Conversely, 2% or 1% is not going to save you if you're the persecuted minority.

anomie · Post by **anomie** » Sun Nov 25, 2012 11:17 pm

Hi,
Here's an objection I did not see on

http://earlyretirementextreme.com/wiki/ ... Objections
: "You have to be really smart at investing to do that"
ie, Can 'normal' people ERE, or must you be an investing whiz?
Even assuming someone bought into the first part - lower expenses, and save your money - then what do normal people do with their saved money to grow it to that magic 3% SWR?