Yahoo: Secret Math Behind Early Retirement

[George the original one]

Word is being spread, no secrets amongst us...
http://finance.yahoo.com/news/secret-ma ... 16428.html

[leeholsen]

i'm sure it is appreciated that ere gets mentioned, but thats not how i'm seeing ere.

he lists a 4% withdrawal rate, which may be the average; but not for the avg ere person. i'd be looking at another 20 yrs of work instead of less than 5.

[jacob]

@GTOO - Interesting how there are almost no complainypants arguments in the comments of that article. Maybe they're on vacation. Maybe it's due to the way it was writing (hard to do ad hominems where there are no "hominems"), or maybe times really are changing...

@leeholsen - The average SWR around here seems to be closer to 3%. The 4% rate is based on the Trinity study and heavily promoted by MMM who gets away with it because he can easily make money through other venues. Also, optimism helps, as the 4% happens to be the single most worst case, historically speaking.

[pathguy]

@GTOO - Interesting how there are almost no complainypants arguments in the comments of that article.

You may have spoken too soon.

"The whole article is based on a premise delivered in passing as a simple throwaway.

Please explain where one can get 5% over inflation on a safe investment. And since we are making up fantastic sustained 5% safe investments year after year for decades, why stop there?"

David can't find a savings account returning 5% over inflation, so obviously the whole article is BS. Never mind the fact that the stock market has returned 7% historically.

[dot_com_vet]

The comments are pretty sane. It's hard to argue math.

[RealPerson]

@GTOO - Interesting how there are almost no complainypants arguments in the comments of that article.

David can't find a savings account returning 5% over inflation, so obviously the whole article is BS. Never mind the fact that the stock market has returned 7% historically.

The stock market has indeed returned some 7% on average. However, an average is just that. It does not tell you what will happen next year or the year after. The sequence risk of retirement is the reason some people do not consider stock market averages. At what point in your retirement bear markets occur can greatly impact your available financial assets. A 30% bear market occurring right after you retire has a much more negative impact on your assets than one that happens 10 years into retirement. The correct approach is to implement strategies to manage the sequence risk, not to ignore the stock market because it is too risky. Jacob has discussed some strategies to manage the sequence risk in various threads.

[pathguy]

Fair enough, but to dismiss the possibility of early retirement because there aren't any "guaranteed" 5-7% returns is a bit ill informed.

[jacob]

Another ill-informed meme I saw in the comments was that "you need to win the lottery, start a business, leverage real estate" to pull it off. That's pretty standard too.

[RealPerson]

Fair enough, but to dismiss the possibility of early retirement because there aren't any "guaranteed" 5-7% returns is a bit ill informed.

I totally agree with that. Very few things in this world are truly "guaranteed".

[jennypenny]

For every article like that one though, you get articles like this one about the coming world-wide retirement crisis...
http://news.yahoo.com/ap-impact-world-b ... ZJUDI4M18x

People are worried that they'll have to lower their standard of living after retirement to make it work. It still doesn't seem to occur to most people to lower their standard of living before retirement to make it possible. Or that most people's standard of living is unsustainable before or after retirement.