The continued viability of the 4% rule in the US in the 21st century

[delay]

This would be a clue why that was: https://www.multpl.com/10-year-treasury-rate

At first thought, it looks like interest rates going down is good for financial assets.

But then if I look at 1930-1940 interest rates went down too, yet stocks lost a lot of value. It looks like rates going down alone is not sufficient.

Perhaps rates going down is but one aspect of a policy to promote converting savings into financial assets? And other aspects were missing in the 1930s?

It might be amusing to contemplate how to spend the $50,000 on your final assortment of goods/tools with which you must thence forward survive and/or thrive on your 2 acre island.

Luckily for you and me, it looks like the world isn't about to run out of resources just yet.

[chenda]

Perhaps one could plan for deliberate capital depreciation ? Also, how is portfolio failure defined in these studies, total loss or partial loss ?

[Scott 2]

If you do that with your portfolio, you introduce a lot of extra risk that is arguably decreasing your SWR (as your worst case scenario has just gotten worse through all that downside risk from speculation)

When I suggest rebalancing, I'm assuming commitment to an asset allocation within the portfolio. Restoring it at regular intervals, based upon predetermined criteria. The personal investment strategy determines one's distribution of risk. Something like the golden butterfly looks very different than
VTI and chill. Downside can be mitigated.

No reason the portfolio must be 100% stocks. Mine is not. I don't even think about individual trades. Every decision is based on the portfolio.

That portfolio perspective can extend to one's skills, wants, relationships, etc. How does one make their personal system antifragile? IMO the energy needed to go from 33x to 50x in financial assets, is much better spent there. Resilience over robustness.

ERE folks seem to accumulate resources post retirement. Their SWR continually declines. One could argue starting at a 5% SWR with that in mind.

Last round of asset inflation at the cost of the median voter made people...

We're 100 days into an administration. Despite the media frenzy, I don't think the long term economic impact is clear. My bet is we eventually experience a reversion to the mean. This isn't the first time in history wild stuff happens.

People will get spooked, wind down their leverage, the market will make big moves. Then sentiment will shift and the opposite happens. Some of stuff goes up, some down. Provided one avoids personally irreversible risks, it generally works out.

The tariffs will probably slow the velocity of money, making things look real bad. At some point they become politically unsustainable, and cash will woosh back in. Maybe we'll spend less next year, if it's still playing out. That's cool, this year was flush anyways. I'm playing a game of decades.

Let's say the government raises taxes so that my company is now paying $1m more in corporate income taxes...

IMO this comes back to the velocity of money. If the taxes can get more transactions happening faster, people work more. That work produces value, lifting all. Historically, the wealth recenters with capital holders. Government attempts to redistribute are mitigated, because business can pivot faster than legislation. It's not clear the taxation will be destructive.

Equally important - the rules will change over time, causing asset volatility. This gives the rebalancing side of the portfolio strategy a chance to work.

On the personal side, if the government is redistributing wealth, I'm gonna get where it's going. Free healthcare for those earning $X/yr??? Well now that's how much I earn. What a coincidence.


I think it's also incredibly difficult to infer the impact of AI. What happens when everyone has essentially zero cost access to knowledge work? More disruption sure, but likely economic growth. What if AI plus robotics advancements complement one another? Capital holders could profit immensely. I'm low key expecting those running a sub 3% SWR to become ridiculously wealthy. I think that's the most likely scenario.


I'm purposefully avoiding quantitative examples here. Over a 50 year horizon, ones qualitative assumptions overwhelm any numerical details. If one believes the singularity is going to wipe out humanity, well there's no SWR. If it ushers an utopia, with universal basic income, retirement savings again become moot.


My personal sentiment seems more optimistic than average here. It's honestly a little surprising. I tend to be risk adverse among my IRL connections.

[ertyu]

I suspect the French path (picking money off the wealthy to keep the failing system alive) is more likely across the globe.

I disagree. Increased weath inequality has resulted in a billionaire class that's very powerful and that's actively seeking to limit the powers of government. For the above to hold, someone needs to vote it in. And for them to vote it in, they need to a. not be fully in rich ppls pockets, and b. there need to be institutions left that are at least somewhat free of regulatory capture. You're not looking at France. You're looking at South Africa and Latin America: ghettos and brownouts with a smattering of warlords

[Jean]

I thought i was among the pessimistic, but i have a hard time believing it will evolve all the way down to south africa level of getthoisation and raciallymotivatrd violence.
Otoh, you really have a lot in common with big south armerican countries like argentina or brazil.
You mainly have a better designed state, and a higher coruption allergy rate.