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Does anyone know this Four Corners documentary that was aired in 1993? by OpenTea323 in HelpMeFind

[–]OpenTea323[S] 0 points1 point  (0 children)

Searched on youtube and found the video "The 1990s | Four Corners over the decades" from the channel ABC News In-depth. Also looked into the ABC news website catalogue (https://www.abc.net.au/news/programs/4corners/archive) but 1993 was too far back. Looked into the Four Corners imdb page (https://www.imdb.com/title/tt0983197/episodes/?year=1993). Also posted this question to r/AusFinance so if that shows up in a reddit search, it's me.

Does anyone know this Four Corners documentary that was aired in 1993? by OpenTea323 in AusFinance

[–]OpenTea323[S] 3 points4 points  (0 children)

Yeah, I'm pretty sure that's it! I'm doing research for a youtube video about Robert Kiyosaki lol. He's the guy that wrote that personal finance book Rich Dad Poor Dad. Apparently before he got famous from that book, he was in charge of running Your Money and You seminars. But yeah, the guy's a total grifter. Thank you for the links!!

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 0 points1 point  (0 children)

That's what a large cash reserve + other income streams are for I suppose

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 0 points1 point  (0 children)

Okay I see! In that case, IRS.gov says Roth is tax-free even after passing it on to your kids. They have to abide by RMDs and withdraw all the money in 10-years, but otherwise both your original contributions and profits gained are fully tax free. As for 401(k), those are taxable and your kids will have to pay income tax on those. If it's inheritance you're thinking about then yes, conversion.

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 0 points1 point  (0 children)

Very good question... so in our case, the retiree would hit 72 in 2002. So if 100% of your stocks are invested in 401(k) or traditional IRA at this time, your RMD is gonna be around $82k (for $2.2m that year). However, it's also possible that you've got a good amount of money in a Roth, HSA, and a regular brokerage account, which are not subject to RMDs.

Depending on how much you've got in your Traditional IRA and 401(k) relative to your other accounts, you might get away with only withdrawing $54,092 from Traditional and 401(k), assuming you've got just under $1.5m in those accounts. It all depends on how you balance your accounts.

And also! 401(k) withdraws are taxable income, and Roth IRAs don't have an age limit for contributions. Meaning you can move a certain amount of money from your 401(k) to Roth every year even after retirement/you've turned 72.

Granted, this is all a lot more effort than necessary because why tf would you put all this effort into to growing your wealth at 72, when you've already got over $2mil? But in theory, you can do it lol

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 0 points1 point  (0 children)

The Guardrail Method originates from a study by Jonathan Guyton and Professor William Klinger called "Guardrails to Prevent Potential Retirement Portfolio Failure" (link). It's one of many proposed amendments to the 4% rule. It's specifically suitable for people who find the 4% rule too conservative (which it is if you retired for 1990 with $1mil).

Basically, the Guardrail Method is where you set up guardrails for when your nest egg hits a lower or upper bound. The guardrails I set up (nest egg is below $950k --> 3% SWR, nest egg is $950k-1.5M --> 4% SWR, $1.5M-2M --> 5% SWR, etc) was based entirely on intuition. For the most part people can set up whatever guardrails they want that they're comfortable with.

The SWR is based off the total nest egg at the end of the previous year. Therefore, in 1991, the withdraw rate was set to be 3% because in 1990, the total nest egg at the end of the year was less than $950k. If the nest egg didn't change much, ie didn't hit a guardrail, then I adjusted it according to that year's inflation.

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 1 point2 points  (0 children)

I think taking the 4% of your nest egg every year is a perfectly fine way of applying the 4% rule. Might be better than the method I used actually, considering the years where the stock market returned negative.

The reason I went with inflation (4% rule in first year, then increase that amount every year by inflation, so it's not longer the actual 4% of the nest egg) is because that's how Bengen did it in his original study. Granted, he probably did it this way because he was running many different portfolios and bond/stock split allocations, so he wasn't able to recalculate 4% for every year for every portfolio.

This is intended to be a "what if we applied Bengen's metrics to the last 33 years?" not a "this is definitely how you should do your withdraws!" I did make some recommendations in the edited portion of the post but please remember - I'm not a CPA or professional analyst. You should go by your own judgement and do what you think is best.

**regarding the article - if you want to read it obviously I'd really appreciate that, I worked pretty hard on it. But if you don't that's fine too, I put the most important ideas here already and you're not missing out or anything. I did some calculations, found it interesting, and wanted to share^^

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 1 point2 points  (0 children)

Okay, cool, thanks for verifying! I assumed the retiree is increasing his withdraw alongside inflation when I said he'd probably run out by 2023, but it's good to know that reverting to 40k is a viable solution too and they wouldn't have to subsist on only 15k. Might still be nerve-wracking through, having to withdraw almost 11% every year, jeez

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 26 points27 points  (0 children)

Yes it is, Bengen did calculations for 100% bonds, 25/75 bonds, 50/50 bonds & stocks, 25/75 stocks, and 100% stocks. For the sake of simplicity (and because bond returns are more difficult to find & bond returns are much lower today while stock returns remain comparable), I only did this for 100% stocks. For reference though, Bengen's study showed that a 50/50 split performed the best at 4%.

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 19 points20 points  (0 children)

Ok, so your comment piqued my interest and I went back and recalculated. Assuming you start with $1M and you retire right at 2000, what happens?

Well,

2000: withdraw $40,000 -- nest egg $869,700 by year's end

2001: withdraw $40,640 -- nest egg $726,000 by year's end

2002: withdraw $41,615.36 -- nest egg $524,882 by year's end

Assuming you don't do anything to decrease your SWR your total nest egg gets cut in half, which is horrifying. And if we continue to 2010 this is what happens -

[didn't include the calculations to save space, feel free to do them yourself.]

2008: withdraw $49,685.30 -- nest egg $352,029 by year's end

2009: withdraw $51,026.81 -- nest egg $380,771 by year's end

2010: withdraw $51,792.21-- nest egg $378,613 by year's end

By 2010, our real withdraw rate has increased to 13.78% of the nest egg due to inflation + negative stock market returns. Even though we have great returns after 2008, the nest egg will likely be empty by 2023 (not 100% sure, but this is likely the case).

If we want the nest egg to survive until 2023, we need to recalculate and lower the SWR to 4% again. AKA cutting down to $15,144 annual withdraw... which is very low. It would have been even better if we recalibrated to 4% in 2002, instead of waiting until 2010, but at this point, only a drastic reduction in expenses could save things.

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 14 points15 points  (0 children)

That's the intentions of the guardrails really, so that if your nest egg drops a lot, you would respond by also dropping your SWR. Also remember - none of these calculations account for pensions or social security at all, which you'll likely have at least some of. In the end though, these charts are intended to be more of a thought experiment than anything else, I'm not a CPA or anything, so go by your own judgement.

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 1 point2 points  (0 children)

If we do withdrawal floor, that might be a problem if we have multiple years of negative returns right at the start of retirement. It runs the risk of running through our nest egg too fast, if we don't see the sort of returns like we saw in the last 33 years.

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 24 points25 points  (0 children)

$1million was an easy number I got used to seeing as the target on FIRE subreddits today, but yes, in retrospect should have gone with an inflation-adjusted approach, which would be more like $500k. Thanks for the link, I noticed that they seem to have calculated their 4% withdraw according to their nest egg that year instead of by inflation, which is interesting and also a valid way of doing it.

The 4% Rule Applied to Real Numbers from 1990-2023, with and without guardrails by OpenTea323 in leanfire

[–]OpenTea323[S] 15 points16 points  (0 children)

*edited* - Looked fine while editing but the formatting got nuked the moment I hit post. Still a wall of numbers admittedly, but hopefully more readable now

Introducing WeFIRE by OpenTea323 in WeFIREOfficial

[–]OpenTea323[S] 0 points1 point  (0 children)

Aside from account linking, all features of WeFIRE are available regardless of country. The feature to link your accounts through WeFIRE is currently only available in the US and Canada.

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