120: Are FIRE Naysayers Bad at Math? Yes. with Michael Kitces

BiggerPockets Money Podcast

BiggerPockets

Investing, Education, Business

4.6 • 2.9K Ratings

🗓️ 13 April 2020

⏱️ 83 minutes

🔗️ Recording | iTunes | RSS

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Summary

Michael Kitces joins us today to talk about Early Retirement - and how the recent stock market movement affects the FIRE Community and the 4% rule. We spend a lot of time on the 4% rule - including this graph which illustrates what Michael discusses - basically, there is an ultra-high probability that you will come to the end of 30 years with MORE money than you started out with, and an extremely LOW chance you’ll spend it all. In fact, only one time does the retirement fund hit zero - and even that isn’t until year 31! Since the FIRE Movement is based on the 4% rule, we wanted to hear from Michael, the Research Nerd Supreme, what he feels about it. “...historical safe withdrawal rates aren’t based on historical averages. They’re based on historical worst case scenarios.” Yes, we’re seeing some pretty big movement in the market, and yes, it can make you think. This episode provides some pretty powerful reassurance that “every little thing, is gonna be all right.” If you are worrying about your financial future, if you have money or want more, this powerful episode is a can’t miss, absolutely-must-listen edition of BiggerPockets Money. In This Episode We Cover: The origin of 4% rule Three different time periods that trigger the 4% number Safe withdrawal rates Different 4% rule scenario Bucket strategy Key assumptions that start crapping up on modeling or evaluating the short term cash bucket The right time to start looking at bonds Constant mid-course adjustments What a retirement red zone is Bond tent strategy Safe withdrawal rate research Guardrail strategy Smart money moves during this market Dollar cost averaging And SO much more! Links from the Show FinCon Determining Withdrawal Rates Using Historical Data Software Solutions To Calculate Safe Withdrawal Rates Online Data - Robert Shiller The Ratcheting Safe Withdrawal Rate – A More Dominant Version Of The 4% Rule? Yield Shield - Millennial Revolution How Has The 4% Rule Held Up Since The Tech Bubble And The 2008 Financial Crisis? Mr. Money Mustache BiggerPockets Money Facebook Page Learn more about your ad choices. Visit megaphone.fm/adchoices

Transcript

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0:00.0	Welcome to the BiggerPockets Money Podcast, episode 120 where we interview Michael Kitts us from
0:05.9	Nardside View blog and the XY planning network.
0:10.4	The problem or the place where I think we get ourselves into trouble is when we focus so much on the retire or the retire early
0:16.7	We create this binary state I'm working until I have enough and I never have to work again.
0:24.0	And we don't think of it from what I think is a much better framework of the
0:28.0	FI framework, which is I'm going to accumulate enough money to get to the point where what I decide to do with my time is no longer
0:36.1	dependent on money, which is very, very different than saying I don't have to work
0:41.4	anymore.
0:42.4	Hello, hello, hello, and welcome to the BiggerPockets Money Podcast.
0:46.0	My name is Mindy Jensen and with me as always is my laugh in the face of
0:50.0	sequence of returns risk.
0:52.0	Co-host Scott Trent.
0:54.4	I don't know, I'm going to have to be pretty withdrawn in response to that.
0:58.4	Oh my God, I quit.
0:59.5	Okay, from episode 120. Now, Scott and I are here to make financial independence less scary,
1:07.4	less just for somebody else and show you that by following the proven path you can
1:12.2	put yourself on the road to early financial
1:14.0	freedom and get money out of the way so you can lead your best life. That's right
1:18.3	whether you want to retire early and travel the world just navigate this
1:21.4	coronavirus market crash and maybe recession or go on to make
1:25.6	big-time investments in assets that's like real estate will help you build a position capable
1:30.0	of watching yourself towards your dreams. Welcome to the show today.
	...

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