Hello everyone on today's episode we're bringing back on the show the very popular 5 tax guys Sean Malaney and we're going to be looking at the four back stops to the four percent rule.

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Alright guys very excited to dive into this week's episode and help me do this.

I have my co-host Brad here with me today. How you doing buddy?

Hey Jonathan I am doing quite well. Yeah this is this should be a really good episode.

So Sean wrote this amazing article the four back stops to the four percent rule and it was something we knew we wanted to have him on to talk through because it's really it's something.

Obviously we talk about the four percent rule here fairly often the four percent rule of thumb as we call it but we don't really dive into the nuance.

And I think that's what Sean's article does so so well. So yeah with that Sean welcome back to choose a five.

Jonathan Brad always great to join you look forward to this conversation.

Awesome brother well it's going to be a lot of fun and I think probably to start with let's do a little bit of definition of terms just to make sure we're you know everybody's caught up and understands why we're diving into the nuance the four percent rule.

Why is this term important for people that are you know trying to be strategic with their intermediate financial goals.

So Jonathan all of us at some point need to face the prospect of not working right so there's this debate in the fire community is it five or is it fire right in the retire early well at some point all of us are going to have some desire or some need to not work right and many in the five community would like that to be sooner rather than later.

So you have all sorts of different levels of hey I'm going to need to withdraw financial assets to support me because I'm not going to have a W2 job or self employment or whatever it is right and then you guys have talked about the four percent rule many a time on choose a five podcast and as Brad mentioned it is just a general rule of thumb but it is a powerful one right if we think about accumulating 25 times our annual expenses and financial assets and spending roughly four percent.

A year of those assets in theory that can support a long retire and I think that can happen for several reasons one of them is most investors are aiming for returns that exceed 4% of you right I think that is a fair statement for Americans thinking about their investments whether they're in the workplace now or if they're thinking about being retired or if they are retired right so in theory if you spend 4% of your time.

If you spend 4% a year and your annual returns are in excess of 4% a year perhaps significantly so in theory you have a perpetual money making machine and that 4% rule of thumb works and works really well right you'll never run out of money if you're growing your money and by the way if you run many simulations of 4% rule that actually is a fairly common outcome is that the money grows as opposed to the pleats.

But there are risks involved in that we'll talk about those risks.

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