Today I’m tackling a popular and contentious principle in the FIRE community: the 4% rule. I’ve written about a major flaw of the “rule” before, namely that it relies on a false myth of level spending year over year in retirement, but today I’m taking on whether we can actually expect the 4% rule to give us enough of a margin of safety in the future.
As total newbs to this whole early retirement thing, though admittedly newbs who’ve thought about this stuff a ton, we find ourselves now wrestling with a very practical question: Should we spend what we budgeted for this year, or aim to spend less, maybe a lot less? There are good reasons for either approach, so let’s talk about what those are.
The question of whether 4 percent is a safe withdrawal rate, as the “4 percent rule” suggests has been — and will continue to be — debated endlessly. Fortunately, this isn’t more of that debate. Instead, let’s look at whether the fundamental underlying assumption of the 4 percent rule — level spending every year — is actually realistic and safe to plan around. (Spoiler: it’s not.)
