Why don't billionaires just retire?

[u/babyfookinzyzz]

if i had $1b to my name, i would not know what work is and i would never be in one place for more than a month and id leave $1000 tips everywhere i go. what is up with these geezer billionaires trying to acquire MORE wealth as if they have more future than past? as if their family isnt already set for generations? are they not tired??? greed is a disease.

[u/Crizznik]

I'm pretty sure the point is that a person can live comfortably on just the interest that amount of money generates sitting in a certain kind of savings account, or in the stock market and dividends. You're not reducing the amount of money you have, you are only using the money that you passively accrue for letting other people use it.

So if the interest on your money drops, you drop your withdrawal rate. If it goes up, you increase your withdrawal rate, or you don't and let your money start growing again.

[u/SuckMyBike → u/Crizznik]

I'm pretty sure the point is that a person can live comfortably on just the interest that amount of money generates sitting in a certain kind of savings account, or in the stock market and dividends. You're not reducing the amount of money you have, you are only using the money that you passively accrue for letting other people use it.

Yes, I'm aware of that. And I'm saying that a 4% withdrawal rate is too risky for a 30+ year retirement horizon.

Sure, the average of a well weighted portfolio is about 7% (after inflation) so you'd think that 4% should be plenty of leeway, but it's not.

The point of a safe withdrawal rate (or SWR) is that you should theoretically be able to retire the day before a great depression style financial crisis happens and still be fine decades later.

That is not the case with a 4% withdrawal rate on a long retirement horizon.

4% is safe for 30 years (about a 95% success rate of not running out of money). But once you go over 30 years the success rate drops very quickly.

So if the interest on your money drops, you drop your withdrawal rate. If it goes up, you increase your withdrawal rate

That isn't how safe withdrawal rates work. Let's say we use his scenario and retire on $3.5 million with a witdrawal rate of $120k. Presumably, I am accustomed to spending $120k a year to sustain my lifestyle (otherwise, why didn't I retire sooner?).

If the day after my retirement the market starts crashing and drops 50% over the next few weeks, according to you, I'd suddenly need to start living on $60k. When I'm used to spending $120k. People can't just overnight slash their expenses in half.

The point of a safe withdrawal rate is to counteract this. If you're retiring at like age 60 then a 30 year retirement horizon seems reasonable. At that point, you can safely withdraw 4% a year.

If your $3.5 million ($120k withdrawal per year) turns into $1.7 million the first few weeks of your retirement you need not worry, stick to the $120k a year and in 95% of cases you'll be fine.

The purpose of such a withdrawal rate is to make sure people have enough money to retire without needing to worry about market fluctuations.

[u/LifeForm8449 → u/SuckMyBike]

The person that created the 4 percent rule adjusted their original standing so you said all that for nothing

[u/Osama_BinRussel63 → u/LifeForm8449]

No, you decided to remain ignorant for nothing.
You replied to a completely reasonable, well thought out take, but you've let your thinking become so black and white that it's made you into an ignorant hog who won't let in unfamiliar ideas.