Many people are afraid to stop working even though the experts would say they are financially independent.
Though stock market returns in the future maybe different than in the past a study of stock market behavior in the last 50 years show past results is a good indicator of the future because over time the same broad trends happen over and over and over. Every decade people say: “this time is different!” and they are proven wrong.
So, some interesting statistics about past stock market activities that prove the 4% rule has been safe and a bit conservative because it is for the worst case.
1) a balanced mutual fund of 60% total Stock Market and 40% total bond market has been up 54% of trading days.
2) 33 out of the last 46 years a balanced portfolio has given a 4% or better return. With a 4% withdrawal each year, you will have a larger amount in your investment account on January 1st than the start of the prior year.
3) A balanced portfolio is up 71% of the years and down 29%.
4) 70% of the time, a 4% inflation adjusted withdrawal will leave your family or charity twice the amount of money you started with at your death.
5) A 4% inflation adjusted withdrawal survived every 28 year cycle starting in January 1926 to starting thirty years ago today. See link for more information:
What do you think?
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