That leads to another question: how does the volatility matter in the context of “RE” ?
Here are two curves, one following an index, with an average 5.2% return on 18 years, one with a fixed yield of 5.2% each year (I assume the risk-free rate compensating for inflation, so 0% real). Everything is reinvested. As expected, the curves meet after 18 years.
Now, say I want to retire, and spend 6 units each year. Most is covered by the 5.2% return, right?
Mmmh, actually, not quite…
If I withdraw 6.05 each year
I’m broke after 18 years!