# Is 4% SWR really safe?
**URL:** https://forum.mustachianpost.com/t/is-4-swr-really-safe/327
**Category:** Uncategorized
**Created:** [June 7, 2017, 5:58pm UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327 "2017-06-07T17:58:07Z")
**Posts on this page:** 7
**Page:** 1
### Author:  [@1000000CHF](https://forum.mustachianpost.com/u/1000000CHF)
#### Post date: [June 7, 2017, 5:58pm UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327/1 "2017-06-07T17:58:07Z")
Hello Ladies & Gents,
We have already [a thread about the applicability of 4% rule in Switzerland](http://forum.mustachianpost.com/t/does-the-4-swr-work-for-switzerland/150). However, I’m opening a new thread as I discovered more general problem with the rule itself.
Although it’s recommended by 99% of financial advisors and FI rockstars (e.g. MMM, JLCollins), I started doing some research on that rule (William Bengen’s papers, Trinity Study, etc) and I came across a [reddit thread](https://www.reddit.com/r/financialindependence/comments/6ezrw1/nobel_laureate_sharpe_on_retirement/) that mentioned a critique of that rule by [William F. Sharpe](https://en.wikipedia.org/wiki/William_F._Sharpe) (an economic Nobel prize winner who figured out _CAPM_ and _Sharpe ratio_):
- [http://retirementincomescenarios.blogspot.ch/2013/12/the-x-rule.html](http://retirementincomescenarios.blogspot.ch/2013/12/the-x-rule.html)
- [http://web.stanford.edu/~wfsharpe//retecon/4percent.pdf](http://web.stanford.edu/~wfsharpe//retecon/4percent.pdf)
In the blog posts he mentions a paper proposing alternative solution to 4% rule. I don’t have access to it, but [here you can read the abstract](http://www.cfapubs.org/doi/abs/10.2469/faj.v69.n5.2):
“The floor-leverage rule is a spending and investment strategy designed for retirees who can tolerate investment risk but insist on sustainable spending. **The rule calls for purchasing a spending guarantee with 85% of wealth and investing the remaining 15% in equities with 3× leverage.** Surprisingly, this leverage is a tool for managing risk. The authors compare the rule with some popular strategies, illustrate it for a variety of retiree preferences, and evaluate its historical performance.”
I don’t understand much of that critique and I guess I need a free weekend to analyse it more carefully. I’m curious about your opinions about the rule.
It seems like common sense that 4% cannot be fixed rule - if during the year of the crash my $1M portfolio becomes a $0.5M, my 4% rule generates $20k, instead of $40k, and that might be not enough for living. And even if it were enough for a living - spending such huge chunk of your portfolio during recession years seems to be a solution far from optimal.
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### Author:  [@ElMago](https://forum.mustachianpost.com/u/ElMago)
#### Post date: [June 7, 2017, 11:45pm UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327/2 "2017-06-07T23:45:25Z")
Hi 1M
thanks for bringing up this topic again. Since my original post about the applicability of the 4% rule I did some more research and without citing sources, my current opinion is that the 4% rule:
- Is NOT safe
- Makes not much sense as a WR
- Is based on insufficient data (Trinity Study).
However, I see it as a good rule of thumb to get an estimate of how much money (invested in stocks/bonds) you need to reach FI.
My go-to resource regarding SWR ideas pointed out to me by @nugget is:
> **[The Ultimate Guide to Safe Withdrawal Rates – Part 1: Introduction](https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/)**
>
> Welcome! You probably landed on this page because you clicked someone’s link to my Safe Withdrawal Rate Series. Thanks for stopping by! This series has now grown to 30+ parts and if you are l…
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### Author:  [@1000000CHF](https://forum.mustachianpost.com/u/1000000CHF)
#### Post date: [June 9, 2017, 9:39am UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327/3 "2017-06-09T09:39:38Z")
Hi @ElMago,
Thanks for you feedback. I’m glad that I’m not the only one skeptical about the 4% rule in the forum. I’d be really happy to learn about some simple alternatives, but I’m afraid the alternatives won’t be simple to apply.
PS. I really strongly recommend everyone to listen to the podcast interview:
[https://www.bloomberg.com/view/articles/2017-06-06/william-sharpe-on-pricing-and-risk](https://www.bloomberg.com/view/articles/2017-06-06/william-sharpe-on-pricing-and-risk)
This guy is really brilliant. He’s one of the persons standing behind academic research that inspired creators of passive index funds.
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### Author:  [@Alex](https://forum.mustachianpost.com/u/Alex)
#### Post date: [June 13, 2017, 8:20am UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327/4 "2017-06-13T08:20:02Z")
Thanks for the recommendation, @1000000CHF! I only understood about half of what they were talking about, but the rest was very interesting. I’d like to find the time to look into his RISMAT software…
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### Author:  [@Mr.HdLR](https://forum.mustachianpost.com/u/Mr.HdLR)
#### Post date: [July 21, 2017, 1:53pm UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327/5 "2017-07-21T13:53:41Z")
> [@ElMago](#):
>
> My go-to resource regarding SWR ideas pointed out to me by @nugget is
I just had a deep reading into the series from ERN. I like the 60Y model
I haven’t downloaded the Excel (Google DOCS) sheets but definitely is a must.
We’re close to ER (2019) so I’m starting to read more about this topic and putting in place a Withoughal strategy.
Since we’ll be moving to LAM I need to estimate and simulate a dramatic scenario with high inflations rate and currency exchange scenarios.
Has any of you started to model some scenarios in Excel?
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [December 25, 2022, 12:44pm UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327/6 "2022-12-25T12:44:32Z")
2 posts were split to a new topic: [Safe Withdrawal Rate [2022]](https://forum.mustachianpost.com/t/safe-withdrawal-rate-2022/9461)
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### Author:  [@Dr.PI](https://forum.mustachianpost.com/u/Dr.PI)
#### Post date: [December 25, 2022, 12:44pm UTC](https://forum.mustachianpost.com/t/is-4-swr-really-safe/327/7 "2022-12-25T12:44:39Z")