Everyone wants to see totals rise above that line by at least 3-4% every year, which will in turn sustain your spending without lowering your principal. I think of ‘the line’ as the level of your asset pool upon quitting your job. The ability to drop from a 4% to a 3% spend rate in trying times can significantly increase your ability to hang on through the lean years.
Overall, it can act as a decent buffer and help you sleep at night, knowing that there’s plenty of time to recover from any massive losses.Īfter all of this work, one thing is fairly clear: your spending rate has a fairly big impact on your chances of success.
Holding cash will limit growth when the market is roaring up, but there’s some real protection when those numbers are plummeting. In our examples section we found that holding a cash buffer did absolutely nothing to protect against the Great Depression, modestly helped to protect against the 70s bear market, and was very effective in combating the twin cliffs of both 20. If history has anything to say about the future, we’ll be fine. Perhaps most importantly, we observed our plan absorb practically everything the US Market threw at it over the past 140 years. What exactly did we accomplish along the way? We determined that our asset allocation works, health care is affordable, most taxes can be sidestepped (given modest annual spending), and cash buffers can protect our stash somewhat against sudden market drops. Through careful analysis, data crunching, and charting, the SuperPlan has been validated.
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