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Foolishness of the 4% rule
Comments
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bostonerimus said:Thrugelmir said:bostonerimus said:Terron said:Deleted_User said:When talking about essential spending it can't be reduced, because it is essential, and an increase beyond inflation is likely not essential. So the only option that makes sense is for unwavering index-linked withdrawal.
You are assuming that essential spending is going up with whichever “index” you prefer. In practice its unlikely to be true. A couple of holidays a year might me essential for a 65 year old but an 85 year old might not be interested at all. Rental pricing or petrol might not be relevant at all.
As people get older, the “inflation” which impacts them the most is healthcare. There isn’t a real market for healthcare; most countries have the government as one and only or the dominant buyer (even in the US). The government has strong incentive to not let inflation impact healthcare. Even as population ages and demand soars, prices are actually going down. Market retaliates by creating a shortage of supply and we get implicit healthcare rationing and having an indexed pension won’t help here.
Its complicated but as discussed above, the cost of retirees basic needs tends to go down as they age.
In the UK health costs drop to zero on state retirement age as you no longer need to pay NI and even in England prescription charges drop to zero. Inflation does affect health costs for the NHS but not for retirees.4 -
Thrugelmir said:bostonerimus said:Thrugelmir said:bostonerimus said:Terron said:Deleted_User said:When talking about essential spending it can't be reduced, because it is essential, and an increase beyond inflation is likely not essential. So the only option that makes sense is for unwavering index-linked withdrawal.
You are assuming that essential spending is going up with whichever “index” you prefer. In practice its unlikely to be true. A couple of holidays a year might me essential for a 65 year old but an 85 year old might not be interested at all. Rental pricing or petrol might not be relevant at all.
As people get older, the “inflation” which impacts them the most is healthcare. There isn’t a real market for healthcare; most countries have the government as one and only or the dominant buyer (even in the US). The government has strong incentive to not let inflation impact healthcare. Even as population ages and demand soars, prices are actually going down. Market retaliates by creating a shortage of supply and we get implicit healthcare rationing and having an indexed pension won’t help here.
Its complicated but as discussed above, the cost of retirees basic needs tends to go down as they age.
In the UK health costs drop to zero on state retirement age as you no longer need to pay NI and even in England prescription charges drop to zero. Inflation does affect health costs for the NHS but not for retirees.
They also forget a large part of their wealth was due to government support through unprecedented fiscal expansion.
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itwasntme001 said:itwasntme001 said:27 pages of time and effort spent on trying to come to some sort of conclusion on a "safe" withdrawal rate and how best to accomplish it. Surely time better spent actually enjoying life by spending some of the money? If there is a 1 in 2 or 1 in 3 chance of getting cancer in a lifetime, surely time better spent keeping fit and healthy and not stressing or worrying over safe withdrawal rates? And so what if you run out of money into old age. You will be cared for by the state anyway.Better to just have a very rough sense of how much you can spend and set appropriate allocations. No need to get so accurate about these things and certainly no need for 27 pages.Perfection is the enemy of good/action/progress etc.
And now 51 pages of nonsense. People trying to bring order and precision in a world that is inherently disordered and chaotic. Utterly pointless.Doing it once raises eyebrows. And then copying and reposting the same smartness again and again… Blocked.0 -
Deleted_User said:itwasntme001 said:itwasntme001 said:27 pages of time and effort spent on trying to come to some sort of conclusion on a "safe" withdrawal rate and how best to accomplish it. Surely time better spent actually enjoying life by spending some of the money? If there is a 1 in 2 or 1 in 3 chance of getting cancer in a lifetime, surely time better spent keeping fit and healthy and not stressing or worrying over safe withdrawal rates? And so what if you run out of money into old age. You will be cared for by the state anyway.Better to just have a very rough sense of how much you can spend and set appropriate allocations. No need to get so accurate about these things and certainly no need for 27 pages.Perfection is the enemy of good/action/progress etc.
And now 51 pages of nonsense. People trying to bring order and precision in a world that is inherently disordered and chaotic. Utterly pointless.Doing it once raises eyebrows. And then copying and reposting the same smartness again and again… Blocked.“So we beat on, boats against the current, borne back ceaselessly into the past.”1 -
Thrugelmir said:bostonerimus said:Thrugelmir said:bostonerimus said:Terron said:Deleted_User said:When talking about essential spending it can't be reduced, because it is essential, and an increase beyond inflation is likely not essential. So the only option that makes sense is for unwavering index-linked withdrawal.
You are assuming that essential spending is going up with whichever “index” you prefer. In practice its unlikely to be true. A couple of holidays a year might me essential for a 65 year old but an 85 year old might not be interested at all. Rental pricing or petrol might not be relevant at all.
As people get older, the “inflation” which impacts them the most is healthcare. There isn’t a real market for healthcare; most countries have the government as one and only or the dominant buyer (even in the US). The government has strong incentive to not let inflation impact healthcare. Even as population ages and demand soars, prices are actually going down. Market retaliates by creating a shortage of supply and we get implicit healthcare rationing and having an indexed pension won’t help here.
Its complicated but as discussed above, the cost of retirees basic needs tends to go down as they age.
In the UK health costs drop to zero on state retirement age as you no longer need to pay NI and even in England prescription charges drop to zero. Inflation does affect health costs for the NHS but not for retirees.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
bostonerimus said:Personally I would have got the money from higher taxes on corporations, dividends, CG and income tax.All in good time......Personally though, I thought the freeze on the Personal Allowance was a regressive step - I'd have preferred to see a rise in income tax instead, but at the time the govt didn't want to break a manifesto promise.....though you could argue that this is a play on words, as freezing the PA is effectively a tax rise, for most, in all but name.The NI increase is more debatable.......they have to get more money from somewhere, while at the same time not shafting the economy....it's tough to square that circle.......but again I think it would have been fairer on income tax....if they wanted to get more from employers, they could have raised just the employers NI rate (though, again, not sure this would be a good idea quite yet....with furlough finishing etc)......
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MK62 said:bostonerimus said:Personally I would have got the money from higher taxes on corporations, dividends, CG and income tax.All in good time......Personally though, I thought the freeze on the Personal Allowance was a regressive step - I'd have preferred to see a rise in income tax instead, but at the time the govt didn't want to break a manifesto promise.....though you could argue that this is a play on words, as freezing the PA is effectively a tax rise, for most, in all but name.The NI increase is more debatable.......they have to get more money from somewhere, while at the same time not shafting the economy....it's tough to square that circle.......but again I think it would have been fairer on income tax....if they wanted to get more from employers, they could have raised just the employers NI rate (though, again, not sure this would be a good idea quite yet....with furlough finishing etc)......
“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
My father was a GP.1 -
The increase in NIC is for one year only. After that there will be a new tax - the health and social care levy. Over time we could (not saying we will) see the HSC levy be applied to eg unearned income and/or continuing after SPA, while leaving NIC as is.0
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bostonerimus said:Thrugelmir said:bostonerimus said:Thrugelmir said:bostonerimus said:Terron said:Deleted_User said:When talking about essential spending it can't be reduced, because it is essential, and an increase beyond inflation is likely not essential. So the only option that makes sense is for unwavering index-linked withdrawal.
You are assuming that essential spending is going up with whichever “index” you prefer. In practice its unlikely to be true. A couple of holidays a year might me essential for a 65 year old but an 85 year old might not be interested at all. Rental pricing or petrol might not be relevant at all.
As people get older, the “inflation” which impacts them the most is healthcare. There isn’t a real market for healthcare; most countries have the government as one and only or the dominant buyer (even in the US). The government has strong incentive to not let inflation impact healthcare. Even as population ages and demand soars, prices are actually going down. Market retaliates by creating a shortage of supply and we get implicit healthcare rationing and having an indexed pension won’t help here.
Its complicated but as discussed above, the cost of retirees basic needs tends to go down as they age.
In the UK health costs drop to zero on state retirement age as you no longer need to pay NI and even in England prescription charges drop to zero. Inflation does affect health costs for the NHS but not for retirees.
Then the 4% rule will have to become the 3% rule.
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