The 4% Rule is 100% Safe

By Josh, February 28, 2018

If you’ve stumbled across my site and haven’t heard of the Trinity Study and the 4% Safe Withdrawal Rate, go ahead and click over to Google to read about it. I’ll wait…

For the rest of you, we’ve all heard about the 4% rule as a safe withdrawal rate in retirement. Something like 97% of portfolio balances end up being positive after any scenario of stock/bond performances in the past 100+ years when using a 4% withdrawal rate. Close enough for me, I’d consider it 100% safe, because I love rounding. 🙂

So why do I think the 4% rule is safer than you might think? First, it assumes that you will never make another dollar of earned income for the rest of your life. It’s like saying that you retire one day and spend the next 3-4 decades sitting in a rocking chair, sipping lemonade, and reminiscing about days gone by. I don’t know about you, but when I think about retirement, I think about spending more time on hobbies I enjoy, possibly teaching some classes, and/or spending my time with other creative endeavors. Some of these things will be volunteer, while others might earn me some kind of paycheck or royalty (if I write a book or something?) I might start buying items on the cheap at local garage sales and then selling them for more money online. The possibilities are endless when you aren’t chained to a desk chair for 40 hours a week, 52 weeks a year!

Another reason the 4% rule is 100% safe is that you don’t just withdraw 4% on January 1st and hope that remaining 96% grows back to its 100% self again throughout the year. For example, and for simplicity’s sake, on January 1 you withdraw 0.33% (1/12th of 4%) to live on for the month of January. February 1 you do the same thing, and so on. The beauty of this is that 99.67% is still in your account after January 1, which is 3.67% higher than if you withdrew 4% of your account balance all at once. The money only makes money when it is still in your account!

Reason #3 is that you don’t have to ALWAYS withdraw 4% each year. Maybe you don’t have any big travel plans this year, you don’t need a new roof on your house, and you don’t need a new car this year. With a paid-off house and no travel expenses, it may be possible to comfortably live on 2-3% for a given year.

The fourth reason that 4% safe withdrawal rate is 100% safe is that it does not factor in any Social Security or Medicare coverage. Some of your basic living expenses and a chunk of health care costs are covered by the Federal Government, even in the bleakest of scenarios for those 2 major programs. You can log onto to see your anticipated Social Security earnings at each given retirement age (62-70) and factor that money into your calculations for how much you need to withdraw to meet your minimum obligations. It is likely that you will need far less than you think you need to withdraw in retirement.

And the final reason is that your living expenses may Decrease, not Increase, as you age. As a newly-minted retiree, most people want to spend on lavish vacations, maybe buy expensive toys (collector car?) or tools for a new hobby (gardening?). But do you have the same energy at 85 as you do at 62? Of course not. By 85, if you still have good health, you may not want to travel the world any longer, or drive fancy cars, and you lost the energy to do manual work like gardening. If any or all of those are the case, it may be possible to live on less than 4% in some of your golden years.


The Tweet that Started this blog…

On the evening of January 5th, 2018, I posted this Tweet and it generated higher-than average interest, including a request for a blog post to explain what all of this means:Screenshot_20180201-023011

So, due to a request from Penny at, I’m writing this post on my re-launched blog to help explain what all of this is about, and why I would introduce so much additional hassle into my everyday transactions.

SportClips is my go-to place when I need to get a professional-looking haircut. Sometimes I cut my own. As the name implies, SportClips allows the customers to watch sports while getting their haircut, so their clientele is majority male. They continue the sports theme with their pricing scheme, a standard haircut is the Varsity, while kids are Junior Varsity. The MVP treatment includes the Varsity haircut, plus a relaxing shampoo in a massage chair, and a neck and shoulder massage with a hand-held massage tool.

J.P Morgan Chase (Chase) is my favorite banking institution, but it has very little to do with their brick and mortar locations or their banking procedures. Chase issues some of the most-rewarding consumer credit cards, with their Chase Sapphire and Chase Freedom “families” of cards. The rewards earned with Chase Sapphire (Preferred or Reserve) cards are called Ultimate Rewards, and those points are able to be transferred to nearly a dozen travel partner airlines and hotels. Chase Freedom and Chase Freedom Unlimited only earn “cash-back” value, but if you have a Chase Sapphire Preferred (CSP) or Chase Sapphire Reserve (CSR), you can transfer that “cash-back value” into Ultimate Rewards, and then the points can be transferred to airline and hotel partner programs.

Chase Freedom Unlimited is easy to understand; all purchases earn 1.5c per dollar spent, on every purchase with no limits on the cash-back bonus. Chase Freedom earns 1c per dollar spent, with the exception of a specific category that changes each quarter. Those quarterly categories are worth 5c cash-back, up to a maximum of $1500 per quarter, which means $75 cash-back can be earned each quarter with the Freedom card.

CSP and CSR have access to the Chase Ultimate Rewards travel portal, where the cardholder can book travel directly through Chase, just like they might from other OTA sites like Expedia or Priceline. CSP provides a value of 1.25c per Ultimate Reward point (URs) when booking travel through the travel portal. CSR provides 1.5c per UR in value.

Getting back to the Tweet in question, I used my Chase Freedom card to earn 5% back in the first quarter of 2018 by making the purchases via a mobile wallet (AndroidPay in this case). All of the various mobile wallets work for this category, including ApplePay, SamsungPay, AndroidPay and Chase’s own ChasePay. I just received an email this week that AndroidPay is being changed to GooglePay in the coming weeks. By transferring the 5% cashback value earned on my Chase Freedom card to my CSR (remember, 1.5x value), I effectively turned that 5% category into a 7.5% category for the MVP haircut on Jan 5th. For the $23 haircut and $5 tip ($28 total), I earned $1.96 in value. This compares favorably against a 2% cashback card ($0.52 that I would have earned).

Rounding out the Tweet, I frequently use different credit cards to purchase gift cards at grocery stores, Best Buy or Walmart to maximize limited-time offers such as 10% cashback for purchases with ChasePay in December for holiday shopping at Best Buy and Walmart (2 separate offers). Now I am sitting on a hoard of gift cards to restaurants, gas stations, Walmart, Starbucks and Lowe’s. I decided to pick some gift cards out of the drawer and enjoy a meal at Chili’s and a hot beverage (Caramel Apple Spice) at Starbucks without spending any additional dollars on my credit cards.

With one of those 10x offers at Best Buy, I bought $300 in gift cards, earned 10c back per dollar spent, and then transferred that cash-back value to my CSR for 1.5x additional value towards travel. Therefore, I earned $30 x 1.5 = $45 in travel for purchasing $300 in gift cards for future purchases that I will use throughout the upcoming year. 15% back for just knowing how to do it, where and when = win! 🙂

Write goals so you can track them! And changing your mind is OK!

By Josh January 5, 2018

I am not usually a person who sets concrete goals or even writes anything down as a New Year’s Resolution. But thanks to the personal finance community, I actually tweeted a list of 6 goals for this year when Bridget (@moneyaftergraduation on Twitter) asked us to tweet them to her in late December.

  1. lose weight, obv
  2. achieve 1/4m NW
  3. draw down my travel miles/points through actual travel, not point expiration
  4. give up unhealthy/unproductive habits (especially driving for Uber)
  5. actively meet new & interesting people (Hello #FinCon18)
  6. begin a creative pursuit

Boom! #6 is right here. Thank you, Penny (@picksuppennies on Twitter) for the push to just get on it… And this one is related to #4 below because I am now sitting at home on a Friday night instead of driving around random drunks!

So clearly Goal #1 is not personal finance related, per-se, but I’ve got to lose some weight this year. I’m a big guy at 6’5” tall and “299+tax” but laughing about my weight hasn’t made it go away.

But back to my finance-related goals for 2018. I rounded out 2017 with a Net Worth (NW, not like Kanye’s kid, North West) of around $215k, everything included. This was a huge jump ($88k) in 2017. Assuming markets hold up and don’t crash, I foresee hitting this $250k goal easily, but I’m already assuming that we see a drop in 2018… because it HAS to happen sometime, right? 250 shouldn’t be a stretch, but it miiiiight be.

#3 is travel hacking related. I started in March 2016 with the Chase Sapphire Preferred card and have quickly rolled through TEN cards in the past 21 months. I’ll get around to writing a more detailed post (or posts) about this topic later, but let’s just say I have accumulated quite a pile of points at this time. Better get around to using some of them, or else what’s the POINT? GET IT?! lol

#4 deserves a multitude of posts, but for the past 3 years, my main hobby outside of work and the PF Twitterverse has been driving around random strangers, aka Uber. Besides not really paying very much, after all costs are considered, it also led to very dangerous habits such as screwing up my sleep schedule (highest paying rides are after 2AM) and spending additional hours sitting in my car and being sedentary, on top of my already-sedentary desk job. Look for major changes here in 2018.

#5 is probably my most exciting goal/resolution, because I already have plans to blow this one out of the water. FinCon18 is being held in my home state of Florida. (By the way, it is soooo weird to say that I’ve spent more of my adult life in Florida than my native Indiana.) I’m happy to welcome so many of my FAVORITE PEOPLE IN THE WORLD to Orlando on September 26-29th, and I hope to meet so many of you then. I’ve already mentioned this on Twitter, and hopefully some of you will take me up on this offer: Since I live in Florida, I will be driving to the Conference and would be so very happy to provide airport pick-up service to my FAVES instead of relying on random Uber/Lyft drivers or some overpriced Taxi.

I also have a “creative pursuit” idea related to FinCon. Let’s just say I’m not graphically gifted, but I think I should be able to pull off the idea or get someone else involved to make it happen. But it’s an idea that I think AT LEAST 50% of FinCon attendees will LOVE, so I kinda have to make it happen, at least in concept.

Why do you work?

This is the post excerpt.

By Josh  January 5, 2018

I feel like this question is central to the Financial Independence and Retire Early movement: Why you do work?


Do you work just to pay your bills, to put a roof over your family’s heads and keep them fed? What if you had already earned enough to cover all of your expenses? Then what?

Would you continue to work or would you find new ways to spend your time?

Do you feel obligated to “make a contribution to society”? Do you feel obligated to “live up to your potential”?

Do you want to spend more time with your family? Do you want to travel and see this beautiful planet that we are blessed to call home?

Do you feel there are causes in your community that are worthwhile for you to spend your efforts, even if you don’t receive a paycheck? Do you want to do something more personal and share your thoughts with the world through a blog or a book?

Maybe you want to pass on your wisdom through teaching or consulting part-time?

Do you have a goal of playing golf every day? (That’s one of Jover’s goals) Or are there other physical pursuits you’d like to try? Hiking, running a marathon, a triathlon, etc?

Or maybe you find fulfillment in your work life right now? Maybe you wouldn’t change much at all?

Maybe you would start working for yourself? If you love your work but hate your boss, maybe that would be an enjoyable alternative?

Reaching Financial Independence gives you the ability to answer these questions and so many more. I long for the day when I can make any decision I want to make for any of these questions, because FI will give me the Freedom to do as I choose with my life.