Weekend Reading – Why the 4% rule doesn’t work for FIRE edition

Weekend Reading – Why the 4% rule doesn’t work for FIRE edition

Hey Everyone!

Welcome to my latest Weekend Reading edition, where I list some of my favourite finds from the personal finance and investing blogosphere.

In case you missed the last edition, you can check it out here: 

Weekend Reading – Death by PowerPoint, Bond ETFs, RESPs and more #moneystuff

Earlier this week, I shared my latest monthly dividend income update.

Eventually, we hope to earn about $15 per hour from some key accounts in our portfolio. That would provide some needs and wants as part of our semi-retirement dreams.

Have a great weekend and enjoy these articles!

Mark

Weekend Reads

Before we get to the headliner, check these out:

According to this post, by The Irrelevant Investor, there is a significant number of high-net-worth individuals in the world.

“Their findings show that 200,000 people in the world have a net worth north of $30 million. They represent just 1% of the population of millionaires around the globe but account for 34% of that group’s wealth.”

Thought of the week…

There are generally three stages of thinking:

  1. Too simplistic (it’s easy).
  2. Too complicated (it’s hard).
  3. Simple (it’s simple but not easy).

We tend to avoid the hard work necessary to make it simple. – Source: FS Blog

Amazing dividend income

Outstanding work by Mr. Tako Escapes.

“For the year so far, we’ve collected $30,933 in dividend income, which is comfortably above our household spending for the year. This extra dividend income will tide us over during the ‘dry’ months.”

Sam is also doing a great job with his dividend income snowball.

Well done to my friend Bob Lai with his income update. Impressive work to invest that much in a month. 

Dividend Daddy is rollin’: My June 2021 dividend total was $6,049.01. This was my best month ever. I’m very grateful.” Indeed. 

Why the 4% rule doesn’t work for FIRE

Vanguard Canada recently debunked elements of using the 4% rule for any FIRE-like / early retirement. A good read. For me, the most important element of their article is not about the 4% rule. Rather, to remain dynamic with your spending. Just like in your asset accumulation years, spending varies. You should plan for the same during any retirement period in my opinion.

From the article:

Giving yourself more spending flexibility may decrease your income stability, but it increases your long-term chance of success. Our research shows that when a FIRE investor with a 50-year retirement horizon uses a dynamic spending strategy, their probability of success in retirement increases from 56% to 90%.**”

Leveraging that article and inspiration for a post, Cashflows & Portfolios believes:

Why the 4% Rule Doesn’t Work for Early Retirement (FIRE)

Let me/us know your thoughts on the Cashflows & Portfolios site, or here. I enjoy reading comments!

Kyle Prevost can’t wait NOT to be a homeowner from Million Dollar Journey.

Speaking of houses, Liquid from Freedom Thirty Five Blog shared how he now makes 6-figures from his investment portfolio. Impressive:

  • “Dividend income = $19,400
  • Interest income = $9,200
  • Rental income = $63,000
  • Options income = $8,400″

Like A Purple Life, I don’t really get the “Lean FIRE”, let alone regular FIRE, and then the “Fat FIRE” terminology and definitions. FIRE is mostly marketing really. 

Then again, FIRE = more like Financial Independence, Retire to Entrepreneurship.

Financial independence definitions aside for now, Robb Engen mentioned he’s starting to Coast to his FIRE goal.

My friend Tom Drake wondered if oil remains a good investment. I think it’s a good hedge (small hedge) for inflation myself.

I read this good market update from ModernAdvisor.

Thanks to Jon Chevreau for highlighting our take on the Longevity Pension Fund. 

Well done on Vibrant Dreamer – great ways to save money via grocery apps. We use Flipp all the time!

Always great to try and make sense of the markets. A never ending challenge I say!

Other great pages and reading material:

You can always find some great questions asked by readers on my FAQs page. 

There are also dozens of Retirement stories and essays you can learn from on that page.

Save, Invest, Prosper!

As always, check out my Deals page.

My very own personal BMO promo code remains available!  Use that BMO code to get hundreds in cash back when you open investment accounts with BMO like your RRSP, TFSA, taxable account and more! What’s even better with BMO now is they have commission-free ETF investing. Yup. They are now offering commission-free investing for more than 80 Exchange Traded Funds (ETFs), via their self-directed BMO InvestorLine clients. The ETFs cover a broad range of asset classes, geographies, management styles and popular themes from Canada’s largest ETF providers, including BMO, iShares and Vanguard. Simply awesome and I hope more big discount brokerages follow their lead. 

I’ve got a new partnership with EQ Bank – just look at the banner in the margin! EQ Bank typically offers the best savings account rates in Canada. I hope to park my cash wedge for retirement there!

With 5i Research, take a no obligation FREE trial for your ETF and stock research.

With LegalWills.ca use my personal My Own Advisor promo code for 15% off any services – that never expires. A family member used their services and they completed a review with me. 

I earn about $600 in cash back every single year. Scroll down my Deals page to get the same credit card I use in your wallet. 

All the best,

Mark

My name is Mark Seed and I'm the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I've surpassed my goal and I'm now investing beyond the 7-figure portfolio to start semi-retirement with. Find out how, what I did, and what you can learn to tailor your own financial independence path. Subscribe and join the newsletter! Follow me on Twitter @myownadvisor.

6 Responses to "Weekend Reading – Why the 4% rule doesn’t work for FIRE edition"

  1. Well I wouldn’t expect the 4% rule to work either for 50 years, if you have 50% fixed income. I hate these crappy self promo articles that don’t tell you the assumptions unless you read the ** fine print.

    Reply
  2. Thank you so much for including me in another great weekend reading! It is always fascinating to see how savers and investors despite their high income try to utilize simple tools like “Flipp” to pay less, save more, and grow faster.

    Unfortunately, the concept doesn’t apply to those who call themselves “poor” blaming the society, family, or destiny. I have talked to many individuals and they basically come back with a non-sense answer like “Why do I care about $1 less per pound” Or “$40 savings a week on grocery is nothing to worry about”!

    Regarding the wealthy population, I don’t really know if I can trust those numbers especially as they might not have access to the financial situations of individuals in closed or more controlled countries but yes we all agree the distribution of wealth isn’t fair in this world.

    WOW for $30,933 dividend income just in 6 months of the year! That’s amazing.

    Reply
    1. Flipp is great, but I do confess, I don’t scrutinize our grocery budget very much. We like good food. We pay ourselves first and with any money leftover, we spend the rest as we please.
      https://www.myownadvisor.ca/better-way-budget/

      I think if folks are struggling with how to budget, they should absolutely be concerned about spending $40 here and there. Little things add up.

      The wealth distribution is increasing. That’s concerning. We see that playing out politically in the U.S. Very sad.

      On a happier note, have a great weekend 🙂
      Mark

      Reply

Post Comment