Hello! In today’s episode Alvar will talk with the ‘Poor Swiss’ from the Poor Swiss blog, who recently has published an article in which he re-read the Trinity Study with a few twists in order to use it all the way up to 2018 instead of 1995. Also, he looked at if the 4% safe withdrawal rate is still holding up for 50 years instead of the 30 Trinity Study is using, as in general retirement can now last longer and it would be extremely nice if our money can keep up for this period as well. So sit back relax and enjoy the show!
We also talk about:
- Inflation and interest rates
- Currency risk
- Stock/bonds ratio
- JL Collins’s structures
- Tracking expenses
- Stock markets
First insights on the 4% rule
The Poor Swiss is a software programmer living in Zurich that recently discovered the FI movement and is aiming at reaching financial independence in Switzerland. When first approaching the concepts at the basis of the movement he stumbled upon the 4% rule and the Trinity Study. This study is considered one of the cornerstones of the 4% rule, which basically is the result of the analysis that its authors perform on the results of different portfolios across a number of years.
Translating the 4% rule in today’s Europe
As he read the study, the Poor Swiss found some issues when trying to adapt its principles to his situation. First of all, the authors consider 30 years of retirement, because it was intended for standard retirement. With today’s life expectancy coupled with the perspective of early retirement, a longer timespan should be considered. The study is in fact 20 years old and many parameters of the analysis should be adjusted consequently. Moreover, the data on which it’s based are related to the American society and adapting it to the European reality is not an easy process.
An update to the Trinity Study
To address these issues and be able to use the valuable insights of the Trinity Study, the Poor Swiss has built his own dataset retrieving all relevant data from the internet and also his own simulation, so that the principles of the study could be applied to his situation. This way, he has gained a deeper knowledge to define his FI strategies, and he encourages all the people on the road to FI to do the same, gathering the appropriate data and building a customized version of the study tailored to each one’s needs.
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