Lately I’ve been pondering the affects of inflation on early retirement. I will write a post soon on how this is going for me. In the meantime, here are some other author’s musings on early retirement:
Minimalism And Early Retirement Go Perfectly Together
Financial Samurai
Since my own early retirement I have had a desire to simplify as much as possible. Sam from Financial Samurai writes about how he has tried to simplify his life with varying results. I especially appreciated his thought that while the small hassles of life such as car troubles continue in retirement you have more time to deal with these as an early retiree. That doesn’t mean it’s fun!
What’s a Safe Withdrawal Rate Today?
Christine Benz & John Rekenthaler, Morningstar
Last year Morningstar wrote an article arguing that the safe withdrawal rate (the percentage of a portfolio a retiree can withdrawal in the first year of retirement, adjust for inflation, and likely not run out of money) should be 3.3%. This was significantly lower than the 4% plus that had been assumed by many financial advisors in previous years. The reason for the lower safe withdrawal rate was due to a combination of low bond yields and high equity valuations (which should logically lead to lower returns in the future.) This year, due to the sharp rise in bond yields and lower equity valuations Morningstar has increased their recommended safe withdrawal rate to 3.8%
Retirement Security Is Being Threatened By High Inflation
Nathaniel Lee, CNBC
Inflation is arguably the biggest risk for any retiree, and especially for an early retiree. Assuming this period of elevated inflation lasts for a while it is crucial to take inflation into account when making retirement plans. This is arguably a bigger factor affecting the safe withdrawal rate than the nominal returns on stocks and bonds.
