ChooseFI Podcast Summary

Episode: Safe Withdrawal Rates, Drawdown Strategies, RMDs, and 50 Year FI Timelines
Date: September 8, 2025
Hosts: Brad Barrett & Jonathan Mendonsa
Expert Guests: Dr. Karsten “Big ERN” Jeske (Early Retirement Now), Fritz Gilbert (Retirement Manifesto)

Episode Overview

This episode features a deep dive into the most frequently asked questions from the FI (Financial Independence) community related to long-term withdrawal strategies, rising questions around safe withdrawal rates (SWR), Required Minimum Distributions (RMDs), dynamic drawdown strategies, and navigating 50+ year FI timelines. Brad and Jonathan bring in leading FI authorities—Karsten Jeske and Fritz Gilbert—to tackle complex listener questions, challenge emerging claims in the personal finance world, and offer actionable, research-backed insight.

Key Segments & Discussion Points

1. Is the 5.5% Safe Withdrawal Rate Legit? [04:32–15:46]

Context & Listener Question

• Mike asks if the new claim by Bill Bengen—that a 5.5% withdrawal rate is now “safe”—holds up against Dr. Karsten Jeske's (“Big ERN”) research.

Karsten’s Analysis

• Historical SWR (4% Rule): Assumes a 30-year retirement, 50–75% equities, inflation-adjusted withdrawals. Historically failed in only the most catastrophic economic periods (~1.5% failure rate).
• Bengen’s “Upgrade” to 5.5%:
  • Two steps:
    1. Asset Allocation Change: New focus on small cap and international stocks, which historically (pre-1980) outperformed but have not done so for the last 45 years.
    2. Success Criteria Shift: “Safe” becomes “average”—the average historical withdrawal rate, not the fail-safe.
• Key Critique:
  • Relying on past small-cap outperformance is “betting on a party that’s long since ended.”
  • Raising the withdrawal rate to 5.5% is deceptive:

    “Calling this a new safe withdrawal rate is extremely deceptive because... over the next 30 years, you might run out of money with a 50% or even higher chance.”
    — Karsten (12:53)

  • The true “fail-safe” withdrawal with Bengen’s new asset allocation is only 4.7%, and even that is highly debatable.

Hosts’ Takeaways

• Brad: The discussion underscores why FI folk stick to conservative rates: “We are looking for something close to 100%... People might give up years of their life working extra to get that certainty.” [17:02]
• Jonathan: The cost of excessive conservatism (“fat FI”) is real; flexibility and Social Security get undervalued in most plans.

2. Withdrawal Rate Adjustments for 50+ Year Timelines [25:10–33:48]

Listener Question (Rachel)

• How should the 4% rule change for early retirees planning for 50+ years?

Karsten’s Insights

• Original 4% Rule:
  • Assumes: 30 years, asset depletion at end is okay.
• For Longer Horizons:
  • The reduction in SWR is not linear; doubling retirement length does not mean halving spending.
  • For a balanced (75% stock/25% bond) portfolio, historical fail-safe rates are:
    • 30 years: 3.82%
    • 40 years: 3.58%
    • 50 years: 3.35%
    • 60 years: 3.25%
  • Needing a 50-year timeline = ~15–17.5% lower annual budget or portfolio about 17.5% larger than 30-year retiree needs.

    "Even doubling your retirement horizon only requires about a 17.5% larger nest egg, not 100% larger."
    — Karsten (29:41)

• Other Good News: Social Security and possible pensions later in life can actually push safe withdrawal rates back above 4%, despite early reductions.

Hosts’ Takeaways

• Brad: Most FI folks are “way, way too conservative even on a 50-year timeline—most will die with far more than needed”; compressing the SWR further than 3.25% rarely makes sense.

3. RMDs vs. Safe Withdrawal Rate: Are They Competing Rules? [36:40–41:44]

Listener Question (Pete)

• Does the compulsory RMD (starting at age 73–75) make the 4% SWR obsolete once RMDs start?

Fritz Gilbert’s (Retirement Manifesto) Response

• RMDs only apply to pre-tax/IRA assets, not the entire portfolio.
• Example:
  • $2M portfolio: $1M in pre-tax, $1M in taxable/Roth.
  • A 4% RMD equals $40K, which is only 2% of your entire investment base.
• Just because you’re forced to withdraw more than needed via RMD doesn’t mean you have to spend it—money can be reinvested in taxable accounts.
  • Notable Quote:

    “Just because you’re forced to liquidate that RMD doesn’t mean you have to spend it.”
    — Fritz Gilbert (40:22)

• Additional point: Using the RMD rate as a withdrawal guideline for the whole portfolio is a solid (and research-backed) “safe spending” strategy, per Stanford's Center on Longevity.

Hosts’ Takeaways

• Brad: RMDs are “apples to oranges” with SWRs—don’t confuse forced taxable withdrawals with actual spending needs.

4. Dynamic Drawdown Strategies – Pros & Cons [45:06–50:07]

Listener Question (Matt)

• With a largely stock-heavy, $2.5M portfolio, is it a good idea to withdraw 0.25% monthly (totals to 3% withdrawal per year), topping off a money market account as needed?

Fritz Gilbert’s Guidance

• The approach is fundamentally sound but overly complicated.
  • Downside: Monthly transactions = “a lot of decisions… a lot of transactions;” increases behavioral risk.
  • Alternative: Quarterly or annual withdrawal rebalancing makes life much simpler.

    “Once a year might be sufficient… semi-annually, at minimum. Once a month is an awful lot of transactions.”
    — Fritz Gilbert (48:07)

• Asset Allocation Warning: 90% stocks is high risk at the point of retirement; build in bond/CD ladders to help minimize sequence risk.
• 401k Logistics: Rolling to a traditional IRA often makes withdrawals simpler; consider Roth conversions early for tax planning.
  • Tax Impact: Don’t forget to include conversion/income taxes in your spending plan.

Hosts’ Comments

• Brad: Build explicit, simple “rules of the road” before you need them—automate as much as possible, minimize needless touch points.
  • “If you’re going to have to rely on your brain and your behavior… that’s a bad strategy.” [50:07]

Memorable Quotes & Moments

• Karsten (6:33): “This new 5.5% rule is all a big nothing burger... Even under the most optimistic assumption, you can only go to 4.7%. And even this is highly controversial. I would not personally bet my retirement plan on an uncertain small cap premium that has not worked for the last 45 years.”
• Brad (17:02): “We are looking for something close to 100%. And that might mean giving up actual years of your life to a job you may not like. There's a real cost to that—let’s be clear.”
• Karsten (29:41): “Even doubling your retirement horizon only requires about a 17.5% larger nest egg, not 100% larger. That was a real eureka moment when I first started my personal retirement planning journey.”
• Fritz (40:22): “Just because you’re forced to liquidate that RMD doesn’t mean you have to spend it. You can put it in a taxable account. One important caveat is you cannot put that into a Roth.”
• Brad (50:07): “Get your brain out of it. Set up rules, make it simple. Don’t rely on your courage or consistency in the heat of the moment.”

Timestamps for Major Segments

• 4.5% vs 5.5% Withdrawal Rates / Small Cap Outperformance: 04:32–15:46
• Should Early Retirees Use a Lower SWR for 50+ Years?: 25:10–33:48
• RMDs and Their Relationship to Safe Withdrawal Rate: 36:40–41:44
• Dynamic Drawdown Strategies—How Simple is Best: 45:06–50:07

Episode Highlights & Actionable Insights

• The 4% rule remains a robust North Star—using higher rates often means significantly higher risk or is based on unsustainable market conditions (like hoping for a small-cap renaissance that hasn’t materialized since 1980).
• Planning for very long retirements (40–60 years) only requires slightly more savings, NOT double!
  • Rule of Thumb: For maximum safety, use 3.25% as your baseline SWR for a 60-year timeline, with adjusted upwards if you expect Social Security or other later-life income.
• Mandatory RMDs in retirement do NOT force you to spend beyond your needs—extra can be saved or reinvested.
• Drawdown simplicity trumps complexity; yearly or semi-annual rebalancing can solve most portfolio withdrawal headaches and behavioral errors.
• Automate rules where possible (“set it and forget it” policies), especially in emotionally-fraught market conditions.
• Over-conservatism (“fat FI”) can cost you years of life—don’t overestimate future risks or ignore future guaranteed income streams like Social Security.

Resources Mentioned

• Karsten’s Safe Withdrawal Rate Series: earlyretirementnow.com
• Retirement Manifesto—Fritz Gilbert: theretirementmanifesto.com
• Stanford Center on Longevity’s Research: On withdrawal strategies
• Investor Policy Statements and “bucket” strategies
• Empower (formerly Personal Capital): Asset allocation and rebalancing tool

Final Thoughts

This episode is a cornerstone primer on withdrawal rates and retirement spending strategies for both new and advanced FI seekers. The nuanced, evidence-based perspectives from Karsten and Fritz, plus Brad and Jonathan’s focus on living intentionally, make it an essential listen or read for anyone planning their FI journey—especially those eager to retire young and stay secure for the long haul.

Listener action: For more, submit your own questions to choosefi.com/feedback and join the new ChooseFI member portal to interact with experts and local FI communities.