iamlucky13 wrote: Wed Sep 17, 2025 3:11 am
nisiprius wrote: Mon Sep 15, 2025 12:23 pm
The missing piece of data is “how many such decisions a year do you make?”
The quoted WSJ excerpts in the first post seem to imply daily, but looking up the blogger referenced as the source of the rule, he doesn’t seem to clearly answer the question. His statements on his own website about the scope of this rule are non-specific, but suggest a high degree of liberality:
https://ofdollarsanddata.com/climbing-t … th-ladder/
0.01% is a good proxy for what constitutes a trivial amount of money for any level of wealth…[0.01%] shouldn’t affect your finances in the slightest.Instead of telling you the secret up front, he says you can learn all the details about the 0.01% rule by…guess what…
…buying his book. He’s yet another person who has learned the secret of financial happiness is for everyone else to give him their money :
https://ofdollarsanddata.com/the-wealth-ladder/
From a little more poking around, I confirmed he does argue you can do this daily. About 5 minutes into this podcast:
https://pathlesspath.com/nickmaggiulli/
I have this rule called the 0.01% rule. And the idea behind that is that 0.01% of your wealth, or 1/10,000th. So just take your net worth, divide by 10,000. That’s the amount of money that you can spend basically every day without having to worry about it …it’s that marginal decision.….
Where does this assumption, the 0.01% come from? There’s a few different areas I got it from, but I just assume that your wealth grows by that daily. And so over the course of year, if you do 0.01% every single day for a year, that’s about 3.7% a year, which is I say a very conservative return. That’s what treasuries are basically paying now.
….
Where I actually came up with the rule, though, there’s a Jay-Z lyric…
In other contexts, he suggests a slightly better basis than song lyrics for financial advice, but it still seems to revolve around an assumption that 4% real returns are basically guaranteed. To demonstrate with no worse a degree of simplification than he uses why one should be highly skeptical of his advice, consider someone at retirement with $2.5 million saved, who sets their first year’s withdrawal at 4%, and who then manages their discretionary spending using his 0.01% rule:
- Withdrawals: $100,000 = $8,333 / month
- Daily discretionary spending: $2.5 million x 0.0001 = $250
- Annual discretionary spending: $91,250 = $7604 / month
- Leftover for fixed expenses: $729 / month
- US median monthly housing costs: $2035 / month
- Leftover for non-housing fixed expenses (Food, utilities, transportation, insurance, etc): -$1306
Not sure why an author trying to sell his book is annoying to you, that’s what authors do! But regardless:
If one follows the 4% “rule” then in some years, perhaps even many years, one’s portfolio value may end the year lower than where it began. Does that mean that a 4% SWR is doomed to fail? Or is useless? It’s a guidepost. A person with $2.5m is not going to face a $250 “should I get guac on my burrito” decision every day. Regardless of what he says (and regardless of whether he did the math) using this guide prudently strikes me as not a terrible idea.
We also know that a 2-3% SWR for 30 years is basically a perpetual rate of return, yet there are BHs who plan for 2% real returns. So, go figure!
