Forget About Money 𧩠Sequence of Returns Risk Solved! Karsten Jeske on Safe Withdrawal Rates π
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Jul 5, 2024 Karsten Jeske, known as Big ERN, is a retirement researcher with a PhD in economics and the founder of the popular blog Early Retirement Now. He delves into the intricacies of Sequence of Returns Risk, explaining how the timing of returns can significantly impact retirement savings. Karsten advocates for tailored withdrawal strategies and discusses the importance of a conservative bond allocation. He highlights practical tools for adjusting withdrawal rates and critiques common bucket strategies, emphasizing a gradual asset allocation shift to mitigate risks in retirement.
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How Early Retirement Now Began
- Karsten started Early Retirement Now in 2016 while still working and used deep quantitative curiosity to build the blog.
- He expanded an intended short series into 60+ posts through reader questions and iterative research.
Why The 4% Rule Exists
- Safe withdrawal rate asks how much you can withdraw each year, inflation-adjusted, without running out over a horizon (typically 30 years).
- Historical worst cases show a ~4% floor because early bad returns plus withdrawals can cripple recovery.
Sequence Beats Average Returns
- Sequence of returns matters more than average return because early-year losses amplify withdrawal impact.
- Early poor returns can deplete principal so much that later strong returns can't recover the portfolio.