Key insights
- A financial analyst highlights the inadequacy of the 4% Safe Withdrawal Rate (SWR) for European retirees due to higher inflation and Euro debasement. The analyst suggests that static retirement targets are underfunded and proposes dynamically adjusting targets based on local inflation. This could lead to lower withdrawal rates (e.g., 3%) for Eurozone retirees. While the direct impact on US equities is limited, it signals broader concerns about global retirement planning amid inflationary pressures.
Most FIRE spreadsheets online assume US inflation, USD assets, and a static target.
I ran the numbers for a 30-year retirement factoring in the real debasement of the Euro (and CHF), and a static $1M/€1M target is actually deeply underfunded by year 15. I couldn't find a tool that dynamically adjusted the FIRE target line during the decumulation phase based on local inflation.
I ended up coding a visual simulator that plots a 'moving inflation target' vs portfolio growth (including a small BTC hedge) to fix my own math. The results on the chart were a huge wake-up call for my timeline.
How are you guys adjusting your withdrawal rates for the Eurozone right now? Are you dropping to 3% to be safe?
(If anyone wants to run their own numbers on the visual simulator I built, let me know in the comments and I'll drop the link).