4% Rule
Hey everyone,
I’ve been thinking lately about the best way to handle the 4% rule when the time comes to finally enter the drawdown phase (I’m still pretty young, but I like to plan ahead). My main goal is maximum automation and zero stress. I don’t want to be checking charts every January or making hard choices when the market is bleeding.
I see two main ways to go about this, and I’d love to hear your thoughts:
1 The 100% ETF Route: Putting everything into a single multi-asset fund (like Vanguard LifeStrategy 80/20 or 60/40) and just blindly selling 4% every year. The idea here is to trust the fund's internal rebalancing to do the heavy lifting during a crash.
2 The Buffer Route: Keeping 2 to 4 years of expenses in a Euro Money Market Fund (like XEON) for the bad years, and leaving the rest in equities.
Personally, I’m thinking that a hybrid approach—combining a Vanguard LifeStrategy ETF with a solid 4-year MMF buffer to ride out any major market crashes—sounds like a sweet spot.
If you wanted a true "set and forget" retirement setup:
How would you personally manage this? What exact steps would you follow every year to keep it automated?
What do you think about combining a multi-asset ETF with a 4-year MMF buffer? Is it a solid plan, or is it too much cash drag, even though the MMF yields some interest?
For those who went 100% into an ETF, do you actually feel comfortable blindly selling shares during a multi-year bear market?
Would love to hear how you guys would manage this or if there's a simpler setup I'm overlooking. Thanks!