The 4% Rule No Longer Works ($1M–$5M Net Worth)

Guys, the 4% rule doesn't make any sense. And I'm going to explain why. Especially for people that are 35 to 55 year olds. Especially for people that are Bitcoin ccentric investors and understand the philosophy and kind of the um yeah, political like reality of Bitcoin um and are motivated by that philosophy. Okay, the 4% rule doesn't make any sense. But real fast for the new people, my name is Brian. I talk about Bitcoin personal finance specifically for people that are aged, you know, 35 to 55 and are scaling their net worth. Okay? Scaling their net worth from 500K to a million or a million to 5 million. Some of you guys are doing 5 million to 10 million. I don't super talk to you guys yet because I'm projecting where I'm at scaling from around a million up to 5 million. Okay, a million dollars is like loosely if you have a million dollar in investable assets, you're loosely in the top 10% of the United States. Five million puts you top five percent United States. Okay. And so I've been a personal finance nerd my entire life, but I bring up all this Bitcoin stuff because what happened as I got out of college, joined the workforce, and was, you know, you get more assets under management for your own like personal finances. And I took a hard right turn into like Bitcoin philosophy. And that ate up like six, seven, eight years of my life. and I went to work for multiple Bitcoin uh financial services startups, worked at those. And so Bitcoin was like my personal finances and my hobby and my professional hobby and my like working reality for years. Okay. And so now I've sunseted that part of my life of working in-house at Bitcoin startups and I've come back around to kind of just seeing what's happening with broader personal finance and and this all circles back to the issues with the 4% rule. Okay. So, I say all that to be like I didn't have an adult period of my life where I was going down the financial independent retire early uh rabbit hole like content trail on YouTube or the dividend snowball rabbit hole. Okay. And so now as an adult with a Bitcoinbased like personal finance bent, I'm now coming up and consuming all this content to just see, you know, what's all out there. And there's two groups that basically talk past each other all the time. There's the like growth focused forever investor that's buying index funds and buying tech growth stocks and then they have their spreadsheet math that has when they hit X number they'll be fired and be able to take 4% per year off of that and the investment will grow enough um to that the 4% will last X years or whatever, right? And then you have the people that are like, "No, they like dividends and they have they build a dividend snowball with the goal of hitting X um you know, monthly income from that." And so the issue I'm and so I lean dividend stocks, you know, for sure I lean dividend stocks on that whole thing from that paradigm. part the part of the reason for that is because I like the combination of Bitcoin upside with some income on the products that I talk about like over there. But that's not what this video is about specifically today. So again, if you're new, you can poke around on those other videos um to talk about that. But my issue with the 4% rule is it doesn't I it doesn't account for this reality. Here's the reality for people that are 35 to 55. Like there's there's no retirement. You're going to like randomly slow walk into it. I actually think it's pretty rare for you to be like I'm going to retire in X year and then you decide to do it on that year because there's so many variables. There's like what your partner is doing. There's do you like your job? There's does your boss change? You know like uh you know what time of the year is it? when does your stocks like there's not a clean cut off when you hit that number that the spreadsheet says that the 4% will do. And so say here's a here's a very real reality. Say you're shooting towards that. Say you're 37, your partner's 38, you're shooting towards that. It's looking really good and you're like 3/4 of the way there. All right, you're 3/4 of the way there and you're only 37 to your fire number. All right, according to the 4% math. Boom. then you get laid off, okay? Or boom, your partner gets laid off or you like want to take a sbatical for whatever reason. You're like, say you're not laid off. Say you just literally hit a wall, like a professional wall of just this is not interesting anymore. Life is good and this is not interesting anymore. Okay? And and the the desire to have more free time hits you. All right? the spreadsheet would tell you that, oh, you're not ready yet. You're not ready yet because the 4% uh off of this thing will eat into it too much and then at XYZ year in the future, you'll be out of money, right? The 4% rule doesn't account for the reality of I think people are going to go through multiple retirements. And you see this you this is a concept that is talked about also, but I haven't seen it talked about in the same video. And so the the thing about when and another thing that sparked this the other day is I watched so Chimoth started his own YouTube channel which is good. Um uh great. I think it's better for him to break away from the all-in podcast and just do his own thing. Um I'm I'm not Yeah. So I don't like the All-In podcast, but I but Chimoth is fine and says some interesting things. He said this thing of he's like 50 and he has a lot of friends that are also 50 that are quote unquote out of the arena. And I agree. And he's like, I don't I don't get that. Like, why are you out of the arena? Like, why are you not like charging forward? And I I agree with that. Actually, I don't think when people say retire or retire early, I think that just means like if I was in a one-on-one kitchen table conversation with with any of you, any of you that call me like through the link and just be like, "Yeah, like I just want to do what I want with my time and like be I want to be financially secure and do what I want with my time." The majority of type A type people that are already consuming personal finance content and consuming, you know, how to retire early content or consuming Bitcoin content, continue uh dividend snowball content are not going to be satisfied to just like to to just sit on the lump sum and withdraw the 4%. And that creates anxiety in a different way of just constantly monitoring the stock market, constantly monitoring the stock go the the price of it going up and down, whether it's Bitcoin or stock or anything else, and then wondering if your 4% is okay. The antidote to this, I believe, is income. That's why I just made a video yesterday about keeping three plates spinning at the same time. Yes, you want your main growth thing to be growing so that you can DCA off of it in times when you need to DCA off of it to supplement your monthly income. You also want cash coming in. I don't I don't think like how and tangent for a second. I'm super bullish on like peptides and like AI medicine getting like super customized to every single person. So I I'm fully drank the Kool-Aid on longevity and like the to the longevity lifespan is going up. It's going up. So again, if you're 35 to 55 right now, you have 50 more years, 60 more years, 70 more years. All right? So that's another reason why I just don't buy the like 4% rule for total because I don't believe there's just two phases of your life. I don't believe there's the working phase of your life and then the retired phase of your life. And in the retired phase of your life, you draw down the for. That's way too simplistic. Way too simplistic. The reality is what's going to happen is you're going to stumble into financial independence. You're literally going to trip and fall over financial independence and you're going to wake up and look at your partner and be like, I think we're good. Like I think I genuinely think we're okay. I think we're okay. It's kind of nervous to send that email or to switch that thing and it's going to wreck your identity and start to change your identity of who you are and what you do with your time and people are going to look at you weird for being out doing stuff on random Tuesday mornings, but I'm going to trip and fall into it. And then you're going to combine some sort of cash flow from owning a business or dividend stocks or covered call funds or whatever something some c or a side hustle Uber like anything literally just anything cash is going to be coming in from doing something investments or starting a business or a side hustle or consulting or whatever you're going to DCA off of your stack to supplement the monthly bills. And the third part is you're going to take loans. So you're going to have helocks, you're going to have credit cards, you're going to have Bitcoin backed loans, you're going to have your margin loans, you're going to be taking loans. And so your growth portfolio acts as a battery that you can draw off of. Your credit and debt acts as a battery that you can draw off of. And then your income, you can choose to throttle that up and down based on your level of motivation and your level of opportunities in front of you. And when when if slash when you choose to really throttle up the income, what do you do? You refill both batteries. You pay off the debt and you ramp up the growth investments. And so that's the 4% rule is fine if you understand it in context of that entire triangle and you understand it in context of yes, it is okay to sell off of your growth portfolio. Again, price up or down. price up or down, it's okay to sell off of your growth portfolio to supplement your monthly income. And I think more and more people are running the math on stepping away from traditional employment in order to run this triangle. Or here's another very real reality of why the 4% rule doesn't super work. Because probably what's going to happen is that you're going to hybrid it and one spouse is going to keep their W2 and the other spouse is going to go start to build this other cash flow bucket. They're going to start to build the business. They're going to start to build the side hustle. They're going to start to build the dividend portfolio. Okay? And then that's where the income comes in. So the growth is still growing. Or you may just stop contributing to the growth account and it just is what it is. And then the debt is what it is. The W2 floats the day-to-day reality while the cash flow engine gets built. That's the position that my wife and I are in. She works at W2. I'm building a business. And so if that real quick, this video is brought to you by Horizon. Horizon, I'm very thankful that they are a sponsor of the channel. Um they're the only Bitcoin only company to make it through the Y Combinator program. Um sorry, I know that was a hard pivot. I just I talked live on this and I I remembered that I needed to tell you guys about them. um they're the only Bitcoin only company to make it through the Y cominator program. They are the easiest way to flip your home equity into Bitcoin. So again, in this triangle, if you are sitting on a nice primary residence, don't give up your primary residence. Have a nice primary residence. Have an awesome lifestyle asset primary residence. I'm super bullish on that and I want people to have amazing awesome homes. Have your amazing awesome home. If you've been in that for a while and you have the cash flow covered, but maybe you're a little bit under on growth, look at how much your home equity is growing per year and can you take an home equity investment through Horizon and pivot some of that money, some of that capital into Bitcoin. That's what it's for. So, use the link in the description, check your address, see how much of your home equity you can swap into Bitcoin today. Thank you to Horizon for sponsoring the channel. that makes sense about the triangle and about having growth, income, and debt all working together and why the 4% rule is too simplistic. I hope that makes sense. I think it does. I think it does. And I'm not none of this is super original to me, although it's undertalked about for sure. There's people all there's there are people all over the country actively doing this right now but I don't think they've put systems to it and they keep feeling shamed honestly like by a financial adviser or like by the fire community or by the Bitcoin community or whatever because everyone has their everyone has their like their exact framework and I more and more every day as I've been like just climbing over all of this for myself combining all the frameworks is the answer. Combining all the frameworks is the answer. There there is not a silver bullet. There's no silver bullet. Combining the frameworks is the answer because your situation is super unique and and no one that like coaches or talks on like retirement or financial independence. I don't I have never seen a YouTube video on the hybrid phase of when one spouse is working W2 and one spouse is starting to carve the you know path working together to do that. Okay, just just yesterday. So, I open up an LLC this year. Just yesterday, estate planning attorney let me know that like, oh, the trust owns the LLC. And I was like, that's amazing. Like, that's amazing to have that kind of level of help to where we both own the LLC. And it it's just awesome. like it feels good to be doing it in real time navigating like the early stages of financial independence because again and no one and that's the other thing too I don't think anyone acknowledges the early stages like you either feel behind and like you don't know enough or you're like in like a super decked out podcast studio talking about like these millions and millions and millions of dollars that just doesn't it doesn't feel that that doesn't feel attainable from the couple that is like in right in the like 1 to 2 million 1 to 3 million range with one still working one carving the path and so that's what I'm passionate about is just really talking to people right right right right right right right right right right right right right right right right at that level all right we're having a conference for these kind of people that are Bitcoin aligned like specifically Bitcoin aligned because that's what I'm most able to speak to and it's November 3rd to the 5th here in Southern California. And so that link is in the description as well. If you made it all the way in, definitely check out that link. Definitely come meet us in person. If in person isn't your thing or if you want to talk more about it, there's a link in the description to talk oneonone as well. And so, really appreciate it. Talk to you more soon.