To an extent I can see some circumstances where it might apply to someone with my way (chicken-little
) of thinking. If I was struggling along with a barebones $500,000/4%/$20,000 a year scenario I'd be very scared if my portfolio dropped 15% and I'd probably immediately cut down to,say, $16,000 a year just in case the portfolio dropped further. For a scenario of $2m/4%/$80,000 a year and a 15% drop I may not make immediate cuts in expenditure because the portfolio may go up again in the near future - however at a drop of 25% I'd probably make immediate cuts.
The figures are examples only - and probably it doesn't make sense - but I've never claimed to be an entirely logical human being
I think Ken's example is a good one of how the psychology of humans and the utility of money comes into play. Of course if the 2 million dollar portfolio owner is so extended that they really need every penny of the 80k per year to stay afloat, then the psychology wouldn't be much different.
If we are saying that a person with a 100 million portfolio can live on less than 4 million, I think that isn't the same as saying the safe withdrawal rate is different.
That is at the core of the issue of course, even if the higher port person never has to drop their spending, the psychological comfort provided changes investment decisions, allowing them to assume riskier higher return positions and stay in them in extended downturns. Something I believe a reasonable person living close to the edge wouldn't do, unless we assume a computer or third party is running the show.
In a way I totally agree with your perspective, ataloss, because I dont' see any way to address this issue directly with math, but I think the psychological factor is there, it is an influence, whether we can stick it in an equation or not. If we can't then why worry about it other than to suggest 'sensible WR' strategies?
"Do not spoil what you have by desiring what you have not; remember that what you now have was once among the things only hoped for." - Epicurus