“Greaney’s Study Was a CONSERVATIVE Study in the Eyes of Most Stock Investors of the Time. He Was Not Telling People That the Safe Withdrawal Rate Was Higher Than Other People Were Saying, He Was Telling People That It Was LOWER.”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

Hey Rob, I saw a pretty good segment on PBS about early retirement. Check it out!

https://www.youtube.com/watch?v=RyF40JydVNU&feature=youtu.be

I’m not sure what your motive is in putting the link here. The Retire Early movement is of course dear to my heart. Seeing this stuff discussed in mainstream places (I saw articles on Mr. Money Mustache in the New York Times and in the New Yorker not too long ago) brings to mind those exciting days at the Motley Fool board where there were fewer people who knew about this stuff. It’s very exciting stuff. You certainly won’t hear different from me.

We need to be honest about it. You can’t get away from that, Sensible. There’s no way. If you are not honest, you are not helping people, you are hurting them. If you are dishonest, you will ultimately make the entire Retire Early movement look bad. The whole thing falls apart if it is rooted in dishonesty.

I was kinda, sorta dishonest for a long time — three years. I loved helping people on the saving side and people loved me in turn because all of this Retire Early stuff is very exciting and I was helping them with that. I never talked about investing in those days. Greaney would push his safe withdrawal rate study every day and people loved it and I would keep my mouth shut about the errors that I knew were in it. I was a snake, no? That’s pretty darn low behavior. I am making friends with these people and encouraging them to hand in resignations from high-paying jobs long before they were in circumstances that would permit them to do so safely and I didn’t say anything. Huh? What the f?

I had to rationalize my behavior, of course. I wouldn’t have been able to live with myself if I didn’t do that. That rationalization that I came up with was a pretty darn good one. Before Greaney’s study came along, lots of people were using the 7 percent withdrawal rate that was recommended by Peter Lynch. Greaney’s study was a CONSERVATIVE study in the eyes of most stock investors of the time. He was not telling people that the safe withdrawal rate was higher than other people were saying, he was telling people that it was LOWER. That’s a fact. I don’t think that Greaney would deny that one. The true safe withdrawal rate was somewhere between 2 percent and 3 percent during most of this time-period. So the number in Greaney’s study was a lot closer to reality than most other information sources available to people at the time. I told myself that the net effect of the study was a positive. I persuaded myself that it was okay to keep my mouth shut.

Was I right? Today, I don’t think so. It is a betrayal of the Retire Early movement to know that the numbers that people are using to plan their retirements are wrong and to not say anything about it. Mr. Money Mustache is a leader of the movement today. I had dinner with him at one of the Financial Blogger Conferences and we talked about all this stuff. He doesn’t disagree with me re safe withdrawal rates. His response to all that I told him was to say something along the lines of “no good deed goes unpunished” (that’s a paraphrase, I don’t have certain recall of the precise words he used).

If Mr. Money Mustache thought that he could get away with telling people the truth about safe withdrawal rates, he would do it. He’s like Wade Pfau and Bill Bernstein and Scott Burns and Michael Kitces and Jack Bogle and lots and lots and lots of others. He knows that as a general rule it is better to be honest when talking about financial matters. But he also knows that telling the truth about what the last 37 years of peer-reviewed research teaches us about stock investing is very, very, very dicey stuff at a time when prices are where they are today. So he keeps his mouth shut for now.

How about after the next crash? There are going to be lots of early retirees facing very dire financial futures in the days after the next price crash. Will that mean that the idea of early retirement was always fantasy stuff, as its critics have always maintained? It won’t mean that, in my view. It will just mean that we should have permitted honest posting at all of our boards. Turning our boards into corrupt enterprises was a mistake. If you are going to permit discussion of safe withdrawal rates, you should permit HONEST discussion of safe withdrawal rates. Otherwise, the entire thing becomes a scam.

The Retire Early movement is a scam today. Not by intention. But I am 100 percent confident that, after large numners of the people who have retired early in recent years suffer failed retirements because of the lies that they were told re safe withdrawal rates, there will be many people saying that the entire movement was a scam from the first day. And most people who hear about it and don’t bother to study the matter in depth will be inclined to agree with them. If it weren’t a scam, you wouldn’t have seen the death threats and the threats of career destruction and all the rest.

I believe in the Retire Early movement. I would like to see everyone alive exposed to the ideas that drive the movement. Financial freedom is a wonderful thing. It is great to live at a time when the prospect of financial freedom is available to most middle-class people. It’s an amazing movement and it thrills me that more people are discovering it.

But I very much think that it has to be rooted in honesty. I think that we are hurting people in very, very, very serious ways with the dishonest, fraudulent side of the project. I don’t think there’s a place for that. If we were all thinking clearly about these matters, I think we would have universal agreement re that one. I think that one of the reasons why we see such violent reactions from the Buy-and-Holders when we try to talk about the last 37 years of peer-reviewed research is that they appreciate themselves how important is it to be honest when calculating the numbers used to plan a retirement.

I went crazy on the day when I discovered Greaney’s web site. It was one of the best days of my life. i had been hoping to find such a resource for a long time. One of the things that excited me about it was that he put a lot of focus on the calculation of the safe withdrawal rate. I think he did that because he knew how important it was to be rational rather than emotional when planning an early retirement. Greaney and I have a lot more common ground than most people (including Greaney himself, to be sure) realize.

Those are my thoughts, Sensible. I couldn’t love the movement more. If I were to agree to post dishonestly re safe withdrawal rates, that would ruin it for me. I would feel that I was destroying people’s lives rather than helping them. That changes it, you know? That changes things in a fundamental way. I wish everybody in the movement the best of luck. I hope they make it through. But for me to put up posts, I would need to be permitted to do so honestly. I think that has to be a bottom-line condition. Again, I think that every single person in the movement would agree with that if he or she were capable of thinking clearly re these matters. The Get Rich Quick impulse messes with our brains. The Get Rich Quick impulse is the enemy of Retire Early dreams, in my assessment.

My best wishes to you, in any event.

Retire Early Advocate (From Way, Way Back!) Rob

I’ll add one more thought. I don’t recall Greaney criticizing Lynch for getting the numbers wrong. It may be that he did so, I just don’t recall it. But I do remember him criticizing community members who tried to argue for withdrawal rates a lot higher than 4 percent. I remember that happening on several occasions. So I think it would be fair to say that there is at least a piece of Greaney’s brain that accepts the idea that prudence is called for when putting together a Retire Early plan. He warned people of the dangers when OTHERS got the numbers wrong, he just wasn’t able to turn that critical eye to his own study. His pride of authorship blinded him to the human misery he was causing by relentlessly pushing numbers that are wildly off the mark according to the last 37 years of peer-reviewed research in this field.

So Greaney is not all bad. He is a mix of good and bad, like most of us, His focus on safe withdrawal rates was right on and his methodology was a big improvement over the one used by Peter Lynch just a few years before. But his Campaign of Terror against the thousands of us who expressed a desire to post honestly re these matters was truly bad stuff. I don’t think that anyone has ever done more long-term harm to the Retire Early movement than John Greaney. We all played a role in what happened because we all tolerated his behavior to some degree or another (that includes me). But I think it would be fair to say that there is no human being who ever walked Planet Earth who caused even a tiny fraction of the number of failed retirements as did our friend John Greaney. And I think that that’s a very, very, very sad reality that we all need to come to terms with, I am ashamed of the role that I played in making that reality a reality. If I had it to do over, I would have begun posting honestly on the first day.

Brings back memories!

Ashamed (But Committed to Doing Better in the Future) Rob