First of all, don't take this post too seriously. This is playtime with Taleb and one of his anti-fragility ideas. I think I have done this before but I wanted to mentally run through it again.
IF
- robust systems are identifiable by the reduction of single points of failure and redundancy of resources at critical points, and
- we assume a $1M portfolio P1 for a 60yo, spending a deterministic (real) 40k, and
- of that 40k in spend, 20k is a life-or-death floor, and
- we use SS-like life table to assess the probability of spending anything at a future time, and
- the PV at t(0) of the probability-weighted cashflow of the floor is .43 of the initial P1, and
- we simply and blindly double that part of the portfolio (.43) that defeases the floor at t(0),
THEN
- the initial portfolio P1 is now 1.43 x P1 = P2
- The spend rate of 40k of P1 is now .028 of P2 at age 60
- The need for redundancy will decline towards zero at later ages. I haven't gotten into that.
So very conservative spend rates in early retirements can be considered either:
a) a soul-sucking denial of the joy of life, or
b) a prudent Taleb-style redundancy of essential capital used to manage uncertainty in the future, a redundancy the need for which will go towards zero at very late ages.
Will this approach work? Maybe. I'd have to play it out and think about it. Probably. That's a pretty low spend. Fwiw, this is not too far from the level of spend that my foray into reinforcement learning (using consumption utility) taught itself for a 60yo. It is also within striking distance of what I was doing myself three years ago at age 60 while at the same time I was being or had been criticized by "people not me" for my conservatism ;-)
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