5.1% return above average but still reasonable. However, inflation is ~2.5 - 3%. So, unless your spending principle that's 21k/year ignoring taxes. Also, many people get discounts on health insurance and other benefits that don't apply.

Sure, you can burn down your principle based on life expectancy. But that's only really useful if your old. At 40 even 1% in your first year will probably cause you to run out of money.

Long term returns on the S&P 500 have averaged ~7% real returns including dividends. In personal finance there's a "4% Rule" which is supposed to be your target annual withdrawal if you're living off the money as a retiree. The 3% spread allows for market crashes, long periods of stagnancy in returns and a small increase in living standards as you age, however, if you're young I do agree a smaller 2-3% withdrawal level is appropriate.

source: http://www.investopedia.com/ask/answers/042415/what-average-...

Good point, though the S&P has not averaged 7% annual returns if you consider reverse cost dollar averaging. There where two decades when the S&P went negative in real terms including dividend reinvestment. It's actually tricky to find what percentage you could take out every year from 1950 to now and have the same amount adjusted for inflation at the end, and that's assuming things don't get worse.

Basically, you take out a lower percentage of your money on good years than bad. Further, you need to take taxes out to cover inflation. Aka, you pay taxes on 7% even if your real return was only 4%.

PS: There is a reason many institutions are ok with a very steady 3.5% ROI there is a lot of risk going for more.

You're not putting 100% of your portfolio in equities if you're living off its cash flow [1]. ZIRP means your fixed income can flow is weak. Things to consider when allocating as a retiree.

[1] imo it's okay to do this while you're in the workforce since you're salary effectively acts as your fixed income portion of the portfolio.

My prior comment may not have been 100% correct. I believe the specific research that lead to the so called 4% rule did include a mix of stocks and bonds. As you point out, you would tend to roll back your risk tolerance as you reach retirement. Here's more on it for anyone interested:

http://blog.cordantwealth.com/how-much-can-i-spend-in-retire...?