Re: Constant $ withdrawal
Posted: Fri Jan 12, 2018 9:36 am
no ,those dates are the worst historical dates for retirees in any allocation and they are the dates the 4% safe withdrawal rate was based on . all of those dates failed and you needed to reduce to about 3.70% with any allocation over 35% equities to survive the stress test 100% .
but those dates failing still represent over a 90% success rate at 4% so it is still acceptable .
but the common denominator to all failures at 4% are conditions were so bad the first 15 years that even the best of years coming along later could not salvage them .
so mathematically it takes about a 2% real return the first 15 years to have 4% hold . of course what balance is left at 30 years depends on your actual allocation , but the income stream should hold up ok
the funny thing is researcher michael kitces found that if you made it to the 15 year mark okay , that even if your retirement went out longer than 30 years you still were okay .
so you can see in the 30 year results for all those failure years 30 years was not bad . but the 15 year periods sucked .
we don't know how the pp would have held up over those benchmark years since gold's prices were really skewed but it is not important . thanks to kitces we know no matter what you use if you are not seeing a 2% real return the first 15 years you are in danger of not holding 4% so a pay cut may be in order. in fact if you are not holding a 2% real return 5 years in , i certainly would proactively cut spending as a precaution
but those dates failing still represent over a 90% success rate at 4% so it is still acceptable .
but the common denominator to all failures at 4% are conditions were so bad the first 15 years that even the best of years coming along later could not salvage them .
so mathematically it takes about a 2% real return the first 15 years to have 4% hold . of course what balance is left at 30 years depends on your actual allocation , but the income stream should hold up ok
the funny thing is researcher michael kitces found that if you made it to the 15 year mark okay , that even if your retirement went out longer than 30 years you still were okay .
so you can see in the 30 year results for all those failure years 30 years was not bad . but the 15 year periods sucked .
we don't know how the pp would have held up over those benchmark years since gold's prices were really skewed but it is not important . thanks to kitces we know no matter what you use if you are not seeing a 2% real return the first 15 years you are in danger of not holding 4% so a pay cut may be in order. in fact if you are not holding a 2% real return 5 years in , i certainly would proactively cut spending as a precaution