DAVE G from TX posted about 1 year ago:

WB, When you say "It may surprise people to know that the historical average across all 100 years is 7.0%." I get a little skeptical if you really are talking about a simple arithmetic average. You are certainly aware of the fact that you can easily drown crossing a river with only 1-foot average depth.

DAVE G from TX posted about 1 year ago:

WB, is there a reason why you still only use 30 years. I have found moving this out to 40 years catches a lot more cases - meaning that 30 years is not enough time to say with confidence that you won't run out of money if your retirement goes longer. Also, if your charts are ending with significantly less money than when you started you risk a similar catastrophic failure near the end of life, from a large increase in expenses, just like the case of very poor market performance on the front end.

DAVE G from TX posted about 1 year ago:

WB, I agree with your conclusion that with "your stock allocation between about 46% and 73%, you get about the same withdrawal rate no matter what the stock allocation is within that range." However, the equity allocation does adjust what I would call your "sleep factor." At near 80% you suffer near the same volatility that a 100% equity portfolio would suffer.

BARRY J from TX posted about 1 year ago:

Bill Bengen first articulated the “4%” rule of thumb for retirement withdrawal rates, which was later popularized by the 1998 Trinity study, which used the same data as Bengen. Bengen later revised this 4% rate to a 4.7 ”SAFEMAX” rule discussed here AND revised it to 4.5% for tax-free assets and 4.1% for taxable assets. I have a series of issues with Mr. Bengen’s article. #1 Mr. Bengen’s SERIES OF MULTIPLE “just so” assumptions and DISCALIAMERS following almost every benefit he proposes to deliver and his consistent reliance on generalized straight-line trends (that mask the high probability of frequent volatility variations), back-testing data, his MAXSAFE product looks like an Edsel before the recall. #2 A few of the more curious [I counted 13] disclaimers include: (1) “There are a lot of nonintuitive things happening in this world.” [No kidding. Here are a few: (2) “There really is no correlation between investment returns and your ultimate safe WD rate, “ (3) “4.7% rule is a worst-case scenario.” “I studied 400 retirees retiring from 1926-1924.” [I need to see (a) the 1926-1935 retirement data, (b) 1929-1953 depression recovery data, (c) pre-1936 SSI retirement data, (d) the inflationary 1970s data, and (5) the pre-ERISA 1974 retirement data.] (4) “The safe WD rates shown are not supposed to be 100% accurate.” (5) “We’re dealing with relatively little data for current phenomena, and the markets are changing, so you have to be careful about expectations.” (6) “Just because you have a safe WD rate doesn’t mean it’s going to last for your whole retirement.“ (7)“the plan assumes that you will take out all your money in the last year.“ (8) “I put an updated version of it in my book, and that’s when I realized that I was dealing with a phenomenon that had a lot of unexpected aspects to it.” That is a short list of a dozen disclaimers and suspiciously beneficial “just so” assumptions. #3 “Nonintuitive” – (“I don’t understand why something happened.”) is not the same as a “counterfactual” – (“The events I am using as examples did not happen.”) You cannot use counterfactuals as support for an argument. SAFEMAX relies on counterfactual events that never happening. #4 Many retirement plans have been humbled by betting on counterfactuals – betting that a series of events would NOT happen and they did -- sufficiently early in the planning collating sequence that they changed ALL future outcomes. #5 1929 was such an event. It took 25 years for 1929 investors to recover to their 1929 asset price levels (Exhibit 1). The recent increasing frequency of drawdowns over 20% (2000 and 2008) conspired in tandem to be the #2 largest drawdown that similar 15-year recovery period to get back to 2000 levels (Exhibit 2). #6 The name “SAFEMAX” sounds like a product hawked to insomniacs on late-night TV. Charles and Cynthia prompted for more specifics, but the Bengen’s’ parade of generalities continued. The quoted statements above confirm that (A) SAFE MAX is not safe, and (b) SAFE MAX is not the maximum; it’s an estimated guess based on specious data (see list above), which the demurrages, deflections, and disclaimers stress. #7 I see this product as “MISTAKEMAX.” I reject the whole SAFEMAX program. Besides the word “safe” in the name, you should always run from any offer any financial advisor offers you that uses the word “safe” in a product name. The only thing “safe” about paying a financial advisor for “help” is that you will be the one who pays for the “safety.” #8 Making a larger WD in Y1 -- when you have the most money -- sounds like a rookie mistake that will breed more withdrawal mistakes. The magnitude of these “safe mistakes” will be compounded over 30 years, adding at least a 50% “REAL RISK” (Cloonan’s definition) to this plan. #9 Using a higher rate of inflation as THE “multiplier” that “inflates” the possibility to “inflate” the remaining portfolio balances over time also sounds like a rookie mistake. Yes, you do receive “more” income during inflation, but that “inflated” money is exactly offset by the ”deflated purchasing power it brings. #10 Adding exposure to 4 “non-traditional” assets classes – that Mr. Bengen acknowledges adds no diversification -- requires the retiree PF manager to diminish the US asset base he/she has accumulated and MANAGED over 25-50 years – the very thing (as Willie would say) “what brung them to the [retirement] dance.” #11 Papa Bear’s (100% equities) porridge OR Baby Bear’s (100% bonds) porridge AND what Mama Bear thought of her new “7 asset” porridge we will never know. #12 The (unproven) conclusion that with "your stock allocation between about 46% and 73%, you get about the same withdrawal rate no matter what the stock allocation is within that range" is an interesting artifact from 1959 book, Portfolio Selection.” In the 1950’s the only portfolio allocation program available to Markowitz was “mini-max,” and early Operations Research program from WWII used to estimate ballistic trajectories, which produced the famous “efficient frontier” curve that led to HM selecting the 60/40 portfolio allocation as the “model” portfolio for “max” return AND “mini” risk. Bengen’s “46% and 73%” allocation spread straddles and centers on the same point on HM’s 60/40 “model” portfolio. Bengen claiming (without reference) this as his discovery is like Columbus discovering America. · Minor intellectual nit-picking aside, my biggest concern is that retirees will only discover they have sunk below the required expected run rate trajectory AFTER it’s too late to recover. This is not a good place to be. Mr. Bengen will not be there to reassure them, and certainly will not remunerate them, due to the “best efforts” clause in this CFA/CFP/publisher disclaimers. #14 As we Boomers turn 80, we need to never forget that we all have big bullseye on our “assets” that every Millennial/Gen X/Gen Y/Gen Z, who hasn’t made their “FIRE” goals yet, seeks to exploit AND they have organized themselves into various cabals of “retirement advisors” who seek out “SAFEMIN” credentials, travel in the concentric promotional circles, and reenforce each other’s bona fide by quoting each other’s research for support. This is exactly the problem Powell’s 2023-2024 monetary policies produced for 2025. The counterfactual is that this can happen again. “Wrong way betters never win.”

VICTOR S from NC posted about 1 year ago:

Barry J raises some interesting points. My view is these things are rough data points in a bigger universe. Countless phrases exist like "past returns are no indication of future returns" or "your mileage may very (YMMV)" to explain this. Would you put a lot of trust in a weather forecast for next week, much less 30 years into the future? In the event, folks do need a framework and one built on data like this one, despite its flaws, can serve as a useful guidepost.

ROBERT A from NC posted about 1 year ago:

I'd never sleep if my portfolio suffered severe declines because of my withdrawals from it. I expect volatility and can live with it, but over the long haul, I want my assets to keep GROWING---FOREVER! Oddly enough, I'm pretty sure they would do that with a 5% withdrawal rate, but I still think it would be foolish to apply such a high rate of burn. The best ingredient for a long, happy retirement is FRUGALITY!

GARY J from CA posted about 1 year ago:

20 years ago I started planning my retirement. I found the 4% rule useful but difficult to use. What securities should I sell to generate my 4%? What if the market tanked during my first retirement year? While 4% withdrawals seemed to make logical sense, the strategy was too stress-inducing for me. I began to experiment with an alternative strategy. I wanted to leverage the compounding magic of dividend reinvestment. But I wanted a higher yield than was available from Coca-Cola and J&J. So I began purchasing closed-end preferred stock funds instead (FFC, JPC, FPF). Over the past 20 years I’ve received annual dividends of 7-10% (paid monthly). I spend what I need and reinvest the rest in additional fund shares. And my dividends are mostly qualified (taxed at capital gains rates). I have never sold a single share from my portfolio. I sleep well at night. I have more than tripled the value of my original investment over 20 years while avoiding stock market risk. Closed-end preferred stock funds are concentrated in financial services companies. But the issuers are high quality (Bank of America, JP Morgan Chase), and preferred dividends must be paid before any common dividends can be paid. Closed-end funds also use leverage which can increase price volatility. But I don’t ever intend to sell any shares – I care only about dividend sustainability. (While closed-end preferred prices fell during the financial crash of 2008-9, dividend payouts stayed remarkably constant). I’m sticking with my 20-year closed-end preferred fund retirement strategy. I’m generating twice the return of the 4% rule without touching my principal. GARY J from (CA)

BARRY J from TX posted about 1 year ago:

Charles, #1. A 08/13/25 Morningstar report, "MIND THE GAP, "estimates the average dollar invested in US mutual funds and exchange-traded funds earned 7.0% per year over the 10 years ended Dec. 31, 2024 (“investor return”). That’s about 1.2 percentage points per year less than these funds’ 8.2% aggregate annual total return (“total return”) over that span ... assuming an initial lump-sum purchase. That 1.2 percentage point “investor return gap," which is explained by the timing and magnitude of investors' purchases and sales of fund shares during the 10-year period, is equivalent to around 15% of the funds’ aggregate total return." #2. That 10-year period (2015-2024)can easily be extended 15 years back to 2000 when the tag-team double whammy of the 2000-2002 dot.com and 2008-2009 Great Recession *and their recovery periods.) #3 Although not an "apples to apples" study as Mr. Bengen's, this should concern the AAII retirement community who Mr. Bengen tried to convince them that the tornado was over and "we are not in Kansas anymore." The moral there, as it is here, is "pay no attention to the man behind the curtain." #4 A long-term DECREASE IN RETURNS of 1.2% coupled with a Fed expected/tolerated 2% INFLATION rate in a period where near-cash (CDs, MMFs, etc.) returns up to 4.5% sounds like there is only 1.3%. Mr. Bergen is advocating that retirees can RAISE WITHDRAWALS from HIS "4.0% rule" to 4.7%. That sounds like retirees should expect to have "a safety margin" of 0.8% ... and #5 these are averages that do NOT include (1) LOWER returns during BEAR markets (that follow bull markets every time like Kansas droughts follow rain), (2) INFLATION SPIKES due to INCREASED government spending (like 2022-2024) and RISING national debt, AND (3) price RISING price momentum/valuations/inflation to support EPS bottom line (profit) expectations that drive today's BULL markets. #6 Someone please ask Auntie Em to open the root cellar doors and tell Mr. Bergan that he just broke the piggy bank the nice lady is proudly holding in the photograph above ... and that AAIIers are not Munchkins. #7 I add ... "Sick' em, Toto."

JAMES N from VA posted about 1 year ago:

When Bengen speaks of a 40% bond allocation in the SAFEMAX portfolio - exactly what bonds is he talking about (this question also applies to many other AAII articles which talk about investing in "bonds"). Does this include corporate bonds only, or does it also include the various government-issues like T-Bills, T-Notes, T-Bonds, and Municipal Bonds? If so, wouldn't it make sense to also include CD's (which generally are government insured) under the category of "Bonds"? If not, why not?

SHEILA A from CA posted about 1 year ago:

My biggest concern is the fact that in the last year of the retirement, one will have only the last 4-4.7% left assuming everything works out which I am very skeptical. Last few years of life are the ones with very high expenses for either in home care or nursing home care and the amount left for that year will not be enough. I hope readers don’t use this no without doing their own research based on their situation.

BARRY J from TX posted about 1 year ago:

Well thought out, Shelia. I add ... and Mr Bengen will be nowhere in sight.

BARRY J from TX posted about 1 year ago:

Well thought out, Shelia. I add ... and Mr Bengen will be nowhere in sight.

KEVIN V from NC posted about 1 year ago:

I am reasonably confident in he 4% rule - maybe even in the 4.7% rule. But some questions never get answered. What if you need 32 years of money? (Presumably you won't wake up one day and realize the bank is empty, but still). And why wouldn't you reduce spending from savings when you start collecting SS? That would seem to make the 4.7% even more conservative.

KEVIN V from NC posted about 1 year ago:

I am reasonably confident in he 4% rule - maybe even in the 4.7% rule. But some questions never get answered. What if you need 32 years of money? (Presumably you won't wake up one day and realize the bank is empty, but still). And why wouldn't you reduce spending from savings when you start collecting SS? That would seem to make the 4.7% even more conservative.

GARETH D from MN posted 12 months ago:

I find the article interesting, and at the same time, no matter how it is dressed up, highly theoretical. And, if one wants to apply additional critical thinking, is it even relevant to people who aren't on the margin? Maybe useful for those considering early retirement? People too poor can only wish for a sustainable withdrawal rate. And conversely, those who have been fortunate plus have planned ahead don't need to consider a safe amount to withdraw. As I see it, only those on the margin; just under or just over a theoretical sustainable rate; need to sharpen the pencil. Good comment from Sheila A from CA. 30 years is an inadequate time frame, and to plan to spend to zero at month 360 is foolish. I use age 120 for my planning not expecting to achieve it, but if I approach it, not to worry, I would adjust long before then. To say a little more, those with Social Security can treat it as a bond allocation (example $30,000 annual payments divided by an assumed interest rate 5% = $600,000) that grows over time based on the annual cost of living adjustments. Setting aside the issue of solvency, I suspect many people don't need an additional allocation to bonds. Then there are qualified plans such as the 401s that have RMDs that automatically increase the percent withdrawn each year to a maximum of 50% at age 120 and thereafter. At age 79, the withdrawal percentage is around the 4.7% level. While one doesn't have control over the percentage, withdrawals more than one needs can be invested in something else. One can't control the withdrawal rate of these two sources. But for everything else, my recommendation would be to keep it simple (are people really going to calculate percentages?) and withdraw less than the income provided by those investments and reinvest the excess thereby continuing to grow the income stream.

ROBERT R from IL posted 11 months ago:

If you are running out of money as you approach 30years of retirement and own real estate(personal residence), there is always that asset that can be liquidated or borrowed against as you approach that timeline and so for many at the ripe old age of 95 this will be adequate to see them thru to the end. No need to be so pedantic and worrisome.

DAVE S from CA posted 11 months ago:

For my retirement, I am considering a simple approach-place my portfolio in VOO, withdrawals calculated on RMD tables. What cash needs I have sit in my bank/money market. Any dividends would be paid to cash and re-invested at the beginning of the year. Due to RMD calculations, the % of withdrawals will go up slightly each year, however they would be reduced in a down market. This means living on RMDs calculations along with other income-Social Security, etc. which is doable. In an emergency, draw first from cash in the bank, then look at drawing from equity in my home. Comments? Dave S