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Perhaps because of the proliferation of personal finance websites focusing on early retirement, I’ve noticed a lot of talk lately about safe withdrawal rates. I think this is absolutely terrific, as financial independence is one of the single most empowering life goals one can pursue! But greater exposure also has its downsides, as core assumptions such as the portfolio options, withdrawal method, and retirement length don’t always scale the way you might think and misconceptions can quickly propagate.

Withdrawal rates are an intellectual passion of mine, and I’m always looking for opportunities to contribute to the conversation. And with the recent boon in global portfolio data, I’m finally able to address one of the biggest questions that I’m starting to see more frequently these days.

Does the 4% rule apply outside of the United States?

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A fellow Boglehead asked a really good question recently, and I think it’s something we’ve all considered at some point:

Why shouldn’t my asset allocation be 100% stocks during the accumulation phase?

After all, the typical justification for a heavy stock portfolio sounds pretty darn compelling. They historically have a higher return than bonds in the long run, which means bonds are defensive assets that reduce volatility but do not necessarily increase returns. On top of that, interest rates are so low today that bonds look particularly unappealing. So if you can handle the bad years and pile as much money into stocks as possible you’ll be much better off and can feel free to be defensive with a larger pile of money once you retire.

Well you know what? If you’re the type of investor with a rock-solid stable job, few financial commitments, and the personality to ride out both short-term and prolonged market pain without sweating your account balances, then putting all of your money in stocks is just fine. The Total Stock Market portfolio is included on the site because I appreciate that it’s a good choice for many people.

But I’m going to go out on a limb and surmise that you’re reading a blog about portfolio theory because you believe that just maybe there’s another side to the story. You’ve come to the right place, as I’m a strong believer in the power of asset allocation in creating positive and pleasant investing outcomes. So for those interested in a different perspective, I’d like to try my hand at making the case for broad asset allocation in all phases of life.

Why consider diversifying away from stocks not just tomorrow but today?

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