Between my own independent research and the discussions of other investors I enjoy reading, it seems the topic of safe withdrawal rates has been bubbling to the top lately. One particular question recently captured my attention.
What portfolio has the best safe withdrawal rate in the worst case scenario around the world?
You see, the vast majority of withdrawal rate research focuses on the United States. However, most people consider the US to be an extremely positive outlier, which raises legitimate questions about the appropriateness of determining one’s retirement plan by myopically focusing on only the best case country. Start exploring this question in earnest, and it draws into question not only our biases about what “normal” returns look like but also our assumptions about proper portfolio construction.
While it may sound like a simple question, answering it with real numbers is no small task. The reason that most retirement studies focus on a small handful of countries and portfolio options is that understanding the big retirement picture takes a lot of data. And not just raw source data, but also a mountain of creative calculations to do the topic justice.
Well, it so happens that creative calculations are a strength of mine and I have a few tricks up my sleeve. So let’s roll up those sleeves and talk about truly global withdrawal rates that look well beyond US borders.