Designing a portfolio for maximizing consistent retirement income presents new and unique challenges even to experienced investors. Here you can study the evolving history of retirement research and take a fresh look at withdrawal rates that may leave you thinking about your retirement portfolio in a whole new light.
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Related Commentary
Why Your Safe Withdrawal Rate is Probably Wrong - Several years ago I discovered the concept of financial independence, and the idea was a revelation. Life too often becomes a series of developed habits, and the process of questioning the basic assumptions behind those habits and envisioning a system where your investments can do the work for you to fund your lifestyle in perpetuity…
How Safe Withdrawal Rates Work - After publishing a few tools and articles based on safe withdrawal rates, one of the most common questions I’ve seen so far is some iteration if this: Obviously higher returns support higher withdrawal rates. That’s why I invest in 100% stocks! How can a lower-return portfolio possibly support higher withdrawal rates than a higher-return portfolio? I admit…
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Your Home Country Is Inseparable From Your Withdrawal Rate - 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…
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Recommended Reading
Determining Withdrawal Rates Using Historical Data — This is the original paper published by William Bengen in 1994 on safe withdrawal rates. Short and easy to read, I recommend it for anyone interested in the topic.
Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable — Colloquially known as the Trinity Study (the authors were professors of finance at Trinity University), this paper published in 1998 is perhaps the most well-known study on withdrawal rates.
An International Perspective on Safe Withdrawal Rates — Wade Pfau takes the original Bengen study to the logical next step by using data for international markets. Not surprisingly, the results change quite a bit.
What Returns Are Safe Withdrawal Rates REALLY Based Upon? — Michael Kitces explores the specific historical situations that caused retirement portfolios to fail and illustrates how they represent the worst outcomes, not the average.
How To Calculate Perpetual Withdrawal Rates — Jim Otar discusses the limitations of typical safe withdrawal rates and proposes a perpetual alternative.
