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.
- 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…
- An Illustrated Guide To Retirement Spending Strategies - In all my years of working, I have yet to run across someone who didn’t appreciate getting a raise or become really agitated with the prospect of taking a salary cut. Justified or not, the way that income level sets personal expectations seems to be ingrained in each of us from a young working age. And after thinking that way for perhaps…
- Perpetual Withdrawal Rates Are The Runway To A Long Retirement - There’s a decent chance that anyone who has considered retirement with some amount of self funding has heard of the concept of the safe withdrawal rate — the amount of money that one can safely spend every year without prematurely running out of money. First proposed by William Bengen in 1994, the math is pretty…
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.