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Old 08-10-2010, 01:49 PM   #21
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Similar findings in the Bengen paper I cited above. The bottom line is for longer withdrawal periods or large proportion in taxable accounts you need to either decrease the WR, increase allocation to equities or some combination of both.
Regarding the large proportion being in taxable accounts dictating that you need a higher allocation to equities - is this an issue of tax efficiency? The thought being that you cannot afford to pay taxes every year on a large taxable bond component and it would be much cheaper tax-wise to let the cap gains accrue year after year until you sell (and get favorable cap gains tax rates)?
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Old 08-11-2010, 10:43 AM   #22
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Regarding the large proportion being in taxable accounts dictating that you need a higher allocation to equities - is this an issue of tax efficiency? The thought being that you cannot afford to pay taxes every year on a large taxable bond component and it would be much cheaper tax-wise to let the cap gains accrue year after year until you sell (and get favorable cap gains tax rates)?
Bengen assumes you are invested in a tax efficient manner in your taxable accounts. He freely admits that this is a gray area as you cannot predict future tax rates/rules and therefore takes a conservative approach. He seems to be more concerned about the risks of inflation long term than equity market risk - this was written in 1996, wonder how he feels now post 2008?

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