Originally Posted by gcgang
Above link to a JP Morgan " white paper" advocating a " dynamic" approach to withdrawal rates.
Not sure I understand it all. Would be interested in others opinions.
Makes some interesting points, among them:
Money has more "utility" when you are younger than when you are older.
Focusing exclusively on possibility of failure causes one to overlook how you may best utilize your money over your remaining one life to live.
The conventional Bengen 4-4.5% withdrawal rate, set when you retire and to be followed for the rest of your life, does not correspond to how people actually behave.
The ideas in the paper are fine. I'd call them mathematical methods of getting at things that most of us do intuitively. I have at least a little knowledge of utility theory, "fat tailed" distributions, and varying life expectancy. I'm not sure how much precise formulas add.
Almost everyone here will say that it makes sense to stop and review our situations periodically. When we do, we'll recognize that life doesn't go according to plan.
We may have had unexpected changes in health since we retired.
We almost certainly will have had some pattern of investment returns that wasn't perfectly "average".
We may have changes in our definitions of "needs" and "wants".
We may find ourselves more or less concerned about helping family members.
We'll take all those things into account, and change our spending if it seems we should.
If we know that we're starting out with a lot of cushion (room to adjust spending down), we might be more aggressive in the early years. If we're cutting it pretty close, we will probably be pretty conservative at the beginning. (One of the points in the paper.)
Of course "everyone here" is mostly DIYers. For people who aren't, it may be wise to have somebody else prod them into this review. But, I'm skeptical that value of the computer runs Fidelity can provide exceed the fees Fidelity is likely to charge. Maybe if I saw their fee structure I'd change my mind.