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Old 03-03-2015, 11:25 AM   #21
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Here is a link to the Bernstein article

"The natural inclination of every boat everywhere is to sink".......Nicole Pasulka
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Old 03-03-2015, 11:40 AM   #22
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I agree that 3% to 4% should be the general rule of thumb. If you are in your 30's, I'd lean more towards 3%

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Old 03-03-2015, 12:20 PM   #23
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Originally Posted by ER-Chuck View Post
2) CNN money says $500,000 withdrawal of $43,000/yr for 25 years
Some posters suggest that this CNN calculation includes Social Security benefits, but I haven't seen anyone propose what I consider to be a much more plausible assumption - that it is a fixed withdrawal amount without any inflation adjustment. If you get a 7% return on your investments, you can withdraw $43,000 per year from a $500k portfolio for 25 years before running out of money.

Now, whether that's a wise withdrawal strategy is certainly debatable, but it does go to illustrate a likely reason for the big differences in suggested withdrawal amounts. If you want to keep inflation adjusted spending constant throughout retirement, you have to start out with a much smaller withdrawal in order to provide for cost of living adjustments in later years. If you want to spend more early in retirement while your health is still good, you need to be willing to risk a lower standard of living later on.

It also shows that you should never simply accept the results of online calculators at face value without finding out the assumptions that went into the calculations. If I'm right that CNN got the higher WR by eliminating COLAs, there's nothing wrong with that, as long as you understand what they did and are comfortable living with a gradually declining standard of living as inflation eats into the buying power of your $43,000 retirement income.

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