Link To Trinity Study publication

[Rustward]

This thread http://www.early-retirement.org/forums/f28/4-is-now-considered-to-high-53425.html got me interested in rereading The Trinity Study. The links on the reading list seem to be broken.

I did find this: http://6aa7f5c4a9901a3e1a1682793cd11f5a6b732d29.gripelements.com/pdf/vol1014.pdf which is linked from here: AFCPE | Journal Articles

and this: Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable The first one *almost* has a reference to the second (The title has a couple of different words), so they may be distinct.

Nothing that calls itself "The Trinity Study", though, understandable as there are a lots of contexts for Trinity.

So with both of these, I should have it. Anybody have anything to add?

 

[MasterBlaster]

I believe that this is the actual paper that is known as the Trinity Study -

Cooley, Philip L., Carl M. Hubbard, and Daniel T. Walz. 1998. "Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable." AAII Journal 10, 3: 16–21

from Wikipedia... http://en.wikipedia.org/wiki/Trinity_study

In finance, investment advising, and retirement planning, the Trinity study is an informal name used to refer to an influential 1998 paper by three professors of finance at Trinity University.[1] It is one of a category of studies that attempt to determine "safe withdrawal rates" from retirement portfolios that contain stocks and thus grow (or shrink) irregularly over time.
Its conclusions are often encapsulated in a "4% safe withdrawal rate rule-of-thumb." It refers to one of the scenarios examined by the authors. The context is one of annual withdrawals from a retirement portfolio containing a mix of stocks and bonds. The 4% refers to the portion of the portfolio withdrawn during the first year; it's assumed that the portion withdrawn in subsequent years will increase with the CPI index to keep pace with the cost of living. The withdrawals may exceed the income earned by the portfolio, and the total value of the portfolio may well shrink during periods when the stock market performs poorly. It's assumed that the portfolio needs to last thirty years. The withdrawal regime is deemed to have failed if the portfolio is exhausted in less than thirty years and to have succeeded if there are unspent assets at the end of the period.
The authors backtested a number of stock/bond mixes and withdrawal rates against market data compiled by Ibbotson Associates covering the period from 1925 to 1995. They examined payout periods from 15 to 30 years, and withdrawals that stayed level or increased with inflation. For level payouts, they stated that "If history is any guide for the future, then withdrawal rates of 3% and 4% are extremely unlikely to exhaust any portfolio of stocks and bonds during any of the payout periods shown in Table 1. In those cases, portfolio success seems close to being assured." For payouts increasing to keep pace with inflation, they stated that "withdrawal rates of 3% to 4% continue to produce high portfolio success rates for stock-dominated portfolios." ...

The Trinity study and others of its kind have been sharply criticized, e.g. by Scott et al. (2008)[2], not on their data or conclusions, but on what they see as an irrational and economically inefficient withdrawal strategy: "This rule and its variants finance a constant, non-volatile spending plan using a risky, volatile investment strategy. As a result, retirees accumulate unspent surpluses when markets outperform and face spending shortfalls when markets underperform."
Laurence Kotlikoff, advocate of the consumption smoothing theory of retirement planning, is even less kind to the 4% rule, saying that it "has no connection to economics.... economic theory says you need to adjust your spending based on the portfolio of assets you're holding. If you invest aggressively, you need to spend defensively. Notice that the 4 percent rule has no connection to the other rule—to target 85 percent of your preretirement income. The whole thing is made up out of the blue."[3]
Ironically, the 4% rule of thumb would, in many instances, mandate a more frugal level of retirement expenditures than a portfolio that was fully invested in government inflation-indexed bonds, such as U.S. Treasury Inflation Protected Securities (TIPS). As of mid-October 2008, Treasury Inflation Protected Securities (TIPS) boasted real yields of approximately 3%. A laddered, 100%-TIPS portfolio yielding 3% real would sustain a 5% safe withdrawal rate over a 30-year period. A 100%-TIPS portfolio yielding 3% real would not only be less volatile than a diversified, part-stock portfolio, but also safely sustain a much more generous level—25% more generous, in fact—of retirement expenditures than a diversified portfolio to which the "4% rule" was applied. While a 3% real TIPS yield is well above historical averages for TIPS yield, even a TIPS portfolio that yielded only 1.3% real would sustain a 4%, inflation-adjusted, safe withdrawal rate over a 30-year period.[4]

 

[Nords]

Yep, Bob's financial website seems to be the most likely to keep the link alive without making you pay a fee to read more than the abstract.

Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable

I went nuts 18 months ago trying to find a free version of the original journal paper, and Bob was the only one who had it. Then he went and changed his host to the current link.

Bogleheads' Wiki uses that same link (Safe Withdrawal Rates - Bogleheads) perhaps because IIRC Bob is a Boglehead.

I updated the "Recommended reading with a military twist" list here:
Recommended reading | Military Retirement & Financial Independence

Let me know if there are additions or corrections.

 

[Contrarian]

I dunno. My first reaction-and will review later-is that now after a decade of a flat S&P 500 a study says 4% too high. What was being said in 2000? To be honest,who really knows what will happen over next decade? What if equities do well, will another article appear in 2020 saying can take 6% as SWR? Just my two cents and reaction.

Bob