This was just published in the Journal of Financial Planning. They argue based on the spread between the trailing E/P and bond yields retirees in 2008 should live off equities. Yes counter to conventional wisdom. Makes no sense to me so hopefully smarter people then I can figure it out.
When Does a Bonds-first Withdrawal Sequence Extend Portfolio Longevity?
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These findings have practical implications for retirees in 2008. The spread of stocks' long-term earnings yield over bond yields is +0.63 percent at the time of this writing, indicating that stocks' expected return and the equity risk premium are near historical lows. If the E10/P − Y indicator remains as reliable as it has been in the past, it is unlikely that investors retiring in 2008 who choose a bonds-first withdrawal strategy will significantly extend the longevity of their portfolios compared with investors who maintain a 50/50 stock/bond mix. Investors retiring now who choose to consume bond wealth first will most likely expose themselves to the volatility of an all-equity portfolio for little additional reward.
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DD
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