audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
What does "safe income stream" mean? That has nothing to do with the safe withdrawal rate.
Using an SWR method doesn't mean you can't scale back if you like. Yes the traditional SWR just continues adjusting withdrawals for inflation without looking at market conditions. Some years can cause large draws, but historically, this method has worked over pretty long periods with success as long as your withdrawal rate is not too big and you have an appropriate AA. That was the point of developing the method.
The Bob Clyatt/95% method and the fixed % SWR are both methods that provide a way to scale back and, depending on how long the portfolio has been growing and how bad a bear market we just had, might result in a temporary drop in the portfolio value below where started. Historically, you have a good chance of recovering as long as your rate and AA are appropriate.
Even on a "dividend/interest" income only portfolio there are issues. The income stream is not necessarily guaranteed (you would need an annuity). Your portfolio value can drop significantly due to a bear market. The dividend/interest investor may say that they don't care, but what if the dividend income starts to drop? And the interest income paid by the bond funds start to drop? If you own individual bonds and CDs you might not be able to find new issues with sufficient yield when you roll over. We have been seeing all of these recently. There can be big fluctuations in the income generated by a portfolio. And I think folks trying to optimize for income generation can make themselves vulnerable to future inflation, because they tend to reduce the equity allocation too much in order to increase the yield of the portfolio and interest income generated by bonds does not growth with inflation.
IMO - total return is far easier to implement (and more tax efficient for taxable investments). But apparently I am in the minority?
Audrey
Using an SWR method doesn't mean you can't scale back if you like. Yes the traditional SWR just continues adjusting withdrawals for inflation without looking at market conditions. Some years can cause large draws, but historically, this method has worked over pretty long periods with success as long as your withdrawal rate is not too big and you have an appropriate AA. That was the point of developing the method.
The Bob Clyatt/95% method and the fixed % SWR are both methods that provide a way to scale back and, depending on how long the portfolio has been growing and how bad a bear market we just had, might result in a temporary drop in the portfolio value below where started. Historically, you have a good chance of recovering as long as your rate and AA are appropriate.
Even on a "dividend/interest" income only portfolio there are issues. The income stream is not necessarily guaranteed (you would need an annuity). Your portfolio value can drop significantly due to a bear market. The dividend/interest investor may say that they don't care, but what if the dividend income starts to drop? And the interest income paid by the bond funds start to drop? If you own individual bonds and CDs you might not be able to find new issues with sufficient yield when you roll over. We have been seeing all of these recently. There can be big fluctuations in the income generated by a portfolio. And I think folks trying to optimize for income generation can make themselves vulnerable to future inflation, because they tend to reduce the equity allocation too much in order to increase the yield of the portfolio and interest income generated by bonds does not growth with inflation.
IMO - total return is far easier to implement (and more tax efficient for taxable investments). But apparently I am in the minority?
Audrey