Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Variable Withdrawal Strategies
Old 03-11-2007, 05:22 AM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Feb 2007
Posts: 5,072
Variable Withdrawal Strategies

Has anyone taken a serious look at the Hybrid Withdrawal Strategies listed at Bob's FInanacial website. They are variaation's on the Constant $ + Constant % withdrawal models.

They appear to be geared toward taking some extra in the good years and getting conservative in lean years.

Please comment on the approaches

chinaco is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Variable Withdrawal Strategies
Old 03-11-2007, 02:05 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
Join Date: Sep 2005
Posts: 5,381
Re: Variable Withdrawal Strategies

I haven't studied each of these strategies but have done my own modeling around variations of Guyton's Capital Preservation and Prosperity Rules.

I look at these variable withdrawal strategies a bit differently then how they are often advertised. Rather than trying to maximize my initial WR, I look at the severity of potential standard of living decreases required to keep a portfolio solvent over an extremely long retirement period (60 years in my case). What I've found is that the worst case scenarios can be quite severe requiring a 40-50% reduction in real spending assuming a 4% initial WR. It goes without saying that lower initial WRs help moderate the magnitude of worst case spending cuts. My own personal opinion based on the modeling I've done is that 4% is too high for very long retirement plans relying entirely on an investment portfolio.

But there is an interesting trade off here. Lower initial WR rates result in a lower initial standard of living with a higher degree of certainty. Higher initial WR rates result in a higher initial standard of living with a lower degree of certainty. At some point, though, I think you get diminishing returns by lowering the initial WR. That is to say, what you gain in certainty is outweighed by the lower standard of living (assuming you've planned appropriately and have the flexibility to make the needed spending reductions if the worst case arises). For me that inflection point is an initial WR around 3%.

Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Re: Variable Withdrawal Strategies
Old 03-11-2007, 02:17 PM   #3
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
Join Date: Mar 2005
Location: Chicago
Posts: 10,887
Re: Variable Withdrawal Strategies

Originally Posted by 3 Yrs to Go
For me that inflection point is an initial WR around 3%.
Years ago......before long ago I did the work in Visicalc on an Apple II!!....... I determined that the amount I could safely withdraw from a portfolio to cover a perpetual retirement was 3%. I wish I still had those spreadsheets!

Regardless, I agree, a person with no other income sources than their portfolio, not wanting to do part time work, not expected an inheritance, etc., would be wise to consider accumulating a portfolio that supports a less than 4% WR for a lengthly retirement.
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

Similar Threads
Thread Thread Starter Forum Replies Last Post
Do you agree with Bengen's "Layer Cake" withdrawal rate MikeK FIRE and Money 23 12-16-2006 11:50 AM
Marketwatch Article on Withdrawal Strategies JLP FIRE and Money 11 04-26-2006 08:55 AM
Humberto Cruz on variable withdrawal rates Nords FIRE and Money 28 06-29-2005 12:43 PM
Withdrawal rates - theory vs practice Roger_R FIRE and Money 56 01-17-2005 07:45 AM
"Is the Safe Withdrawal Rate TOO Safe?" Nords FIRE and Money 13 10-20-2004 11:36 AM

» Quick Links

All times are GMT -6. The time now is 12:09 PM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.