I just read an interesting article in the Journal of Financial Planning
there's lotsa good stuff there, and kinda amazing the archives are available
free. Apologies if this has been discussed already, but a quick search of
old topics didn't seem to indicate that it was.
It's basic a scheme for determing SWR based on a basic level and then several
The basic SWR of 4.15% makes typical assumptions - you want to withdraw
a fixed initial fraction and that dollar amt grows with inflation (not adaptive to
portfolio performance), time horizon is 30yrs, rebalancing is done annually,
and the portfolio is almost a "couch potato" of 60% LC stock and 40% inter-
mediate gov't bonds.
You then proceed to adjust this amount up/down as follows:
+0.27% for a more diversified stock allocation (small caps etc)
+0.58% for a lower success rate (based on historical back-testing)
of 95% instead of 100%
+0.10% if rebalancing is done every 4yrs instead of every year (kinda
counter-intuitive, I think the idea is that stock allocation is
effectively increased by not rebalancing as often)
-0.18% if a $100,000 inheritance is desired (I believe this is based
on a $1million initial nestegg
-0.2% if time horizon is 40yrs (instead of 30yrs)
And that's about it. The article has lots of gratuitous graphs and "layer cake"
drawings and such, of course. It also doesn't seem to say how these numbers
were actually computed, although just about everything (except the rebalancing
frequency) could be modeled in FIRECalc (although a quick run of FIRECalc only
supports a success rate of 91% with 4.15% WR and the other "basic" assumptions).