Focus
Full time employment: Posting here.
- Joined
- Oct 10, 2009
- Messages
- 640
Here are the latest and most depressing findings from Wade Pfau and friends, just out:
Asset Valuations and Safe Portfolio Withdrawal Rates
In a nutshell, they propose that from here on it's going to be different (and worse than you ever imagined). Accordingly, they write:
The fun really starts on page 11 of the linked paper (most of which is over my head), with a table showing the probability of success for a 4% initial withdrawal rate over 30 years for different equity allocations, initial bond yields, and initial cyclically adjusted price-earnings ratio (CAPE) values. And it gets even more interesting on page 13, with a table estimating the safe initial withdrawal rates for various equity allocations and retirement periods.
Brace yourself, because the SWR numbers shown are very low (e.g., 1.4% SWR for 30 years, 99% probability of success with 60% equity allocation). Ouch.
Asset Valuations and Safe Portfolio Withdrawal Rates
In a nutshell, they propose that from here on it's going to be different (and worse than you ever imagined). Accordingly, they write:
The issue is that bond yields today are well below and stock market valuations are well above their historical average. Importantly, there are no historical periods in the United States where comparable low bond yields and high equity valuations have occurred simultaneously.
The fun really starts on page 11 of the linked paper (most of which is over my head), with a table showing the probability of success for a 4% initial withdrawal rate over 30 years for different equity allocations, initial bond yields, and initial cyclically adjusted price-earnings ratio (CAPE) values. And it gets even more interesting on page 13, with a table estimating the safe initial withdrawal rates for various equity allocations and retirement periods.
Brace yourself, because the SWR numbers shown are very low (e.g., 1.4% SWR for 30 years, 99% probability of success with 60% equity allocation). Ouch.
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