Yet another guide to withdrawal rates

[Totoro]

But when it comes to my retirement, I realize that I can redefine the "mission" if necessary. Hence, the requirements are not as strict.

Also, building a retirement system with more redundancy before launch can seriously reduce mission lifetime.

It's critical, (relatively) one-shot but also time-critical.

 

[Chuckanut]

Here's one take on the various withdrawal strategies, from fixed to those that adjust based upon various factors:

https://earlyretirementnow.com/2017...de-to-safe-withdrawal-rates-part-11-criteria/

Withdrawal rate rules we consider

1. The Fixed 4% rule: Set the initial withdrawal amount to 4% of the portfolio and then adjust by the CPI every month.
2. Guyton-Klinger with a 4% initial rate. +/-20% guardrails and 10% adjustments. For a primer on what this rule does and some of the skeletons in the closet, check our previous posts on that topic, Part 9.
3. The same Guyton-Klinger rule but with a 5% initial rate.
4. Constant percentage: withdraw a fixed 4% p.a. of the portfolio over time (i.e., 0.333% each month).
5. The Variable Percentage Withdrawal (VPW) rule, see the Bogleheads link on this, assuming a 40-year retiree (mid-point between Mr. and Mrs. ERN’s age at our planned retirement date). The same mechanics as the constant percentage, though we start at 4.6% and increase the rates based on the remaining life expectancy, calculated by smart folks at Bogleheads. In our simulations we cap the withdrawal rates at 8%, though, to ensure we don’t deplete the principal in year 60. We still like to leave a nice size bequest.
6. A rule based on the Shiller CAPE: Calculate the Cyclically-Adjusted Earnings Yield (=1/CAPE) and use this as a proxy for expected equity returns. Then set the withdrawal rate to W = a + b*CAEY with the appropriate parameters for a and b. The first time I encountered this rule was at the ******** site where they use this exact parameterization as their default values: a=1% and b=0.5. (There is some science behind the parameter choice and we will deal with the details in a later post!)
7. Same as 6 but with a=1.5%, i.e., shift up the withdrawal rate in 6 by another 0.50% p.a.
8. Same as 7 but with a=2.0%.

 

[2017ish]

Here's one take on the various withdrawal strategies, from fixed to those that adjust based upon various factors:

https://earlyretirementnow.com/2017...de-to-safe-withdrawal-rates-part-11-criteria/

His series has been a good read.