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Guyton~ Is SWR too safe?
Old 01-23-2006, 10:56 AM   #1
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Guyton~ Is SWR too safe?*

This paper tests these conditions against the extreme period from 1973–2003 (two severe bear markets and a prolonged early period of abnormally high inflation) by employing a balanced multi-asset-class portfolio in conjunction with systematic decision rules to govern the management of investment portfolios, funding sources for annual income withdrawals, impact of years with investment losses, and increases in withdrawals to offset ongoing inflation. This analysis finds that applying these Decision Rules produces a "safe" initial withdrawal rate that ranges from 5.8 percent to 6.2 percent depending on the percentage of the portfolio that is allocated to equity asset classes—rates significantly higher than most published research has previously recommended.


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Re: Guyton~ Is SWR too safe?
Old 01-23-2006, 11:35 AM   #2
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Re: Guyton~ Is SWR too safe?

Interesting, but basically the article ends up at the same place ESRBob did: if you take more than 4%/95% (or similar) you run the risk of depleting your portfolio over the long term, even with a diversified portfolio that beats the snot out of S&P500 and CP. I'd love to see one of these studies done with commodities included...

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Re: Guyton~ Is SWR too safe?
Old 01-23-2006, 11:45 AM   #3
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Re: Guyton~ Is SWR too safe?

A pretty interesting read and I have no desire to argue the results although I'd change the portfolio allocations and tweak the rules.
What all of this amounts to is an example of squeezing out a few (or more) drops out of the orange that we thought had given its all.
Nothing wrong with that.
As I muddled through myriad rules I decided that not 1 in 10 retirees is going to go through all of that for 30 - 40 years.
BINGO! *I'll get a financial planner to handle it for me, but alas, by doing so I see my additional withdrawals going up in smoke causing more to actually be less perhaps. *
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Re: Guyton~ Is SWR too safe?
Old 01-23-2006, 12:37 PM   #4
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Re: Guyton~ Is SWR too safe?

The period they tested is also not nearly one of the worst. In fact, they started right on the tail end of one of the worst (~1964-1974), and threw in the greatest bull market in history.
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
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Re: Guyton~ Is SWR too safe?
Old 01-23-2006, 03:39 PM   #5
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Re: Guyton~ Is SWR too safe?

The author is applying for U.S. patent protection to cover the process of determining an investment portfolio's "safe" initial withdrawal rate by using the decision rules presented in this paper.

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Re: Guyton~ Is SWR too safe?
Old 01-23-2006, 03:45 PM   #6
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Re: Guyton~ Is SWR too safe?

I think we've about beaten Guyton to death:

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