fosterscik
Full time employment: Posting here.
Phau article
This may be of interest to some, but obviously suffers from trying to extrapolate from fitted data.
He "predicts" those who retired in 2000 should limit themselves to ~3%. A few years later he predicts ~4%. Right now,
This may be of interest to some, but obviously suffers from trying to extrapolate from fitted data.
Predicted Withdrawal Rate = 12.15 - 2.47 x log(PE10) + 0.05 x Bond Yield
This equation informs us that withdrawal rates can be expected to rise when interest rates rise, while they will fall when PE10 rise. The precise numbers in this equation were estimated from the historical relationship between sustainable spending rates and these variables. We take the natural logarithm of PE10 in order to fit a more precise curve for the relationship between market valuations and spending rates.
Exhibit 1 shows the historical sustainable spending rates from 1881 to 1986. A hypothetical 1937 retiree—net of advisory and mutual funds fees—saw a historical SAFEMAX of 3.95%.
The figure also provides the estimates developed through this equation for the entire time period through the start of 2016. Until 1986, we can see that the relationship between the predictions and the actual values is close. The two variables (PE10 and interest rates) can explain 55% of the fluctuations in the historical spending rates.
He "predicts" those who retired in 2000 should limit themselves to ~3%. A few years later he predicts ~4%. Right now,
I'm looking to retire mid 2017 so of interest to me.4.16%. While this is very close to the historical SAFEMAX, it is important to emphasize that this is not an estimate of the “safe” withdrawal rate.