Interview w/ Originator of 4% Rule

[GalaxyBoy]

Barron's has an interview with William Bengen that's an interesting read. The article is behind a paywall but it showed up on my Apple News feed (close the window asking for subscribing to read it).

The Originator of ‘the 4% Rule’ Thinks It’s Off the Mark. He Says It Now Could Be Up to 4.5%

I'm not sure the actual interview makes as big a deal of 4% vs. 4.5% as the title implies, and I'm not so bothered by his change in asset allocation, but I found the history of his research interesting.

 

[USGrant1962]

Bengen first suggested the 4.5% rule in 2006. Barrons is a little late to the party.

 

[GenXguy]

Bengen first suggested the 4.5% rule in 2006. Barrons is a little late to the party.

Exactly, and he even suggested 5% last year.

https://www.marketwatch.com/story/the-inventor-of-the-4-rule-just-changed-it-11603380557

Bengen says based on the current environment he thinks a new retiree should be safe if they start with a withdrawal rate of…no more than 5%. “That’s what I use myself,” Bengen told me when we spoke by phone.
OK, so it’s not an earth-shattering change from 4%. It’s even less of a change from the updated “worst case scenario” rule of 4.5%. But the 4% rule is now a 5% rule, if you like.

 

[Dtail]

IIRC, using 5%WR in the inflation adjusted withdrawal concept he espouses would lead to running out of money in certain starting year scenarios of retirement.

 

[ncbill]

IIRC, using 5%WR in the inflation adjusted withdrawal concept he espouses would lead to running out of money in certain starting year scenarios of retirement.

Relative few starting years...since WWII the biggest risk has been retiring before periods of high inflation (e.g. late-1960s retirees)

But I don't expect double-digit inflation to be an issue anytime soon...

 

[GravitySucks]

Yes. He says 4.5 is the MaxSafe historic rate, but doesn't think we're in a worse case scenario. He's looking at low inflation to continue.