Dug up this nice little paper on low yield bonds are challenging Bill Bengen's 4% WR. Pfua and Fink have Ph. D and Blanchett is CFP.
http://www.retirementestateplan.com/wp-content/uploads/2015/07/the-four-percentage-rule-may-not-work.pdf
Actually stumbled on this from Morningstar Director of Finance Christine Benz's write-up on "What We Know for Sure About In-Retirement Withdrawal Rates"
She sums it up nicely "An open question, however, is whether the catastrophic market environment that led to the 4% guideline, while the worst in history, is the worst we'll see. Blanchett and co-researchers Michael Finke and Wade Pfau made waves a few years ago with their paper "The 4% Rule Is Not Safe in a Low-Yield World." In it, they argue that low bond yields, which typically portend meager returns from the asset class, increase the probability of failure for retirees employing the 4% guideline. Other retirement researchers aren't as pessimistic that the 4% guideline won't hold going forward. One key takeaway from the research from Blanchett et al., however, is that investors employing overly conservative portfolios (that is, holding 50% or more of their portfolios in bonds) ought to also be conservative when setting their withdrawal rates. "
What We Know for Sure About In-Retirement Withdrawal Rates
For all of us that are in the Investing For Dummies class with the bright yellow book...and correct me if I am wrong, and I am wrong often...but I believe this all pertains to that "sequence of return risk" folks in this forum talk about from time to time.
http://www.retirementestateplan.com/wp-content/uploads/2015/07/the-four-percentage-rule-may-not-work.pdf
Actually stumbled on this from Morningstar Director of Finance Christine Benz's write-up on "What We Know for Sure About In-Retirement Withdrawal Rates"
She sums it up nicely "An open question, however, is whether the catastrophic market environment that led to the 4% guideline, while the worst in history, is the worst we'll see. Blanchett and co-researchers Michael Finke and Wade Pfau made waves a few years ago with their paper "The 4% Rule Is Not Safe in a Low-Yield World." In it, they argue that low bond yields, which typically portend meager returns from the asset class, increase the probability of failure for retirees employing the 4% guideline. Other retirement researchers aren't as pessimistic that the 4% guideline won't hold going forward. One key takeaway from the research from Blanchett et al., however, is that investors employing overly conservative portfolios (that is, holding 50% or more of their portfolios in bonds) ought to also be conservative when setting their withdrawal rates. "
What We Know for Sure About In-Retirement Withdrawal Rates
For all of us that are in the Investing For Dummies class with the bright yellow book...and correct me if I am wrong, and I am wrong often...but I believe this all pertains to that "sequence of return risk" folks in this forum talk about from time to time.
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