I just do not see how they can say that the new normal is so low....
Say you get zero real return... and we are talking about their time frame which is 30 years.... then a SWR is 3.33%..... 100/30.... sure, you will have zero when you are done, but that is not a failure in their terms....
Even they say that there should be a positive real return... so it should be higher than that...
Now, you do have the sequence or return problem to deal with... but I do not see them saying that is the problem they are trying to solve with the new rate...
Again, Bernstein has said that 2% is "bulletproof" and 3% is "probably ok". As I said, I have seen no one as conservative as Pfau (if anyone has, please chime in).
It's also worth noting the 2.5% inflation adjusted (with reduced fees considered) WR example I gave above from Pfau's work is for a 25% equities PF. His table shows that higher equity allocations create a higher WR rate (2.78% for a 50/50 PF, throw in .25% for those with much lower fees, and you're at 3%). Also observe the higher WR rates using the Guyten decision rules. Point is, it's not all that dire.
Something else he shows is that one can have higher WR rates with bonds and annuities--a case for annuities as a plan B or C, perhaps. Then again, his work is sponsored by the insurance industry so make your own assumptions (personally that doesn't bother me as I've seen good arguments discussed elsewhere for delayed (vs. deferred) SPIA's as an alternative to the cat food/cardboard box scenario in later years).
IMO, it's worth remembering the upside to participation in the bond/equity markets, which Pfau aknowledges and specifically notes that his WR's do not show that upside. In my experience, ESPlanner does a brilliant job of showing what that upside could be, as well as the the % of possible time each scenario could occur (using MC simulations). It's for this reason I'm not too worried about low starting WR rates. Probabilities are they could be adjusted upwards if one manages to avoid the most worst case PF scenarios).
Finally, I agree with the above that noone, but noone, can predict the future (as beautifully pointed out by either Charlie Munger or Buffet in Berkshire's most recent annual letter). Pfua's numbers are based on
expected returns, and it's good to remember that. In the markets, anything can happen, has happened, and will happen. Only on that much we can count on. The
variation I've seen on Sir John Templeton's quote comes to mind: "“The four most
expensive (he uses dangerous") words in investing are 'This time it's different.'”