The 4% (withdrawal) rule is was too conservative for the last thirty years (bond, fund)

[Money Guru]

Here are some interesting stats regarding the stock and bond market return vs the 4% rule for retirement fund distributions:

If someone had retired on January 1, 1985 with a million in their accounts and had a portfolio of 50% Total Stock Market (VTI) and 50% Total Bond Market (BND) and reinvested their dividends and pulled out an inflation adjusted 4% out of their retirement account until the date they died on December 31, 2015, they would had $8,839,860 in retirement assets to pass on to family. (If they had no withdrawals at all, their nest egg on their date of death would be $15,614,628.)

With an inflation adjusted 5% annual withdrawal from the starting amount (1 million) they would have $7,146,168.00 on December 31, 2015

With an inflation adjusted 6% annual withdrawal from the starting amount (1 million) they would have $5,452,476.00 on December 31, 2015

With an inflation adjusted 7% annual withdrawal from the starting amount (1 million) they would have $3,758,784.00 on December 31, 2015

With an inflation adjusted 8% annual withdrawal from the starting amount (1 million) they would have $2,065,092.00 on December 31, 2015

With an inflation adjusted 9% annual withdrawal from the starting amount (1 million) they would have $371,400.00 on December 31, 2015
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By playing it safe and protecting yourself from a terrible stock market and keeping your withdrawals to four percent or less, the retired person is risking leaving lots of money to their family and not living the life they could have in their golden years.

Check this site out to verify my figures:

https://www.portfoliovisualizer.com/...ass-allocation


If we could only have the next thirty years be as good as the last thirty years. (Even with the huge stock market crash in 1987, the terrible bear markets in 2000-2003 and 2007-2009, the 9-11 attacks, and huge social and economic problems in the last thirty years, the retired person with money invested did very well and could have withdrew 9% instead of 4% and still had money left over!)

[Aredhel]

Originally Posted by Money Guru

By playing it safe and protecting yourself from a terrible stock market and keeping your withdrawals to four percent or less, the retired person is risking leaving lots of money to their family and not living the life they could have in their golden years.

Most people FAR prefer that risk over the alternative one of not playing it safe enough and subsisting on Alpo during their twilight years because their savings ran out before they died.

I'm hoping I'll be leaving money to posterity! I think it would be a great thing to leave the world a better place when my will is read.

[Money Guru]

If they had a forty year retirement and retired with a million dollars in 1975 and pulled out an inflation adjusted 4% withdrawal, they would have $21,755,977.00 (Over 21 million) on December 31, 2015.

50 percent total stock market and 50% total Bond market (Dividends Reinvested and re-balanced each year.)

yes, lots of people like to pay it safe but I was just trying to show how conservative the 4% rule is based on recent stock and bond market returns.

[FREE866]

Originally Posted by Money Guru

If they had a forty year retirement and retired with a million dollars in 1975 and pulled out an inflation adjusted 4% withdrawal, they would have $21,755,977.00 (Over 21 million) on December 31, 2015.

50 percent total stock market and 50% total Bond market (Dividends Reinvested and re-balanced each year.)

what were the #'s if they did 75 or 100% stock?

[mizzourah2006]

Using all historical 30 year periods of time you would have essentially a 95% chance you never run out of money.

If, however, you go up to 5% you would only have a 57% success rate. So is it too conservative? Maybe, but is 4.2% really that different?

[Lowexpectations]

Originally Posted by FREE866

what were the #'s if they did 75 or 100% stock?

You can use the link provided at the bottom of the orginal post and enter whatever you want

[Money Guru]

Originally Posted by FREE866

what were the #'s if they did 75 or 100% stock?

You can check out a wide variety of options on this excellent site that will answer your questions:

https://www.portfoliovisualizer.com/...ass-allocation

Click on the Backtest Portfolio Asset Class Allocation link and then put in the percentages you want

[FREE866]

Originally Posted by Money Guru

You can check out a wide variety of options on this excellent site that will answer your questions:

https://www.portfoliovisualizer.com/...ass-allocation

Click on the Backtest Portfolio Asset Class Allocation link and then put in the percentages you want

Thanks...looks good!

[Lowexpectations]

Interesting on the timeframe 85-16

Starting with 1mm and withdrawing 4% annually

Spy/bnd

50%/50% ended with 1.218mm max drawdown of 23% with the last 8 years income being 325k
25%/75% ended with 1.138mm max drawdown 10% with the last 8 years income being 334k
100%/0% ended with 1.282mm max drawdown 48% with the last 8 years income being 307k


If you had to withdraw a fixed amount of 40k inflation adjusted or not the 50/50 portfolio outperformed the 100%

[TwoByFour]

Originally Posted by Money Guru

You can check out a wide variety of options on this excellent site that will answer your questions:

https://www.portfoliovisualizer.com/...ass-allocation

Click on the Backtest Portfolio Asset Class Allocation link and then put in the percentages you want

You cannot pick a single 30 year period from the past and say that the next 30 year period will be just like it. That is a recipe for disaster.

Believe me, many many people have looked at the problem of how much money you need to retire and how much you can spend. This is not a new problem. I would recommend that you study what others have done and why they made the decisions they did in their analyses rather than trying to reinvent the wheel.