Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

Submitted by: KKrista 83

Yes. While the bulk of the studies in this list for which we identified answers agrees with this conclusion, some studies came to different conclusions. We encourage you to consider each of the studies for yourself to understand why they differ. Note that some studies in this list give us reason to question their conclusions. This may be because they were published in sources that are not peer-reviewed, are low ranked or not ranked at all, which may indicate limited editorial oversight. Carefully review the individual study summaries below for more information.
This short answer was generated by aggregating the answers that each of the 18 studies below gave to the question (as indicated by State of K members) and adjusting for source quality and other factors. If key studies are missing or the answers attributed to individual studies are incorrect, the above answer could be wrong. For medical questions, don't rely on the information here. Consult a medical professional.


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All answers are assigned by State of K users. The label Couldn't Identify means that State of K was not able to determine whether a study answers the question "yes" or "no". This could be due to several factors. One possibility is that a study found some evidence to indicate that the answer to the question is "yes" and some evidence to indicate that the answer is "no". This often happens when a study uses two or more proxies to study the same phenomenon (i.e. firearm sales figures and self-reported firearm ownership rates as proxies for the prevalence of firearms) and the proxies yield different results when looking for correlations with another phenomenon (i.e. firearm-related deaths). Alternatively, the label may be applied if the phenomenon under study (i.e. whether breast milk improves cognitive function) is true for one group, but not another (i.e. true for girls, but not for boys). Yet another possibility is that a study found there was insufficient evidence to reach a conclusion regarding the question. Finally, the full text or abstract of a study may not have been written clearly or was inaccessible. This would make it difficult to determine how a study answered a question.

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Does money invested 50% in a US stock index fund and 50% in a US bond index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?
11 studies
Submitted by: BBlack 104

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SUMMARIES OF STUDIES
Total studies in list: 18
Sorted by publication year
1
Joint Effect of Random Years of Longevity and Mean Reversion in Equity Returns on the Safe Withdrawal Rate in Retirement
"Using historical data on inflation-adjusted total equity returns (price change plus dividend) from the S&P 500 from 1926 to 2017, this paper develops a simulation-based model to determine the safe, inflation-adjusted withdrawal rate from a portfolio of assets. The model, named the Realistic Retirement Simulator (RRS), improves upon other simulation models by directly addressing two factors that significantly affect the safe withdrawal rate: (1) uncertainty about the number of years of retirement, i.e., at what age will the retiree die; and (2) mean reversion in equity returns. RRS models the number of years in retirement as a random factor based on the Social Security Administration’s 2015 Actuarial Life Table. The mean-reverting stock return model within RRS is statically calibrated to the 1926 to 2017 S&P 500 data. With these two key factors addressed and assuming future equity returns follow the historical record, RRS shows that a 65-year-old male retiree can withdraw 6% of the starting portfolio balance each year from a 100% stock portfolio with a 90% success rate; a 4% withdrawal rate is 99% successful. A simulation model that does not address these two key factors—and the author is not aware of single model that addresses both factors—shows that a 4% withdrawal rate results in a 90% success rate for a retirement lasting 30 years. At the 90% success level, about half of the increase from 4% to 6% comes from treating the length of the retirement as a random factor and other half comes from the mean-reverting model. Many scenarios are run to show how the success rate changes when RRS input assumptions are changed, e.g., age of retiree or stock/bond mix of retiree’s portfolio. Of particular importance is the assumption that future equity returns will repeat the historical record. If the future, long-run trend for equity returns is a 4% compound annual growth rate (CAGR) instead of the 6.93% observed in the historical data, RRS shows that a withdrawal rate of 4% has a success rate of 95%. Regardless of the assumption about future equity returns, directly modeling uncertainty in the length of retirement and mean reversion in equity returns results in more accurate and higher estimates of the safe withdrawal rates compared to models that do not directly address these factors."
AUTHOR
Donald Rosenthal
PUBLISHED
2018 in SSRN Electronic Journal
Preprint
Couldn't Identify
Couldn't Identify
2
Maximum Withdrawal Rates: An Empirical and Global Perspective
"Standard analysis of retirement strategies involves evaluating their failure rate. One of the shortcomings of this approach is that a strategy may have a low failure rate and at the same time leave large unintended bequests. Maximum withdrawal rates, by definition, exhaust a portfolio by the end of the retirement period, thus leaving no bequest; they can be used both to assess the likelihood of sustaining any chosen level of inflation-adjusted withdrawals, and more generally to evaluate retirement strategies. This article provides a comprehensive historical perspective on maximum withdrawal rates considering 11 asset allocations, 21 countries, and 115 years."
AUTHOR
Javier Estrada
PUBLISHED
2017 in SSRN Electronic Journal
Preprint
Yes
Yes
3
Safe Withdrawal Rates: A Guide for Early Retirees
"When talking about withdrawal rates in retirement it's hard to ignore the 4% rule. The origin of this rule goes back to the work of Bengen (1994, 1996, 1997, 2001) and Cooley, Hubbard and Walz (1998, 2011), more commonly known as the Trinity Study. The Trinity Study showed that withdrawing 4% of the portfolio value at the beginning of retirement and subsequently adjusting the withdrawals for inflation, will likely sustain a 30-year retirement in a portfolio comprised of 50-100% stocks and 0-50% bonds. This result is relevant to the average retiree with a horizon of only 30 years and not the typical early retiree with a much longer horizon, though. We perform extensive simulations and case studies targeted at early retirees and show that the longer horizon and today's expensive equity valuations will likely necessitate a lower initial withdrawal rate."
AUTHOR
Ern EarlyRetirementNow
PUBLISHED
2017 in SSRN Electronic Journal
Preprint
Yes
Yes
4
The 4 Percent Rule is Not Safe in a Low-Yield World
"The safety of a 4% initial withdrawal strategy depends on asset return assumptions. Using historical averages to guide simulations for failure rates for retirees spending an inflation-adjusted 4% of retirement date assets over 30 years results in an estimated failure rate of about 6%. This modest projected failure rate rises sharply if real returns decline. As of January 2013, intermediate-term real interest rates are about 4% less than their historical average. Calibrating bond returns to the January 2013 real yields offered on 5-year TIPS, while maintaining the historical equity premium, causes the projected failure rate for retirement account withdrawals to jump to 57%. The 4% rule cannot be treated as a safe initial withdrawal rate in today’s low interest rate environment. Some planners may wish to assume that today’s low interest rates are an aberration and that higher real interest rates will return in the medium-term horizon. Although there is little evidence to support this assumption, we estimate how a reversion to historical real yields will impact failure rates. Because of sequence of returns risk, portfolio withdrawals can cause the events in early retirement to have a disproportionate effect on the sustainability of an income strategy. We simulate failure rates if today's bond rates return to their historical average after either 5 or 10 years and find that failure rates are much higher (18% and 32%, respectively for a 50% stock allocation) than many retirees may be willing to accept. The success of the 4% rule in the U.S. may be an historical anomaly, and clients may wish to consider their retirement income strategies more broadly than relying solely on systematic withdrawals from a volatile portfolio."
AUTHORS
David Blanchett
Wade Pfau
Michael S. Finke
PUBLISHED
2013 in SSRN Electronic Journal
Preprint
No
No
5
Asset Valuations and Safe Portfolio Withdrawal Rates
"Bond yields today are well below and stock market valuations are well above their historical average. There are no historical periods in the United States where comparable low bond yields and high equity valuations have occurred simultaneously. Both current bond yields and stock values have been shown to predict near-term returns. Portfolio returns in the first decade of retirement have an outsize impact on retirement income strategies. Traditional Monte Carlo simulation approaches generally do not incorporate market valuations into their analysis. In order to simulate how retirees will fare in a low return environment for both stocks and bonds, we incorporate the predictive ability of current valuations to simulate its impact on retirement portfolios. We estimate bond returns through an autoregressive model that uses an initial bond yield value where yields drift in the future. We use the cyclically adjusted price-to-earnings (CAPE) ratio as an estimate of market valuation to predict short-run stock performance. Our simulations indicate that the safety of a given withdrawal strategy is significantly affected by the initial bond yield and CAPE value at retirement, and that the relative impact varies based on the portfolio equity allocation. Using valuation measures current as of April 15, 2013, which is a bond yield of 2.0% and a CAPE of 22, we find the probability of success for a 40% equity allocation with a 4% initial withdrawal rate over a 30 year period is approximately 48%. This success rate is materially lower than past studies and has sobering implications on the likelihood of success for retirees today, as well as how much those near retirement may need to save to ensure a successful retirement."
AUTHORS
Wade Pfau
Michael S. Finke
David Blanchett
PUBLISHED
2013 in SSRN Electronic Journal
Preprint
No
No
6
How Did the Financial Crisis Impact Retirees’ Safe Withdrawal Rate? A Markets-Based Answer
"Individuals retiring in the aftermath of the financial crisis face an unprecedented market environment. Accommodative monetary policy and below trend economic growth present retirees with historically low interest rates and the longest period of negative real short term interest rates since the Great Depression. The result is likely a period of below-average, modest total portfolio returns that a particular challenge to retirees. Most studies of safe retirement withdrawal rates have concluded that a 4% initial withdrawal adjusted for inflation over subsequent years provides reasonable a reasonable margin of safety over thirty years. However, these studies are generally use historical analysis or forward-looking return analysis based on long-term return estimates and/or average realized returns. Because of this approach an extended period low nominal rates and negative real rates is not captured in traditional methodologies; therefore, they run the risk of overstating safe withdrawal rates. As an alternative, this article presents a market-based methodology for determining appropriate spending policy. Simulation analyses along with market-implied capital market assumptions (CMAs) are used to estimate feasible distribution rates for various portfolios over the next thirty years. The results imply that an initial withdrawal rate of 4% is unlikely to provide investors with a sufficient margin of safety. Instead, lowering initial withdrawal rates to 3.5% is likely to prove prudent."
AUTHOR
Michael W. Crook
PUBLISHED
2012 in SSRN Electronic Journal
Preprint
No
No
7
Sustainable Withdrawal Rates During Retirement and the Risks of Financial Ruin
"This paper describes the application of two different techniques for measuring sustainable withdrawal rates during retirement and the associated risks in running out of funds in the retirement savings pool. The first is a bootstrap simulation approach using recent Australian equity and bond market data. The second is a simulation-free analytical approach proposed in Milevsky and Robinson (2005). To illustrate, we compute and compare the probabilities of financial ruin for a retiree with a thirty year retirement horizon for some commonly recommended periodic withdrawal rates."
AUTHOR
Lakshman Alles
PUBLISHED
2012 in SSRN Electronic Journal
Preprint
Yes
Yes
8
Spending Flexibility and Safe Withdrawal Rates
"Shortfall risk retirement income analyses offer little insight into how much risk is optimal, and how risk tolerance affects retirement income decisions. This study models retirement income risk in a manner consistent with risk tolerance in portfolio selection in order to estimate optimal asset allocations and withdrawal rates for retirees with different risk attitudes. We find that the 4 percent retirement withdrawal rate strategy may only be appropriate for risk averse clients with moderate guaranteed income sources. The ability to accept greater shortfall probabilities means that risk tolerant investors will prefer a higher withdrawal rate and a riskier retirement portfolio. A risk tolerant client may prefer a withdrawal rate of between 5 and 7 percent with a guaranteed income of $20,000. The optimal retirement portfolio allocation to stock increases by between 10 and 30 percentage points and the optimal withdrawal rate increases by between 1 and 2 percentage points for clients with a guaranteed income of $60,000 instead of $20,000."
AUTHORS
Duncan Williams
Wade Pfau
Michael S. Finke
PUBLISHED
2011 in SSRN Electronic Journal
Preprint
Yes
Yes
9
Optimal Asset Allocation in Retirement: A Downside Risk Perspective
"Once an individual has retired, asset allocation becomes a critical investmentdecision. Unfortunately, there is no consensus on what the optimal allocation should be for retirees of varying age, gender, and risk tolerance. Thisstudy analyzes the allocation question through a focus on the downside riskscreated by uncertainty over investment returns and life expectancy. We findthat the range of appropriate equity asset allocations in retirement is strikinglylow compared with those of typical lifecycle and retirement funds now in themarketplace. In fact, for retirement portfolios whose primary goal is to minimize the risk of depletion and sustain withdrawals, optimal equity allocationsrange between 5% and 25%. This quite conservative level of equity holdingschanges little even when we significantly change our assumptions on capitalmarket returns. We even find that more aggressive equity allocations, thosethat still retain some focus on depletion risk but also seek to provide substantial bequests to heirs, are also relatively conservative. The study suggests,in short, that the higher equity allocations used in many popular retirementinvestment products today significantly underestimate the risks that thesehigher-volatility portfolios pose to the sustainability of retirees’ savings and tothe incomes they depend on."
AUTHOR
Van W. Harlow
PUBLISHED
2011 in Putnam Institute
UNRANKED SOURCE
No
No
10
Portfolio Success Rates: Where to Draw the Line
"Portfolio success rate analysis provides the information needed to plan withdrawals from a retirement portfolio. Because financial markets and other matters of life change unexpectedly, those plans are likely to change.This updated analysis reports portfolio success rates net of monthly withdrawals through a range of payout periods. The data we rely on are total returns to large-company common stocks and high-grade corporate bonds as well as Consumer Price Index values and inflation rates from January 1926 through December 2009.We conclude that if 75 percent success is where to draw the line on portfolio success rates, a client can plan to withdraw a fixed amount of 7 percent of the initial value of portfolios composed of at least 50 percent large-company common stocks.The sample data suggest that clients who plan to make annual inflation adjustments to withdrawals should plan lower initial withdrawal rates in the 4 percent to 5 percent range, again from portfolios of 50 percent or more large-company common stocks, in order to accommodate future increases in withdrawals.Changes in withdrawal rates or amounts can be made in response to unexpected changes in financial market conditions using the basic tables we provide."
AUTHORS
Daniel T. Waltz
Carl M. Hubbard
Philip L. Cooley
PUBLISHED
2011 in Journal of Financial Planning
UNRANKED SOURCE
Yes
Yes
11
A Safer Safe Withdrawal Rate Using Various Return Distributions
"A common conundrum faced by most people approaching retirement is the amount of money they can safely withdraw from their retirement portfolio without the risk of depleting the portfolio over their retirement horizon. The advice that most retirees will hear is the 4 percent rule—a retiree who faces normal retirement conditions can make an annual inflation-adjusted withdrawal equal to 4 percent of the original portfolio without risk of depleting the portfolio.This rule of thumb has helped bring a disciplined approach to retirement withdrawal strategy. However, tests of the 4 percent rule using simulation methodology have assumed that expected returns are drawn from a lognormal distribution—an assumption that lacks empirical support.The important question, therefore, is whether the choice of method used to represent the future affects estimates of the sustainability of a retirement portfolio.We test the 4 percent rule by creating plausible retirement scenarios using standard methodology, but assuming that expected returns can conform to various distributions.Our analysis indicates that a 4 percent withdrawal rate will result in portfolio failure with greater probability (18 percent) than previously believed, and the truly “safe” withdrawal rate—2.52 percent—is significantly smaller than previously believed."
AUTHORS
Joseph M. Goebel
Manoj Athavale
PUBLISHED
2011 in CFA Digest
UNRANKED SOURCE
No
No
12
Revisiting Retirement Withdrawal Plans and Their Historical Rates of Return
"This paper examines the historical record of the so-called 4% rule, the popular guideline for sustainable real annual withdrawals in a self funded retirement. Our findings indicate that a withdrawal plan following this rule (“4R”) carries an historical risk of failure for a long retirement that is much higher than generally acknowledged. For example, we find that 15% of the historical 35-year retirements failed when funded with equal parts of stocks and bonds. The “real” withdrawal plans that generated no historical failures were all less than 4%, sometimes far less, when retirements exceeded 25 years. The historical failure rates that we find for a 5R plan are higher than a 4R plan by a factor of at least three for all retirement periods. The historical failures are not random. Rather they occur in clusters of years in which the majority of new retirement withdrawal plans fail. A key driver of these failures was a rapid, significant and lasting increase in the rate of inflation - this event increased withdrawals and contributed to a declining real rate of return that was ultimately unable to support the withdrawal plan. Although TIPS bonds and inflation-adjusted annuities are both too new for historical analysis, we note they may offer an opportunity to curtail income plan failures in the future. This is because they (1) offer a known real rate of return and (2) adjust for inflation close to the time at which inflation impacts withdrawals. Our review of the prior literature and a detailed description of the methodology used in the study appear at the end of the paper, after the Summary and Conclusions section."
AUTHORS
Felix Schirripa
Christopher O'Flinn
PUBLISHED
2010 in SSRN Electronic Journal
Preprint
Yes
Yes
13
Data Dependence and Sustainable Real Withdrawal Rates
"Past research on sustainable real withdrawal rates has been overwhelminglybased on past market returns. Suchresearch ignores the possibility, andconsequently the implications, thatfuture market conditions will vary fromthose in the past.• This paper will explore the impact ofvarying returns and standard deviationson a distribution portfolio in order toprovide the reader with information onappropriate sustainable real withdrawalrates for various market conditions.• Experts predict that the future marketreturn for a balanced 60/40 portfolio islikely to be 1–2 percent less than historical averages.• Over longer distribution periods thereturn of a portfolio becomes increasingly important in maintaining the likelihood of success of a distribution portfolio. A 1 percent decrease in portfolioreturn is likely to result in an increase inthe probability of failure that is approximately 4 times greater than a 1 percentincrease in portfolio standard deviation."
AUTHORS
David M. Blanchett
Brian C. Blanchett
PUBLISHED
2009 in CFA Digest
UNRANKED SOURCE
Couldn't Identify
Couldn't Identify
14
Guidelines for Withdrawal Rates and Portfolio Safety During Retirement
"The existing literature for retirement portfolio withdrawal rates suggests that a real withdrawal rate of 4 percent of the initial portfolio is safe." This paper demonstrates that a blanket "4 percent withdrawal" rule may be an oversimplification of a complex set of circumstances. • Risk tolerance, asset allocation, withdrawal size, and expected returns all affect the process of withdrawing from a retirement portfolio. To advance previous research, this paper uses 21 stock/bond allocations and 71 withdrawal rates, for 1,491 possible combinations. For each of these combinations, 10,000 bootstrap iterations are run for 30-year periods. • Results show that withdrawal rates as high as 5.5 to 6 percent can be achieved, but only at a 25 to 30 percent chance of running out of money and with stock allocations of 75 to 100 percent. A 4.4 percent withdrawal rate with a 50/50 bond/stock allocation has a 10 percent chance of running out of money. To visually illustrate the results for clients, the paper develops easy-to-understand withdrawal contours, runout contours, and balance-remaining contours that clearly reveal the relationship between asset allocation, withdrawal rates, the chance of running out of money, and estate building. First, given a tolerance for the chance of running out of money, the largest amount that can be withdrawn can be determined. Second, the contours can be used to provide the client's optimal asset allocation for a fixed withdrawal rate and a given tolerance for running out of money. Third, the withdrawal amount at various levels of tolerance for running out of money can be determined while holding the asset mix constant."
AUTHORS
Sandeep Singh
Jeffrey C. Strieter
John J. Spitzer
PUBLISHED
2007 in Journal of Financial Planning
UNRANKED SOURCE
Couldn't Identify
Couldn't Identify
15
A Sustainable Spending Rate without Simulation
"Financial commentators have called for more research on sustainable spending rates for individuals and endowments holding diversified portfolios. We present a forward-looking framework for analyzing spending rates and introduce a simple measure, stochastic present value, that parsimoniously meshes investment risk and return, mortality estimates, and spending rates without resorting to opaque Monte Carlo simulations. Applying it with reasonable estimates of future returns, we find payout ratios should be lower than those many advisors recommend. The proposed method helps analysts advise their clients how much they can consume from their savings, whether they can retire early, and how to allocate their assets. © 2005, CFA Institute."
AUTHORS
Chris Robinson
Moshe A. Milevsky
PUBLISHED
2005 in Financial Analysts Journal
High quality source
Couldn't Identify
Couldn't Identify
16
Decision Rules and Portfolio Management for Retirees: Is the ‘Safe’ Initial Withdrawal Rate Too Safe
"This paper establishes new guidelines for determining the maximum "safe"initial withdrawal rate, defined as (1) never requiring a reduction in withdrawalsfrom any previous year, (2) allowing for systematic increases to offset inflation,and (3) maintaining the portfolio for at least 40 years.z It evaluates the maximum safe initial withdrawal rate during the extreme periodfrom 1973 to 2003 that included two severe bear markets and a prolonged earlyperiod of abnormally high inflation.z It tests the performance of balanced multi-asset class portfolios that utilize sixdistinct equity categories: U.S. Large Value, U.S. Large Growth, U.S. SmallValue, U.S. Small Growth, International Stocks, and Real Estate.z Two portfolios (65 percent equity and 80 percent equity) are evaluated inconjunction with systematic Decision Rules that govern portfolio management,sources of annual income withdrawals, impact of years with investment lossesand withdrawal increases to offset ongoing inflation.z This paper finds that applying these Decision Rules produces a maximum"safe" initial withdrawal rate as high as 5.8 percent to 6.2 percent depending onthe percentage of the portfolio that is allocated to equities."
AUTHOR
Jonathan T. Guyton
PUBLISHED
2004 in Journal of Financial Planning
UNRANKED SOURCE
Yes
Yes
17
Retirement Spending: Choosing a Sustainable Withdrawal Rate
"To help in the selection of a withdrawal rate, the following sections provide information on the historical success of various withdrawal rates from portfolios of stocks and bonds. If a withdrawal rate proves too high based on historical year-to-year returns, then it seems likely that the rate will not be sustainable during future periods. Conversely, historically sustainable withdrawal rates are more likely to have a high probability of success in the future."
AUTHORS
Daniel T. Waltz
Carl M. Hubbard
Philip Cooley
PUBLISHED
1998 in American Association of Individual Investors
UNRANKED SOURCE
Yes
Yes
18
Determining Withdrawal Rates Using Historical Data
"At the onset of retirement, investment advisors make crucial recommendations toclients concerning asset allocation, as wellas dollar amounts they can safely withdraw annually, so clients will not outlivetheir money. This article utilizes historical investment data as a rational basis forthese recommendations. It employs graphical interpretations of the data to determinethe maximum safe withdrawal rate (as apercentage of initial portfolio value), andestablishes a range of stock and bond assetallocations that is optimal for virtually allretirement portfolios. Finally, it providesguidance on "mid-retirement" changes ofasset allocation and withdrawal rate."
AUTHOR
William P. Bengen
PUBLISHED
1994 in Journal of Financial Planning
UNRANKED SOURCE
Yes
Yes







ADDITIONAL STUDIES TO CONSIDER ADDING TO LIST
Total additional studies: 8
State of K's algorithms generated the list of studies below based on the studies that were added to the above list. Some of these studies may also examine: "Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?" If a study examines this question, add it to the list by pressing the button.

Only add studies that examine the same question. Do not add studies that are merely on the same topic.

The Simplest, Safest Withdrawal Rate
"ew financial planning topics have garnered as much attention as safe withdrawal rates (SWRs), but a key question remains unanswered: Can retirees sustain a 4% withdrawal rate with minimal risk? With the recent introduction of 30-year TIPS, the answer is now yes.

Retirees can withdraw up to 4% per year (on an inflation-adjusted basis) over a 30-year period from a portfolio consisting of solely 30-year TIPS with very high success rates. Unlike a traditional stock-bond portfolio, a TIPS portfolio is not exposed to risk from the equity or fixed-income markets or from unanticipated inflation. The only source of risk is from volatility in real interest rates.

The implications of these results are clear. If a retiree has sufficient funds to support a 4% withdrawal rate over 30 years, then those funds should be invested in TIPS. Funds should only be invested in stocks and bonds if the required withdrawal rate is greater than 4%.

I will discuss how we modeled the TIPS portfolio and then compare it to the results of a 60/40 stock/bond portfolio. I will analyze the performance of a 60/40 portfolio assuming stock and bond returns based on historical averages and show how it performs if more modest “new normal” stock returns are assumed. Lastly, I will look at the results of the 60/40 portfolio if inflation is modeled as a random variable instead of as a constant rate."
AUTHOR
Robert Huebscher
PUBLISHED
2011 in Advisor Perspectives

Add to List
Guidelines for Withdrawal Rates and Portfolio Safety During Retirement
"The existing literature for retirement portfolio withdrawal rates suggests that a real withdrawal rate of 4 percent of the initial portfolio is safe." This paper demonstrates that a blanket "4 percent withdrawal" rule may be an oversimplification of a complex set of circumstances. • Risk tolerance, asset allocation, withdrawal size, and expected returns all affect the process of withdrawing from a retirement portfolio. To advance previous research, this paper uses 21 stock/bond allocations and 71 withdrawal rates, for 1,491 possible combinations. For each of these combinations, 10,000 bootstrap iterations are run for 30-year periods. • Results show that withdrawal rates as high as 5.5 to 6 percent can be achieved, but only at a 25 to 30 percent chance of running out of money and with stock allocations of 75 to 100 percent. A 4.4 percent withdrawal rate with a 50/50 bond/stock allocation has a 10 percent chance of running out of money. To visually illustrate the results for clients, the paper develops easy-to-understand withdrawal contours, runout contours, and balance-remaining contours that clearly reveal the relationship between asset allocation, withdrawal rates, the chance of running out of money, and estate building. First, given a tolerance for the chance of running out of money, the largest amount that can be withdrawn can be determined. Second, the contours can be used to provide the client's optimal asset allocation for a fixed withdrawal rate and a given tolerance for running out of money. Third, the withdrawal amount at various levels of tolerance for running out of money can be determined while holding the asset mix constant."
AUTHOR
John J. Spitzer
PUBLISHED
2007 in jo

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Faktor-Faktor Yang Mempengaruhi Indeks Harga Saham Gabungan
"The growth of the stock market in Indonesia from the Composite Stock Price Index (CSPI) showed quite fantastic in the last ten years after experiencing a downturn in the 2008 global financial crisis. The stock investment in the capital market is not the only type of financial investment, there is another type, namely Indonesia Bank Certificate (SBI) and money market measured by exchange rates. This study aims to find out how the SBI interest rate, exchange rate, money supply (M2) and inflation affect the JCI in the 2011-2015 periods. By using SPSS V20, it was found that in the period of SBI interest rate, exchange rate, money supply (M2) and inflation rate had no effect on the CSPI. This is due to the level of return on the capital market is greater than the SBI interest rate and exchange rate difference, while the number of transactions on the Indonesia Stock Exchange is still dominated by foreign investors, M2 does not affect the CSPI, and they are generally traders rather than investors, thus the inflation rate affects the company's growth was slightly ignored."
AUTHOR
Hendang Tanusdjaja, Augustpaosa Nariman
PUBLISHED
2019 in Jurnal Ekonomi

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Optimal Withdrawal Strategy for Retirement-Income Portfolio
"At the onset of retirement, investment advisors make crucial recommendations to
clients concerning asset allocation, as well
as dollar amounts they can safely withdraw annually, so clients will not outlive
their money. This article utilizes historical investment data as a rational basis for
these recommendations. It employs graphical interpretations of the data to determine
the maximum safe withdrawal rate (as a
percentage of initial portfolio value), and
establishes a range of stock and bond asset
allocations that is optimal for virtually all
retirement portfolios. Finally, it provides
guidance on "mid-retirement" changes of
asset allocation and withdrawal rate.

At the onset of retirement, investment advisors make crucial recommendations to
clients concerning asset allocation, as well
as dollar amounts they can safely withdraw annually, so clients will not outlive
their money. This article utilizes historical investment data as a rational basis for
these recommendations. It employs graphical interpretations of the data to determine
the maximum safe withdrawal rate (as a
percentage of initial portfolio value), and
establishes a range of stock and bond asset
allocations that is optimal for virtually all
retirement portfolios. Finally, it provides
guidance on "mid-retirement" changes of
asset allocation and withdrawal rate."
AUTHORS
David Blanchett
Peng Cheng
Marciej Kowara
PUBLISHED
2012 in Retirement Management Journal

Add to List
Safe withdrawal rates from retirement savings for residents of emerging market countries
"Researchers have mostly focused on U.S. historical data to develop the 4 percent withdrawal rate rule. This rule suggests that retirees can safely sustain retirement withdrawals without outliving their wealth for at least 30 years, if they initially withdraw 4 percent of their savings and adjust this amount for inflation in subsequent years. But, the time period covered in these studies represents a particularly favorable one for U.S. asset returns that is unlikely to be broadly experienced. This poses a concern about whether safe withdrawal rate guidance from the U.S. can be applied to the situation in other countries. Particularly for emerging economies, defined-contribution pension plans have been introduced along with under-developed or non-existing annuity markets, making retirement withdrawal strategies an important concern. We study sustainable withdrawal rates for a sample of 25 emerging countries and find that the sustainability of a 4 percent withdrawal rate differs widely and can likely not be treated as safe. The results suggest, as well, high stock allocations in the portfolio mix are not the optimal choice for retirees in emerging market countries."
AUTHORS
Wade Donald Pfau
Channarith Meng
PUBLISHED
2011 in National Graduate Institute for Policy Studies

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Low Bond Yields and Safe Portfolio Withdrawal Rates
You can view the abstract at: https://doi.org/10.3905/jwm.2013.16.2.055
AUTHORS
Wade D. Pfau
Michael Finke
David M. Blanchett
PUBLISHED
2014 in The Journal of Wealth Management

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Capital Market Expectations, Asset Allocation, and Safe Withdrawal Rates
"Most retirement withdrawal rate studies are either based on historical data or use a particular assumption about portfolio returns unique to the study in question. But planners may have their own capital market expectations for future returns from stocks, bonds, and other assets they deem suitable for their clients’ portfolios. These uniquely personal expectations may or may not bear resemblance to those used for making retirement withdrawal rate guidelines.

The objective here is to provide a general framework for thinking about how to estimate sustainable withdrawal rates and appropriate asset allocations for clients based on one’s capital market expectations, as well as other inputs about the client including the planning horizon, tolerance for exhausting wealth, and personal concerns about holding riskier assets. The study also tests the sensitivity of various assumptions for the recommended withdrawal rates and asset allocations, and finds that these assumptions are very important. Another common feature of existing studies is to focus on an optimal asset allocation, which is expected either to minimize the probability of failure for a given withdrawal rate, or to maximize the withdrawal rate for a given probability of failure.

Retirement withdrawal rate studies are known in this regard for lending support to stock allocations in excess of 50 percent. This study shows that usually there are a wide range of asset allocations which can be expected to perform nearly as well as the optimal allocation, and that lower stock allocations are indeed justifiable in many cases."
AUTHOR
Wade D. Pfau
PUBLISHED
2011 in SSRN Electronic Journal

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Safe Withdrawal Rates for Retirees in the United Kingdom: Where did the 4% rule come from and what is the impact of today’s low bond yields?
"Against the background of the UK pension freedom legislation, it is important that retirees have a
reasonable expectation of the proportion of their assets they can withdraw each year to fund their
cost of living, while ensuring sufficient capital remains to deliver a similar level of income into the
future. This is commonly known as the ‘safe withdrawal rate’.
There is a growing body of literature on safe withdrawal rates for retirees, however most of
this research is based on the historical returns of assets used by investors in the United States.
While there has been some more recent research using projected returns for the United States
(Blanchett, Finke, and Pfau, 2013) its applicability to the UK is questionable. Given the unique market
environment for UK-based investors today, it makes more sense to base withdrawal rates off the
expectations for UK-based investors than the history or projected returns for another country.
In this paper we explore safe withdrawal rates from the perspective of historical returns, both
international and domestic, but more importantly we provide estimated safe withdrawal rates for UKbased investors based on our current return expectations. There are three primary findings from this
research. First, that while the historical performance of stock and bond markets in the UK has been
relatively similar to the global average, future expected returns in the UK, especially in the near-term,
are likely to be considerably lower. Second, given these lower returns, safe withdrawal rates are
relatively low, and may decrease further when incorporating future improvements in mortality (i.e.,
people keep living longer in retirement) and the impact of fees. Finally, a balanced portfolio is likely
the best allocation for UK retirees. Overall, while these findings are less optimistic than past research
on the topic of safe withdrawal rates, they are nevertheless an important starting place for retirees
and financial advisers today."
AUTHORS
Sue Watt
Dan Kemp
Marc Buffenoir
David Blanchett
PUBLISHED
2016 in Morningstar Research

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QUESTIONS TO CONSIDER
What is a safe withdrawal rate for retirement?
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Did quantitative easing reduce US mortgage rates?
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Does money invested 50% in a US stock index fund and 50% in a US bond index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?
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