pkcrafter:

The fixed percentage withdrawal rate is covered in Chin's first link.

 http://www.efficientfrontier.com/ef/998/hell.htm 

Basically this method can produce very inconsistent annual withdrawals, which in turn can create havoc with a retiree's plans to travel, purchase things, etc. But you won't run out of money.

Paul 

 

Hi Paul,

I assume you are speaking of the flexible rate?

The period represents the worst more modern period, where inflation would be our greatest concern, such as it is now. The 4% withdrawal rate survived this period, which means other periods you could have drawn more, but you should not plan on drawing more than the 4%. But, the 4% would be the maximum rate you could withdraw from this portfolio.

With this portfolio, I would not feel comfortable with a 4% withdrawal rate if I could not cut back in some years without pain. This is why I offered the other portfolios to consider, to increase the safety of the SWR.

However, looking at only historic numbers, and considering historic numbers would represent future risk/return, you could draw the 4% at any time. This means in most years, you would be able to draw more. At least historically, you could have depended on the 4% SWR in both of the extreme bear markets looked at.

As far as the flexible rate, like he said, keep a few cans of Alpo in the cupboard.

Also, just for disclosure, Bernstein has warned not to expect a future rate of return as high as the historic rate of return.

Chin