(Social Science Research Network, January 15, 2013)
The authors
put what is hopefully the final nails in the coffin of the 4%
Withdrawal Rule, and make a compelling argument for avoiding any "safe"
withdrawal rate strategy. They conclude that, "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."
As noted
elsewhere on this website, I agree with the authors that the 4% Rule (or
some other specific "safe" withdrawal rate) does a poor job of
balancing the dual needs of retirees to maintain lifestyle spending and
preserve financial assets. Retirees need a spending plan that is
flexible, reflects actual spending and investment experience and
reflects individual circumstances (such as existence of other lifetime
income through defined benefit plans or immediate or deferred annuity
contracts as well as any bequest motives). Fortunately, the actuarial
approach outlined in this website can help you meet these needs.
