JWR1945 wrote: An alternative baseline
These data shout at us to abandon stocks entirely at today's valuations. A portfolio consisting entirely of inflation-matched cash equivalents produces a safe withdrawal rate of 3.33% for 30 years. A portfolio consisting entirely of 2% TIPS produces 4.46% safe withdrawal rate for 30 years (subject only to minor idealizations).
If we were to withdraw 3.4% annually from a portfolio consisting entirely of 2% TIPS, we would end up with $43000 (plus inflation, based on an initial balance of $100000) at the end of 30 years.
We keep coming back to the frustratingly consistent story, however, that tells us to abandon stocks in favor of TIPS at today's valuations. Favorable outcomes are still possible with high stock allocations, but they are not likely.
Alternative choices include careful selection of stocks and other investments that differ significantly from the S&P500 as a whole.
Of course, there is a problem with 2% TIPS. They no longer exist. The issue is whether a person can actually construct a good equivalent portfolio. There is a requirement to be able to handle emergency cash needs. There is another requirement to match inflation. There is an additional requirement to produce sufficient income (above any return of capital that might distort the numbers).
The interesting thing will be to find out whether we can construct something that is at least as good as 2% TIPS.
Mike has pointed out some of the real world difficulties.