The rest of us should be able to alter spending somewhat from year to year, reducing portfolio damage in down years.
What I am picking up from your recent posts is that you want flexibility in application of the number generated by a SWR analysis. I have no problem whatsoever with allowing complete flexibility in application.
Since we haven't seen the swr "tool" that will give objective numbers I am thinking that flexibility will be needed. More importantly, some approach other than fixed inflation adjusted annual withdrawals may be better in terms of a higher withdrawal rate at the cost of some volatility. I think that this is actually a potentially fruitful are to explore.
The rule of thumb is 4%.
Why do you say this? On what do you base this claim? If you are basing it on something you learned from a study prepared using a methodology since determined to be invalid, then you need to update the statement
Please explain how the Trinity study is invalid.
I know that you feel that the future will be worse than the past in terms of stock returns withdrawal rates and you may be correct. Still I don't think anything was invalid.
You cannot determine a "safe" rate unless you are willing to look at all data that bears on the question of what is "safe."
I agree with this so I would not take a 10% withdrawal rate even during a time when raddr's simulations indicated that it was safe. I would base this on the historical analysis/ rule of thumb. I think we need multiple lines of evidence.
. Since we now are aware that the methodology used in the Trinity study does not take into account all of the factors that determine what is "safe," we need to revise the methodology.
Please list all the factors
I could never buy into any study or any analysis with complete certainty for the next 30 years . To me, and to be blunt, that's an absurd proposition unless the SWR was very, very conservative
It is very, very conservative. "Safe" is defined in SWR analysis as the take-out number that works in the worst-case scenario. I don't see how you could come up with a definition any more consersavtive than that.
Is this a past or future worse case scenario. If past, it is covered in the Trinity study. If future please explain how this does not involve predicting the future.
The only factor that introduces an element of uncertainty is the ever-present caveat, the possibility that the future may be worse than the past. SWR analysis does not provide you any cover re that possibility. But I am not sure it matters all so much. Remember, we have had a lot of bad things take place in the 130-year period that produced the data being examined--world wars, depressions, stagflation. We have to have something worse than all that stuff take place for a validly done analysis to fail.
This reminds me of what defenders of the historical method say. I am not sure how this does not apply equally to that situation.
My inclination is to ignore the 5 percent possibility (I believe that is Bernstein's estimate of the odds that the caveat will apply) of the future being worse than the past and form my strategies based on what a valid SWR tells me.
Almost certainly Bernstein was referring to Monte Carlo generated results. Looking at the extremes is problematic. We don't know what the future holds and can't project a swr with a 5% chance of failure. We can find a swr with a 5% chance of failure based on Monte Carlo simulation. This is an entirely different matterand has nothing to do with excluding nuclear wars from consideration.