3.3% is 1/30th. Of course you can safely withdraw 1/30th of your portfolio every year for 30 years, but that seems pretty pessimistic. It’s assuming that your investment rate of return exactly matches inflation, so 2.5% long term, which is much lower than historical return from stocks or bonds. Over 200 years the average returns for both assets classes is around 6%. In recent years it’s more like 9% for the total stock market and 3.5% for bonds. Approaches that increase withdrawals in good years and reduce them, or keep them steady, in bad market years probably have higher safe withdrawal rates than Bengin-style approaches that mechanically increase withdrawals without regard to investment returns.
Technically a 90 percent success ratio means in 10 percent of scenarios you need to make a change.
3.3% is 1/30th. Of course you can safely withdraw 1/30th of your portfolio every year for 30 years, but that seems pretty pessimistic. It’s assuming that your investment rate of return exactly matches inflation, so 2.5% long term, which is much lower than historical return from stocks or bonds. Over 200 years the average returns for both assets classes is around 6%. In recent years it’s more like 9% for the total stock market and 3.5% for bonds. Approaches that increase withdrawals in good years and reduce them, or keep them steady, in bad market years probably have higher safe withdrawal rates than Bengin-style approaches that mechanically increase withdrawals without regard to investment returns.
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