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Subject:  Re: Talk me out of a Financial Advisor Date:  6/2/2013  4:05 PM
Author:  Rayvt Number:  72373 of 88437

but the 4% rule is based on historic returns of a simple portfolio. If a more complex portfolio can be structured to either increase the average annual return or smooth out the valleys at the same return, both after fees, wouldn't the SWR be higher?

Indeed, yes. It's the volatility that forces you to use a lower withdrawal rate than the average Growth Rate.
But don't make the common mistake of assuming "more complex" is ipso facto better.

First of all, simple mechanical timing (like 10-month SMA written about by Faber) dramatically reduces the volatily but is only trivially more complex.

Second of all, there are withdrawal strategies that materially increase the 4% SWR for the *same* investments, just by slighly modifying your annual withdrawal amounts based on a simple set of rules.
Guyton & Klinger wrote a series of papers, the first Guyton paper was in 2004.
By using their "Decision Rules" your SWR can be 5.5% instead of 4% -- that's 38% more, or $55,000/yr instead of $40,000 for a $1M portfolio.

Try asking this FA about a Guyton-Klinger method for withdrawals. I'll give you odds that he won't know what you're talking about -- until he has a chance to google it.
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