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|Subject: Re: Retirement Needs Formula?||Date: 10/4/2013 5:06 PM|
|Author: synchronicityII||Number: 73432 of 76094|
Dr Pfau thinks 4% is too high and he may have a point for people who started withdrawing 4% from their portfolio in 2000.
2.8-3.2% may be more appropriate.
This is aimed at the article and not at you, buzman. It appears that Dr. Pfau is assuming that US financial markets have a substantial chance of performing akin to other nations' financial markets in the future (and their rates of return on assorted assets have apparently been lower than thosein the US).
Although I respect Dr. Pfau's knowledge, he is basically saying "well, if things do worse in the future than they have historically, and/or they have higher volatility than they have historically, then the "4%" rate has a substantially higher probability of failure.
With all due respect, that's a great big "duh, really?" point. I also love the "if you're willing to reduce your spending after a market decline you can start off with a higher rate". Again, "duh, really?" Yes, OF COURSE you can start taking out more if you're going to reduce it later if you need to! Do people need to be told that? Really? The problem for determining retirement for most people is when they have sufficient assets to retire at the lifestyle they wish to sustain during retirement. Hell, one can retire any time at all, if they're willing to sleep on park benches and get dinner out of dumpsters. Hence an SWR calc, which is essentially something pretty darn close to a level of expenses one does not want to go under unless absolutely necessary.
As for why people don't purchase SPIAs...well, as he himself points out, they already essentially have an annuity, with a dynamic inflation adjustment factor no less. It's called "Social Security" and for many Americans is a substantial piece (often the predominant piece) of their retirement income. I get the concept of mitigating longevity risk, but again, SSA has that covered to a laerge extent for most people.
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