Drawing down portfolio for retirement income. Part 2 of 4In this series of four articles, I show the results ofdrawing down an initial portfolio of $1000. The examined results were for every 20-year period from 1961 to 1997 (17 such intervals).Part 2 -- 80% of the portfolio in stocks, 20% in cash/bonds, to cover shortfalls when the draw is reduced. UV strategies.One commonly mentioned strategy is to keep part of your portfolio in bonds or cash, to ride out a down market. The common recommendation is to keep 4 or 5 years living expenses in cash. Peter Lynch wrote an article discussing this strategy; he claimed that you would be better off by keeping the entire portfolio in stocks. My results bear this out.For UV2 with a 10% draw, you would have run out of money in several periods.Here are some figures for 8% drawdown using UV2:Starting balance $1,000 (80% stocks / 20% cash)Lowest ever year-end balance $511 (stocks)Lowest ending 20-year balance $3,057 (1962-1981) Lowest yearend bal $600 Total withdrawal $2,275 Total capped shortfall $249 # times hit 8% cap 11 # times hit 75% floor 5The $200 cash would have covered all but $49 of the shortfall. But overall, this is much inferior to staying 100% in stocks. Both 8% and 10% draw with 100% in stocks are much better than 8% draw with this allocation.The other strategies are worst, so there results are not listed.
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