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Author: rkmacdonald Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 176  
Subject: Safe withdrawal rates Date: 9/13/1999 12:03 PM
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I ran across a really informative site published by Scott Burns of the Dallas Morning News. He covers all sorts of topics. One topic that is particularly interesting to this board is:


This is a link to the, now famous, Trinity Study. It points out exactly why safe withdrawal percentages must be low. It uses actual stock market historical data as opposed to averages or formulas. Before I read this, I really could not see why I couldn't withdraw 7% from an all stock portfolio and be 'safe'. Now I understand!! It is now clear to me that as you approach retirement, and certainly after you're in it, you need a certain percentage of bonds (or Money Market's, CD's, Treasuries, etc) in your portfolio to STABILIZE it. NOT for the income!

If you don't stabilize your portfolio, and there is a significant recession, you will quickly run out of money!!

One thing the Trinity Study does not address, however, is the idea of REDUCING the amount you withdraw from your portfolio in a down-year. I have looked at this a bit, and for a 75/25 stock/bond portfolio, with the stock portion in S&P500, based on historical numbers, you could withdraw 6% to start, increasing by 4% a year, IF you are willing to drop back to the original starting amount in a down-year. This approach will keep you from running out of money based on historical data.

Regards, Russ
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