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This is an interesting thread but highly dangerous....

Forgive me, but I am going to have to take a very strong, yet respectful, exception with this characterization. This isn't a dangerous thread, or a dangerous set of calculations - if you choose to challenge the 8% return assumption, that's fine.

Yes, return on portfolio assets will vary from year to year. With the historical stock market average return rate in the neighborhood of 10-11%, choosing a nominal return rate of 8% while in retirement might be aggressive for some... but that's the whole point. This method allows each individual to choose for himself or herself what a reasonable rate of return for their retirement assets is.

If you think 8% is too aggressive, or represents a rate of return that must be more heavily invested in stocks than you'd like, thereby exposing the investor to more risk than you'd like (and the ups and downs that often accompany that risk), all one has to do is change the rate of return assumptions.

Think an 8% nominal rate is too high? Think that a portfolio not invested in stocks, but invested much more heavily in cash and more conservative investments will mitigate the 'up and down' danger of which you speak? Fine... assume a more conservative portfolio and change the return assumption to 6%, or 4%, or whatever makes you comfortable. What I have presented is a methodology by which each investor can decide for himself or herself what needs to be saved, and what it will take to get there. I would strongly encourage each investor to change any and all of the assumptions I used when creating their own retirement plans.

To me, the real danger is telling investors that some 'magic' 4% or 4.25% withdrawl rate is 'safe'. Just as the 'magic' figure of saving 10% of one's income for retirement can be dangerous... 10% will not necessarily work for every investor, and a SWR rate of 4% or 4.25% will not necessarily work for every investor. Investing and retirement planning is very complex. Respectfully, I believe that the 'one size fits all' approach of using an 'accepted' SWR is the dangerous one.



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