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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 78701  
Subject: Re: Bonds Date: 4/19/2004 11:03 AM
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yobria wrote:
The average retiree who will withdrawing 5% of his portfolio per year to pay his living expenses, and will never have new money to invest to catch cheap post-crash stock prices isn't going to sleep very well with an all stock portfolio.

I hope the 'average retiree' will NOT be withdrawing 5% from his/her portfolio each year.

Historical backtesting shows that taking a 5% withdrawal (adjusted upwards for inflation each year) will drastically lower the chances that the portfolio will survive 30 years. The highest acceptable withdrawal rate for long term portfolio survival is usually accepted to be 4% (adjusted upwards by inflation each year), and ONLY if the mix is about 75/25 equities/bonds.

I believe that REITs added to the mix will increase the safe withdrawal rate to about 4.3%, but there is not enough REIT data yet to statistically verify this.

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