No. of Recommendations: 32
I came across this article by high-fee investment advisor Larry Swedroe saying that the safe withdrawal rate is at best 3% in the current climate of low bond yields and "high" stock valuations.

There should be no doubt that current valuations and yields have changed the SWR. While each investor should run an MCS to determine the right asset allocation and SWR for there personal situation, it seems likely that the old SWR of 4 percent is at best now 3 percent. A recent report from Morningstar also supports this recommendation. That has significant implications for many investors.


Looking at the Morningstar report, I found this.

Each scenario in the analysis is based on a 10,000-run Monte Carlo simulation. Taxes and Required Min
imum Distributions (RMDs) from the portfolio are ignored. The analysis assumes a 1.0% fee, or negative alpha, that is deducted from the portfolio value annually. This fee is included to account for unavoidable retirement portfolio expenses paid by the investor (e.g., mutual fund fees, advisor fees, account fees, etc.) for investment management.


Of course your SWR is only 3% if you're allowing a financial advisor or mutual fund manager to take 25% of your annual retirement withdrawal in fees (e.g., 4% withdrawal from a $1MM portfolio is $40,000. A 1% fee on $1MM is $10,000.) You can put together a diversified portfolio at Vanguard for about 10 basis points in annual fees. See link:

Limiting the "skim" we leave you a lot wealthier.

Print the post  


The Retirement Investing Board
This is the board for all discussions related to Investing for and during retirement. To keep the board relevant and Foolish to everyone, please avoid making any posts pertaining to political partisanship. Fool on and Retire on!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.