No. of Recommendations: 6
Don't forget that the 4% rule assumes a portfolio asset allocation of 60/40 stocks/bonds (and also 80/20 was slightly better).

Not only that - Bengen's original work http://www.retailinvestor.org/pdf/Bengen1.pdf was based on US common stocks for the stock allocation and intermediate Treasuries for the bond allocation. An update to his work, the Trinity study (itself updated) was based on US large company stocks and US corporate bonds https://www.onefpa.org/journal/Pages/Portfolio%20Success%20R...

But it's not 4% of *any* asset allocation, and some people may be bond/cash heavy.

Yes, if counting cash as part of the investment portfolio, the cash would need to be considered part of the bond allocation, and since cash generally receives a lower rate than Treasuries or corporates, that would need to be accounted for. Possible ways to account for this would be to decrease the initial withdrawal rate, increase the stock allocation, or just not count the cash as part of the investment portfolio that one calculates the withdrawal rate on.

There are other people whose stock portion isn't in what was studied, but something more volatile because they believe the returns would be higher.

Yes, just like holding cash instead of bonds is outside the parameters of the study, holding international stocks in your portfolio, or having a stock portfolio of all dividend stocks is outside the parameters of the study.

It may be OK, but it's outside the studies parameters.

Being outside the study parameters may be okay, but it might turn out to be not okay, too, so relying blindly on the 4% rule when not following the parameters could easily lead to failure. Further, since the study was based on historical data, if something outside the parameters of the data occurs, the withdrawal rate should also be reexamined.

AJ
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