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In another thread intercst wrote:

If you look at the 1932 safe withdrawal rate (3 years after the Crash of 1929) the 3.92% withdrawal rate has improved to 5.73% for the 30-Year pay out period starting in Sept. 1932. My God!, that's even higher than the 5.38% figure you calculate for 2003. <grin>

But, of course, "This time it's different."
http://boards.fool.com/Message.asp?mid=18345208

At least one thing is different this time. In September 1932 the PE (10 year average earnings) was down to 9.8 - 37% below average value of 15.5. However the current PE-10 is 22.5 - 45% above average value.

Taking a peek at the historical record of SWR vs. PE-10 through the graph intercst created at the end of the page here: http://rehphome.tripod.com/pestudy1.html , one can see that in years with PE-10 over 20 a large majority of those historic data points yielded a SWR of less than 5%. To be more specific, it looks like there are about 11 datapoints with PE-10 greater than 20 and SWR 5% or less vs. 3 with SWR over 5%.

It appears our research is giving us conflicting messages about the "100% safety" of a 5%+ withdrawal rate at current stock market valuations.

Here is another fine post on the subject: http://nofeeboards.com/boards/viewtopic.php?t=159 . raddr calculates that an inflation adjusted 4% withdrawal on a 75/25 portfolio starting at the end of 1999 is now up to 6.1% on $700,000.

We only have one historic datapoint where a 6.1% withdrawal rate survived when it started from a PE-10 over 20 ... vs. 13 failures. Nice odds, eh?

Ben
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