No. of Recommendations: 3

One weird wrinkle--Using a 4% annual withdrawal adjusted each year for inflation, when you go from 1966 to 1996 you run out of money.

That's why is is absolutely necessary to do some active management, of either in/out timing or amount of withdrawals. Or both.

Take a look at this spreadsheet.

Set the start date & W/D start date to 1/1/1966, withdrawal SWR to 4%, AA to 100% S&P500. With Initial Value at $10,000 and monthly withdrawal at $33.33. Set the max # yrs in chart to 30 or 35 (cell J1). Then look at the chart in the Chart tab to see visually what is happening.

The straight B&H with 4% SWR runs out of money in Nov 1994, as you say.
Total withdrawals of $29,300.

But by timing using the 10 month Simple Moving Average, on the date that the B&H portfolio runs out of money, the timing portfolio is 6 times the starting value. That's with taking the EXACT SAME withdrawals.

Now go back and change the withdrawal strategy to Guyton-Klinger, at 5% target rate (cell I6).

Now, on Nov 1994 the total withdrawals is $23,900, but the B&H portfolio instead of being zero is 3 times the initial value.
With timing, the portfolio is almost 9 times the initial value.
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