No. of Recommendations: 9
The sad corollary of that is when yields are low, if you want to avoid longevity risk, you either have to buy insurance against that risk or pick a withdrawal rate that assumes you'll live forever even at low portfolio returns.
OK, at the extreme, a 1% withdrawal rate is probably OK.
Even if you're in 100% cash, few people manage 100 years of retirement.


As I am prone to remark: It is expensive to be poor.

Whatever you do for this insurance--buy options, large cash allocation, large bond allocation--is a dragging anchor.
If you are rich enough, then you don't need to buy portfolio insurance. Only if you are poor(ish) do you need to buy it---and have an anchor to drag.

I read once -- and playing with Firecalc pretty much bears it out -- that a withdrawal rate for 40 year portfolio survival is good for longer periods, too. The 40 year SWR is the same as the 100 year SWR.

It's only for 20-30 year portfolios that the SWR changes.

Baby boomers are getting to the age when all of a sudden they realize that they don't need a 30 year portfolio---because they aren't going to live another 30 years anyway!
When you hit 70, you probably won't live to 100. So now it makes sense to start looking at a 20 year SWR.

For 95% sucess rate, the SWR is 4.00% for 30 years, but 4.85% for 20 years.

And them the non-financial wife (but she can still do basic math in her head) realizes, Hey, we have $1,000,000 and only spend $40,000 a year. So if our investments do NOTHING it will last for 25 years. So why am I buying bread at the day-old store?

========================================
Okay....had to check it out.
95% survival rate for 40 years is 3.70% SWR.
For 60 years, 3.68%.
For 70 (as if!) years, 3.55%

The people who are running around yelling about the need to do 2% SWR are just being silly.
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