Morning Star / 2.8% SWR

[TheInsuranceMan]

Has anyone read the article from Morningstar, moving from a 4% safe withdrawl rate down to 2.8%.  I was listening to talk radio while sitting in the tractor for 10 hours yesterday, and they had a local investment guy on and they went into how 4% isn't safe anymore, and the newest information boils down to 2.8% as the withdrawl rate recommended.

Thoughts?

http://www.investopedia.com/articles/personal-finance/120513/why-4-retirement-rule-no-longer-safe.asp

http://blogs.marketwatch.com/encore/2013/02/08/retirements-4-rule-gets-downsized-2/

**I didn't see this posted anywhere, if it's a duplicate thread, feel free to delete.

[bacchi]

The upshot, according to Morningstar, is that in today’s markets, retirees who want “a 90% probability of achieving a retirement income goal with a 30-year time horizon and a 40% equity portfolio” should withdraw just 2.8%.

Solution: Have higher than 40% equity.

[nereo]

They assume a retiree puts 60% of their portfolio in bonds, and note how bonds are at historically low rates right now.

IMO that's a run-for-the-hills kind of conservatism.  Using numbers to illustrate, suppose you want $40k/year in spending post retirement.  They advocate a $1.43MM with more than $857k held in bonds.  Assuming the bonds just match inflation that's equivalent to a 21 year bond ladder.

...sound nuts to you?  because it does to me...

[The_Dude]

Seriously?  Bengen as the originator of the 4% rule tested it with a range of stocks between 50-75% and now the rule is broken because portfolios with higher bond concentrations than Bengen originally envisioned aren't sustainable for 30 years?

No kidding...

[thd7t]

This article has been discussed here before. It assumes over 1% expense ratios.

[TheAnonOne]

This article has been discussed here before. It assumes over 1% expense ratios.

Given this...

2.8% + 1 (3.8% for the mathless among us)

They assume a retiree puts 60% of their portfolio in bonds, and note how bonds are at historically low rates right now.

IMO that's a run-for-the-hills kind of conservatism.  Using numbers to illustrate, suppose you want $40k/year in spending post retirement.  They advocate a $1.43MM with more than $857k held in bonds.  Assuming the bonds just match inflation that's equivalent to a 21 year bond ladder.

...sound nuts to you?  because it does to me...

... and this...

I'd say the 4% rule continues to be conservative.