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Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: mistymoney on October 26, 2020, 01:18:28 PM

Title: AA and 4% SWR
Post by: mistymoney on October 26, 2020, 01:18:28 PM
Hey all!

Been reading a lot around the forum, and I've noticed marked differences in asset allocation (stocks/bonds/cash) with stocks varying from 50% (less?) to over 90%.....but I haven't seen the SWR discussed along with that.

It doesn't seem like everyone drastically lowers their stocks percentages, should that affect planned SWR?

Any thoughts or rules of thumb?
Title: Re: AA and 4% SWR
Post by: bacchi on October 26, 2020, 01:35:51 PM
Bengen's suggested 4% withdrawal was for between 50-75% stocks.

I think it is appropriate to advise the client to accept a stock allocation as close to 75 percent as possible, and in no cases less than 50 percent.

His 1996 paper suggested 35-85%.

As you can see, within a range of 35-percent to 85-percent stocks, the withdrawal rate is remarkably constant, diverging from its peak by no more than about 2 percent.

Using cfiresim to test AA is always a good idea.
Title: Re: AA and 4% SWR
Post by: maizefolk on October 26, 2020, 03:37:54 PM
While the SWR math usually uses a 30 year interval for its calculations, higher allocations to bonds become very risky if you need your stash to last significantly more than 30 years, which is suspect is why you don't see a lot of super high bond allocations being discussed here on the forums.

With high stock allocations, you just have to survive the first decade or so without taking a major hit to your principle and the total size of your investments will likely have grown large enough to last indefinitely, regardless of what the market does.* With high bond allocations, spending down your principle over 30 years is pretty much the price of doing business.

*At least assuming the stock market behaves like it has over the past 150 years or so. If the a major war (foreign or civil) is fought on US soil your life will be disrupted in major ways regardless of whether you've FIREd or not. Similarly for revolutions, societal collapses, zombie apocalypses, etc.
Title: Re: AA and 4% SWR
Post by: secondcor521 on October 26, 2020, 04:19:04 PM
If you go to, go to "Investigate" (last tab top right), and click on "Investigate changing my allocation - How will changing the allocation -- putting more or less into stocks -- affect the results?" (second main radio buttn), then click submit, then click whatever you need to click to run Adobe Flash these days, you'll get an image like the attached.

You can see in general that low stock allocations are historically unsafe, and anything above about 50% has approximately the same degree of safety.

The specific shape of the curve varies somewhat depending on how relatively safe or unsafe the WR chosen is.  With default values on FIREcalc, the WR is 95% historically safe.
Title: Re: AA and 4% SWR
Post by: mistymoney on October 26, 2020, 04:30:35 PM
Thank you all, excellent info as usual! Seems 4% is appropriate for most allocations.

will look at the simulation tool, once I get an update on adobe flash.....
Title: Re: AA and 4% SWR
Post by: Playing with Fire UK on October 28, 2020, 08:22:13 AM
Porfolio charts ( is another excellent resource for this sort of question. I'm using it to rethink my AA now that I'm close to FIRE.