Why do people keep missing the point of the paper, I guess no-one has had time to read it. 4% SWR was generated during a history which has not seen a whole lot of sub-3% bond environments, especially when compounded with high Market valuation. Please don't get complacent that 4% SWR is a magic bullet guaranteeing 30 years of COLA'ed success 95% of the time going forward. To highlight, the paper states:
Across the 132 different years with available data there are only 7 periods where the CAPE was above 20 and the yield on 10 year bonds was below 3.3% (1898, 1900, 1901, 1936, 2010, 2011, and 2012). Of these 7 periods only 4 occurred long enough ago so that we can test the sustainability of a retirement income strategy. We could, for example, use January 1937 as a proxy for what could happen, but this implicitly assumes a World War would commence roughly three years into the period. If we further restrict our bond yield to below 2.5% we only have two periods, 2011 and 2012, therefore we are definitely in relatively uncharted territory in terms of the potential implications of the impact for retirees.
Now, to cut to the conclusion, under current CAPE ~22 and bond yield of 2.0%, at an 80% equity allocation, a 4% SWR has a 55% probability of success, which is much lower than the original 95% the Trinity Study predicted. Even more informative is Table 3 (copied): to get to an 80% success rate over a longer, 40 year retirement period SWR is predicted to be 2.1% (yikes!)
All I'm highlighting is, even Pfau is concerned that maybe the 4% rule is being misused in light of new research.