Optimal Retirement Withdrawal Rates Revisited
There has been a long held belief amongst investors and advisors that a 4% retirement withdrawal rate was the magic number you could safely take from your portfolio and not run out of money in most 30-35 year retirement periods. However much of the conviction behind that number came from the fact that for most of the past century, investors in 50/50 bond/stock portfolios could come close to a 4% return simply from clipping coupons and collecting dividends. In today’s interest rate environment, however, a 50/50 portfolio yields roughly 2% or half the historical level. What can a retiree or pre-retiree do?