I am finishing the new Bengen book (author of the 4% withdrawal approach)
My take away from the book was he now considers more asset classes so the withdrawal rate can be higher. But the asset allocation (55% stocks in specific categories, 40% intermediate bonds, 5% cash) is conservative so that sequence of return risk is avoided. If you are unlucky and have a bear market and high inflation in the first part of retirement, your portfolio could fail.
But it is very conservative to achieve a zero failure rate. If I compare to a boglehead 3 fund or more traditional 60/40, the new Bengen portfolio lags. But the others run out of money like in 2% – 5% of the simulations.
Other approaches seem to be to hold 2 to 3 years in cash to ride out the volatility of higher stock allocations but achieve more potential growth.
I’m just curious what others thought of the book and how it has caused you to evaluate your portfolio? I’m planning for retirement in 1 to 3 years so I’m trying to learn more. I like the outcome of a higher 4.7% withdrawal and I can see how if you have a high probability of getting a reasonable (but conservative) return how it would be successful.
4% rule revised to 4.7% with conservative Bengen portfolio
byu/TiberiusCaesar717 infinancialindependence
Posted by TiberiusCaesar717
6 Comments
conservative but solid
>55% stocks in specific categories
This seems like cherry picking to me. Will it hold up in the future? Maybe. Maybe not.
The more complex the portfolio the more doubts that it was picked with hindsight vision because it was a winner.
So I’m of two minds.
First, if you are planning to leave something to your heirs, then it’s more important to consider a higher rate of return
If that’s not a consideration, for whatever reason, then I really don’t care if I die with $10m or $2m. As long as I can love a good life…the life I built for myself, then I’m *satisfied.*
Some folks will say: but you spend more, buy nicer things, go on more trips, live it up!
That’s why I bolded satisfied. The quest for “more” isn’t as important to me.
I watched an interview with him about the book on YT.
You are essentially giving up higher potential returns for a slightly higher “SWR.”
I’m going with 2-3 years cash. With no real backup to this, I believe markets are able to recover much faster than decades ago.
Big ERN doesn’t like it because he said it’s overfitted to the past and there are reasons the allocation may not hold for the future. I don’t have the link handy but it’s in one of his blog posts.
Take that for what you will. It just shows that there could be legitimate risks to consider.