I have been studying this paper for awhile now, and think it has some pretty good ideas:
http://cornerstonewealthadvisors.com/wp ... rticle.pdf
But there are a couple things that trouble me:
1. Foremost, the crux of the biscuit seems to be Table 6, which suggests initial withdrawal rates that yield very high success rates for a variety of portfolios. Given that, as the caption states, one implements these four rules: the portfolio management rule, the withdrawal rule, the capital preservation rule, and the prosperity rule. It's possible to read back through the paper and see definitions for each of these rules, but it's not totally obvious to me how they play together. So I wonder if anyone has come up with a step-by-step procedure to determine one's withdrawal rate for the upcoming year, which integrates the 4 rules. Table 5 comes close, but it's not exactly a flow chart (e.g. do we go to lines 2-4 of the table only if the condition of line 1 fails ?)
2. My second issue is more philosophical. Each of these rules makes reference to earlier data, such as the performance of one's portfolio and one's initial withdrawal rate. That's all fine and good if the goal is to determine the best initial withdrawal rate, and indeed, that is pretty much the title of the paper. But we all know that past performance is not an indicator of future returns. IOW, it seems that after withdrawals begin, the amount one should withdraw THIS year should depend only on the value of one's portfolio, one's AA, risk tolerance, life expectancy, etc, but NOT on what one's initial WD and portfolio value were. So it seems like rather than use these rules, one is better off simply recalculating a new initial WD rate each year, reducing one's life expectancy each year to account for the march of time and for any new information such as health issues.
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