heyyou wrote:Bengen published in the early 1990s. As others mentioned, prior to that, there was no general info about how historical returns had impacted retiree portfolios. Fifteen years later, posters are poking at the imperfections of the very first model.
I'm grateful for Bengen's pioneer work. He started with basics, then expanded from that in later papers. Have you read all of them? I think he did a lot, and others can and will add to his original ideas. Today, you could easily repeat his work. Now try that with 1991 vintage resources--a 286 or 386 computer, an early spreadsheet program, using the historical returns from a printed book, not a download. He was not a programmer, he was a financial advisor. Give the guy some credit for creativity on an original idea. Other than Gummy who is a math professional, are any of the other critics here offering better SWR programs? Much is obvious to others after some original thinker lays a foundation for them to build on.
Yours is the single best post on the topic I have read in the couple of years that I have been following this topic.
This is a topic I first started reading about for my personal interest in preparing for ER, but one which, I am embarrassed to say, has become a surrogate for something else entirely - I am not quite sure what - that is very weird, indeed. I suppose it is catalyzed by the desire to make the uncertain certain that drives some to great excesses on this subject. Whatever it is, obsessing over the original effort (that was long overdue) on the topic is no place to regress to, IMHO. If someone has better methods, that stand up to scrutiny, the world awaits the better mousetrap. However, every one of the mousetraps I have seen trotted out so far with magical 6, 7, 8% dividend-only/last-forever SWRs is nothing more than a version of that "money changer" we all saw as kids in the back of a comic book -- *if* you preload the gadget with known currency (out of your wallet!), then it will gladly roll out whatever denomination you desire; even to giving the appearance
of converting singles into fives, if trickery is your intent!
But what that little money changer could never do is literally
create money. Only businesses do that, and not a single one of them
(as GM is richly illustrating this very moment!) is a 'sure thing.'
So, as was eloquently pointed out above, if you are in a condition to require equities in your portfolio to meet your withdrawal needs in retirement, then by definition, you have a non-zero risk of failure. Some people wish to wave this away, but it stubbornly insists on being true, regardless of such mental negligence.