I just read your new book – Richer Retirement.

What would the SafeMax initial withdrawal rate be for a 74 y/o whose asset allocation is 95% equities (index funds) and 5% cash ?  T.

 

Thanks for your note and your interest in my research.

It’s really impossible to answer your question without more information. For starters, I would need to know the values of the eight Elements mentioned in my book, as well as the inflation outlook and current stock market valuations (i.e. Shiller CAPE).

However, even given that information, I could not readily produce an answer. I have not yet done comprehensive research on using very high stock allocations. I need to test it with my 400 retirees, which I plan to do.

In Figure 8.1 in my book, a 95% allocation to stocks results in a SAFEMAX much lower than 4.7%- only 3.4%. But that applies to only one retiree, specifically the 10/1/1968 retiree. In Figure 8.9 and 8.10, I cite examples for two other retirees for whom the 95% stock allocation was optimum. They resulted in a much higher SAFEMAX than 4.7%.

What I am trying to say is that SAFEMAX is very sensitive to stock market valuations. The optimum stock allocation for a maximum SAFEMAX may well depend on whether you retire at the start of a bear market, orthe start of a bull market, or somewhere in between, as in the Figures cited above.

I hope to get you a more comprehensive answer in the not-too-distant future. This is a high-priority area of research for me.

Best regards,

Bill Bengen