I’m enjoying your book and got to the spending smile part. I would love to see the effect over 30 and 40 year retirement lengths. My basic understanding is that one could withdrawal maybe 1% less of cpi every year. How would that effect the SWR for 30 and 40 year periods with the base case for all other elements?

Thanks, C.

 

Hi Chris,

Thanks for your note and your interest in my research.

The “spending smiles” withdrawal scheme is an intriguing idea, but it hasn’t been fully fleshed out yet. By which I mean, until the curve is defined mathematically, I can’t really analyze it. Thus, it’s really tough to answer questions such as whether you can increase expenses less than the CPI, as I don’t know for sure.

It’s highly likely that the SAFEMAX for the smile will be higher than for other themes, such as COLA, as one is clearly not increasing expenses as fast as inflation. This takes a significant amount of stress off the portfolio.

It’s certainly worth further study as an alternative withdrawal scheme.

Best regards,

Bill Bengen