The simplistic beauty of variable withdrawal calculators is that it mitigates both dying with massive amounts of wealth and SORR.We don’t worry about SORR, because we have a low withdrawal rate and we adjusted our spending downward during high inflation.
Kites said, the truly safe withdrawal rate—“a rate for when we get a market sequence that is as bad as anything we've ever seen in history, and you will survive by definition”—is 4%, he said.
“It's actually a remarkably robust number,” Kitces said. “The irony is that not only is it robust, it overwhelmingly leads to massive amounts of excess wealth in most scenarios.”
Another way to express the 4% rule, he said, is that it’s a 96% Monte Carlo scenario that the client will have 100% of their principal left over. Not just a lot of money left over, but all of their starting principal at the end of 30 years.
These methods also provide an indication that "SORR is materializing" when the suggested withdrawal amounts trend lower (in real dollars).
Statistics: Posted by dogagility — Thu Jul 11, 2024 4:46 am — Replies 11 — Views 776