This article provides a basis for withdrawal rate based on market
variability:

http://www.fpanet.org/journal/articl...p0304-art8.cfm

The answer is 4 or 5%.

The current issue of Kiplinger magazine suggest 7% if you forgo
inflationary increases.

Frank


"DelawareDave" <davejunkmail123[at]yahoo.com> wrote in message news:<aeCdnYBVE41IEc7cRVn-hg[at]comcast.com> ...
- quote -

Very, very helpful - thanks !

"Tad Borek" <borekfm[at]pacbell.net> wrote in message
news:CUH4d.624$JG2.451[at]newssvr14.news.prodigy.com...
- quote -

DelawareDave wrote:
- quote -

DD-
Drop me an email if you'd like a pointer to some of the studies on this
question, there are a bunch out there so you don't need to reinvent the
wheel. Your conclusion is right about the 4% but I think it's good to
see the studies so you can see whether your investments/situation fit
their assumptions. I'd just post the links but I'm not sure these pubs
would appreciate that, they're advisor/planner directed sites.

-Tad
PS if I don't reply my spam trap got it - but I'll keep an eye out

"DelawareDave" <davejunkmail123[at]yahoo.com> wrote:

- quote -

One oft-cited academic study is the Trinty Study see:
http://www.dallasnews.com/s/dws/bus/.../trinitystudy/

Another source is:

http://www.retireearlyhomepage.com/

There are several reports on the subject available for modest fees, which I
haven't read.

For what it's worth, 4% is the figure I'm using when planning my retirement.

-- Doug

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Sorry, Dave. I interpreted that as 3% inflation, 7% real return = 10% gross
return. Not only do I believe 7% real return close to realistic, but may
even be a bit conservative.

Elizabeth Richardson

Tad - thanks for below - very helpful. You're right - there are so many
variables - I did some rough monte-carlo-type simulations - and the outcomes
are "all over the map" based on changes in investment retuns (and timing of
returns), inflation, taxes, etc.

However we've got to "start somewhere" in analysis. Just seems that 4%
inflation adjusted return is sustainable.

Thanks again.

- quote -

My original post stated 7% gross return, not 10%.

7% gross return - 3% inflation = 4% net inflation adjusted return.

Dave
"Elizabeth Richardson" <erichktn[at]worldnet.att.net> wrote in message
news:zef4d.412578$OB3.344426[at]bgtnsc05-news.ops.worldnet.att.net...
- quote -

DelawareDave wrote:
- quote -

DD,
If you do stats kinds of modeling you end up with results suggesting
that 4-5% initial withdrawal rates can be sustained for a very long time
(say, 20-25 years+) in a typical balanced portfolio. It depends how
you're investing of course and bad choices can doom the whole thing.

A lot is affected by your assumptions about withdrawal rates over the
years though. If you assume the investor blindly keeps ticking up the
withdrawal levels each year to adjust for inflation (based on CPI), it
shortens the life of it. Real people don't seem to do that if the goal
is leaving a nest egg. And to the extent you do need to ratchet up some
spending, using a 4% inflation rate (the historical CPI rate, roughly)
is kind of arbitrary, it doesn't reflect realities of what the retiree
might actually be spending money on. Or that Social Security might be
ratcheting up too.

I gotta say, I try to discourage people (in particular clients) from
attempting this type of projection. You end up needing to make
assumptions about too many unknowable things like the inflation rate.
And stock returns. And interest rates, life expectancy, tax rates,
health care inflation, health care policy, home values...anything else?

-Tad

- quote -

I think you paint a picture-perfect scenario. Theoretically, that is
exactly the way things should work.
--
Robert J. Romano, CPA
99 Massachusetts Avenue-Suite 4
Arlington, Massachusetts 02474-8600
www.romanocpa.com

- quote -

I believe that in today's environment, 10% gross return is not realistic.
Perhaps others would like to comment on this aspect of the question.

Elizabeth Richardson

There are a bunch of calculators that will do "How long the money will
last", MSN money has it, Quicken, a lot of banks or find a Monte Carlo
simulator.


"DelawareDave" <davejunkmail123[at]yahoo.com> wrote in message
news:VNKdnUPJUMUm9czcRVn-jA[at]comcast.com...
- quote -

Looking for experienced opinions on what annual withdrawl percentage should
be assumed from investments - with the following background/assumptions:

- Rate net of inflation
- Rate that would preserve principal indefinitely (for passing to children)
- Portfolio is 75% stocks, 25% bonds, with 40% of stock portion
international stocks

Is 4% high/low ?

That is, if one had $1million - could someone withdrawl today's equivalent
of $40,000 (actual amount withdrawn would increase with inflation) and years
out still have today's equivalent of $1million for passing to children
(actual amount in portfolio woujld grow with inflation) ?

If inflation is assumed at 3% - that's 7% gross return - which seems
realistic for a 75/25 stock/bond combo portfolio.

Thanks for any comments !