Bill Bengen’s landmark research into so-called safe withdrawal rates from retirement portfolios led to wide acceptance of the “4 percent rule” as a standard retirement planning rule of thumb. The Journal of Financial Planning asked him some questions recently, and Bill provided (sometimes provocative) answers. Some highlights follow.
“I haven’t seen anything in the past 20 years that would permit you to withdraw at a higher rate than the 4.5 percent that I recommend. We’d have to go much, much lower than we are now, or we did in 2009 even, to consider a higher withdrawal rate. That’s how ridiculously overvalued the stock market has been for 20 years.”
“Right now my portfolios are bizarre. That’s the only way I can describe them. I have very few investments, less than half a dozen investments, and we’re focused almost entirely in the safest bonds I can find, which are U.S. Treasury—which appear to be safe for now, although not in the long term—and gold. I have very little money in the stock market, almost negligible amounts.”
“You need a money manager who is willing to withdraw your funds from the market when there is high risk present—and I believe the risk is very high now—and be willing to then further invest you when values improve and the risk is reduced. That’s one way you’ll be able to conserve capital.”
“I think they [planners] probably have the greatest opportunity in the past 20 years to help people, if that’s what their goal is, and build a practice, because I believe this decade people are going to need financial planners more than ever. The circumstances are going to be very difficult, the investment environment is going to be tough, saving money is going to be tough.”
The entire interview is worth your time.