Retirement Withdrawal Rates and Portfolio Success Rates

Regular readers of this site (thank you!) will know that I cite my friend Wade Pfau’s research on retirement planning — especially his work on safe withdrawal and savings rates — approvingly and often.  His work is terrific and important.  Morningstar has now made an article of Wade’s available which had been locked behind a paywall at the Retirement Management Journal and which summarizes his research about safe withdrawal rates.  It’s an outstanding summary piece.  Here’s a taste:

“High earnings multiples, low dividend yields and low nominal interest rates indicate that conservative retirees should adjust their forecasts for future asset returns downward, which further implies lower sustainable withdrawal rates. For prospective retirees, the real lesson provided by the historical data is not past portfolio success rates, but rather to see how maximum sustainable withdrawal rates have related to the underlying sources of asset returns.”

I also recommend Wade’s blog (note my Links Plus page).


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