Bengen has finally realized that 50-year pay out period returns for the S&P 500 converge to a narrow band. Though I would quibble with the 4.2% figure. While we can calculate historical “safe” withdrawal rates to 3 or 4 decimal places, I don’t believe you can predict the future with more than one significant digit of accuracy. Thus I’d say the safe withdrawal rate is closer to 4% than 3 or 5. Of course, the SWR for pay out periods of less than 30 years should rise above 4%.
Podcast:
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Good podcast/video. While the math is the math, I remember that Bengen did not stay the course for many years. I’m not sure he has confidence in his own work.
There’s an 82-minute podcast with Michael Kitces where Bengen explains what he did in his financial planning practice.
If you have your hocus-like clients that want to withdraw more than 4% because they’re getting a big inheritance in 5 years (assuming the 'loved one" dies on schedule), you have to indulge the madness, or lose the business. Same thing with Social Security. If you only took clients who understood the math about waiting until age 70 to claim unless you have a confirmed medical diagnosis that predicts a shorter lifespan, you’d have very few clients. Financial advice is a sales business, not a math problem. You have to give people what they’re willing to buy even if it’s not particularly good for them.
Bengen also says he got really scared in 2008. That’s when he started the market timing and he admits it cost him money. Like hocus, he’s still mostly in fixed income today.
Jesus, the Covid pandemic alone doubled my net worth. {{ LOL }}
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Yeah. I remember reading an interview with him about 2010ish and he was talking having an advisor (I thought he was the advisor) and staying out of the market until it was safe. Again, his math is his math and can’t be refuted, but he’s afraid of his own cooking. Makes me wonder.