I have a question about the guardrail method for safe withdrawal rate.
It says that if the withdrawal rate is between initial withdrawal rate (IWR) 1.2 and IWR0.8 then we take the initial withdrawal. If outside these bounds then we reduce or increase the withdrawal by 10% or reduce by 10% depending on if the portfolio increase (when it falls below the lower bound) or if the portfolio decrease (when it falls above the upper bound.
The initial withdrawal rate means the withdrawal rate at year 1 of retirement. Is that correct?
if your withdrawal rate increase in time then you will not have enough to survive a couple of decades.
For example if you assume the S&P500 returns from 1928 to 1979, there was a catastrophic 3 years of downmarket and there were a couple of those in the 30s and early 40s.
How the portfolio of a retiree in 1928 would have survived with a 3 or 4% withdrawal rate? Is that the very worst sequence? The retiree starting in 1967 or 1968 would not have fare well either.
What all this says to the 2022 or 2023 retiree with no pension?