Post by Admin/YBB on Apr 1, 2024 6:45:00 GMT -6
Bengen's 4% w/COLA SWR
big-bang-investors.proboards.com/post/48740/thread
Thing to remember is that before-Bengen (BB!), the conventional wisdom was to use average point-to-point TRs and to decrease those some to get a margin of safety. BTW, Dave Ramsey is still foolishly stuck to that notion in 2024 - and was called out for that recently. It turns out that there is no predictable margin of safety for doing this and this notion has to be discarded entirely.
In came Bengen 1994. Remember that Portfolio Visualizer (PV) wasn't around in 1994 to instantly run almost any withdrawal scenario.
Bengen quantified SWR withdrawals to "4% w/COLA" using historical data (also, $300 lump-sum per $1/mo income). That inspired many other studies, including those using Monte Carlo. It doesn't make sense to critic the specific details of Bengen's 1994 work. It made a huge impact in the thinking about SWR, SOR, etc (including the recent YBB SWRM). Bengen himself has tinkered with his rule a bit but it remains standing in essential ways. Being a financial advisor (retired in 2013), he never recommended it for everybody (legally, he couldn't), but told people to contact him or his firm for applications in their specific situations. BTW, before becoming a financial advisor, Bengen was an engineer (MIT BS - Aero & Astro), and even wrote a book on model rockets, and then ran a family franchise business of soft drink bottling. Certainly, a very interesting fellow, and not very old at 76.
web.archive.org/web/20120417135441/http://www.retailinvestor.org/pdf/Bengen1.pdf
en.wikipedia.org/wiki/William_Bengen
big-bang-investors.proboards.com/post/48740/thread
Thing to remember is that before-Bengen (BB!), the conventional wisdom was to use average point-to-point TRs and to decrease those some to get a margin of safety. BTW, Dave Ramsey is still foolishly stuck to that notion in 2024 - and was called out for that recently. It turns out that there is no predictable margin of safety for doing this and this notion has to be discarded entirely.
In came Bengen 1994. Remember that Portfolio Visualizer (PV) wasn't around in 1994 to instantly run almost any withdrawal scenario.
Bengen quantified SWR withdrawals to "4% w/COLA" using historical data (also, $300 lump-sum per $1/mo income). That inspired many other studies, including those using Monte Carlo. It doesn't make sense to critic the specific details of Bengen's 1994 work. It made a huge impact in the thinking about SWR, SOR, etc (including the recent YBB SWRM). Bengen himself has tinkered with his rule a bit but it remains standing in essential ways. Being a financial advisor (retired in 2013), he never recommended it for everybody (legally, he couldn't), but told people to contact him or his firm for applications in their specific situations. BTW, before becoming a financial advisor, Bengen was an engineer (MIT BS - Aero & Astro), and even wrote a book on model rockets, and then ran a family franchise business of soft drink bottling. Certainly, a very interesting fellow, and not very old at 76.
web.archive.org/web/20120417135441/http://www.retailinvestor.org/pdf/Bengen1.pdf
en.wikipedia.org/wiki/William_Bengen