My blog entry for May 22, 2006, set forth the text of an e-mail that I wrote to Wall Street Journal Columnist Jonathan Clements urging him not to put forward further endorsements of Bill Sholar’s dangerous FIRECalc retirement planning tool. Set forth below is the response that I received from Clements (he has given me permission to post his response here):
Thanks for the email.
Given its length, my short reply will hardly do it justice. But I think there are a few points worth considering:
1) Firecalc may not be the last word on safe withdrawal rates, but it does what it states — it tells you how your strategy would have fared historically;
2) Surveys suggest that most retirees have a wildly inflated idea of what a safe withdrawal rate is, so Firecalc is a good reality check, even if it isn’t as much of a reality check as you would like;
3) With 10-year TIPS yielding 2.4%, the safe withdrawal rate must be higher than that, assuming a willingness to eat into principal.