An earlier blog entry described the background of some recent e-mail correspondence between Michael Kitces and I on safe withdrawal rates (SWRs). Set forth below is the text of an e-mail that Michael sent my way on the afternoon of August 21.
Rob,
Thanks so much for the feedback! My deepest sympathies on your computer problems – I feel like I live and breathe by my computer and internet connection these days, so I definitely understand your pain!
Feel free to draw from my email for your blog if you’re so inclined, to advance the conversation.
Regarding the status of retirees who are on a “bad” track because they retired based on a 4% SWR early in the decade – well, from the financial planner’s perspective, this is WHY we work with clients on an ongoing basis and monitor the status of their retirement plans. To avoid those precise disasters. My concern, of course, would be for all those who don’t work with planners, who aren’t as necessarily plugged into “monitoring” their own financial situation, and who may end out too far down a road that has at best some painful choices ahead.
On the other hand, I have to admit that, based on my professional experience, many clients automatically tend to moderate their spending in difficult markets anyway. In other words, I find that many clients moderated their spending somewhat during the last bear market, EVEN IF they “thought” their spending was “safe”, and we are seeing the behavior again from some clients already in this bear market. Unlike almost every other investor behavior that is financially damaging, this tendency to moderate spending in difficult market and economic environments, regardless of whether it’s “necessary”, puts a helpful damper on the bear market drawdowns anyway. Of course, that doesn’t help everyone, and some people also exhibit the “bad” behavior of ratcheting spending up too much in bull markets (and then get caught unprepared in the next bear market), but I hope that the tendency to moderate spending in difficult environments (consciously or subconsciously) will help a little.
In the meantime, I agree with you that the more consumer education, the better!
With warm regards,
Michael
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