Yesterday’s blog entry linked to a recent article on safe withdrawal rates by Scott Burns. William Bernstein, author of the book The Four Pillars of Investing, commented on the article in a thread at the www.Bogleheads.org forum. Bernstein’s words are set forth below:
As usual, Scott is spot on.
The Trinity and Bengen studies–the “4% Rule” came from the latter–were done with historical post-1926 stock returns in the US, a cherry-picked sample if there ever was one, with nominal equity returns in the 10% region.
We’re now looking at forward nominal returns of around 7%: a 2% dividend yield plus 5% of nominal per-share growth: if you’re a wild-eyed optimist, maybe 8%. So, in my mind, a 4% SWR goes out the window; even 3% may be a stretch.