There was a discussion about safe withdrawal rates in the comments section of one of my blog entries a few months ago that provoked a comment by me in which I presented an overview of where things stand today re this issue. I wanted to highlight those words in a post of their own.
The thread from which my words set forth below were taken is here.
Here are the words that I put forward in that thread:
Thanks much for posting both the excerpt and the link, Gonna Get Moderated. Those are extremely helpful.
The key words in the Bengen passage are these: “Can we be confident that these withdrawal rates will work in practice, as well as they have in the laboratory? My answer to both questions is a resounding “No!” ”
This has of course been known throughout the Retire Early and Indexing discussion-board communities and throughout much of the Personal Finance Blogosphere for many years now. There have been thousands of community members who have expressed a desire that honest posting on SWRs and on many other critically important investment-related topics be permitted at all of our boards and blogs. I applaud the community members who have spoken out and urge all who have not until today worked up the courage to do so to make the jump today. The water is fine! There obviously is zero benefit to anyone in keeping the Ban on Honest Posting in effect any longer.
I think it is fair to say that every last one of the thousands who have expressed a desire that honest posting be permitted are grateful for the work done by the experts who developed the Old School SWR studies. We obviously wouldn’t know what we know today had it not been for the fine efforts of those who came before us. Take a bow, Bill Bengen! Take a bow, Trinity authors! Take a bow, John Greaney! Take a bow, Bill Sholar!
I also of course think it is fair to say that not one of the thousands who have spoken out feels even a tiny but comfortable with the tactics that have been employed by the internet predators who have posted in “defense” of Mel Lindauer and John Greaney and their Campaign of Terror against the various communities.
I stand ready to work with Bengen, Bogle, Bernstein, Clements, Burns, Kitces, Schultheis and any others who evidence a sincere desire to put the interests of the investors following their advice ahead of marketing considerations or personal ego considerations long enough to work through these questions in productive and warm and friendly and positive and life-affirming discussions. I will continue to post honestly on what the historical data says re safe withdrawal rates in any event. I will not permit the terrorist tactics or the blacklisting being supported today by a number of big-name personal finance bloggers pressure me into selling out the many fine community members who have participated constructively and bravely in our discussions.
I encourage Bengen and all others who have come to realize with time the mistake they made in being so arrogant and stubborn and narrow-minded in their unwillingness to correct the errors they made in their earlier SWR claims when they were first brought to their attention to join me in calling for a national debate on the realities of stock investing and on the implications of the academic research published 30 years ago showing that Buy-and-Hold has precisely zero chance of ever working out for the long-term investor.
Such a national debate is long overdue given the huge amount of human misery that has been caused by the level of overvaluation that we as a society permitted to take place in the late 1990s (with both the experts and the ordinary investors listening to their advice sharing in the blame). There’s nothing like taking serious action to bring an economic crisis to an end to get a whole big bunch of people feeling better about just about every subject on their minds. Let’s turn the corner on this thing. Let’s stop walking deeper into the darkness and take our first tentative steps together in the direction of the light. That’s when the real fireworks (the good kind!) begin!
I am confident that Bengen’s understanding of SWRs would improve dramatically if he gave up his belief in Buy-and-Hold. He is not alone in that belief, to be sure. There are millions of good and smart people who believe. If they believe wrongly (and the behavior of Bogle and many other lead Buy-and-Hold advocates certainly evidences at a minimum a lack of confidence in this model at this time even among its strongest advocates), they need to find this out.
The best way for as many as possible to discover the realities quickly is for us all to participate actively in a national debate aimed at working through what we have learned or should have learned from the important research done by Shiller, Russell and many others over the past 30 years. A deepening of the economic crisis is to precisely no one’s benefit. (As a side note, it is always amazing to me that such words as those in that last sentence even need to be put forward — Yak!)
I’ve said it before and I’ll say it again — We’ve got a tiger by the tale with this one! We’re deep into Year Eight and The Great Safe Withdrawal Rate Debate is not showing signs of slowing down a tiny bit! Holy moly! Heaven help us all!
Let’s get back to Learning Together!
Let’s get back to Having Fun!