“Take a Bow, Bill Bengen! Take a Bow, Trinity Authors! Take a Bow, John Greaney! Take a Bow, Bill Sholar!”

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!

Starting —




  1. says

    Sorry if this is a completely stupid question, but I just read your entire post, and I’m still unclear what SWR actually is. What is the safe withdrawal rate? This is my first visit to your blog, so maybe I just have to read on, but any quick clarification would be greatly appreciated.

  2. Rob says

    Thanks for stopping by, Almost Millionaire. I hope we hear from you again!

    The SWR is the Safe Withdrawal Rate. The Safe Withdrawal Rate is the highest percentage withdrawal that a retiree may take from his portfolio each year to cover his living expenses and be virtually certain that his retirement will not fail for 30 years.

    The SWR is calculated by looking at the historical stock-return data. Researchers look at what happened in a worst-case returns sequence. If a retirement plan survives the worst-case returns sequence seen in the historical record (we have data going back to 1870), it is deemed safe. If it fails in even one sequence in the historical record, it is deemed to be something less than safe.

    The difference between the Old School SWR studies and the New School studies is that the New School studies contain an adjustment for the valuation level that applies on the day the retirement begins. The New School methodology is rooted in the research of Yale Economics Professor Robert Shiller, which shows that valuations affect long-term returns. The Old School SWR studies do not contain a valuations adjustment because they are rooted in the research of University of Chicago Professor Eugene Fama, who argued that the market is “efficient” (that is, that all factors bearing on price are taken into consideration) and that, thus, overvaluation is a logical impossibility.

    If the market were efficient, the Old School studies would be accurate and Buy-and-Hold would work. If Shiller is right that valuations affect long-term returns (there is now a mountain of research showing this to be so), then there is precisely zero chance that Buy-and-Hold could ever work for a long-term investor. If Shiller is right (as I believe), investors MUST change their stock allocations in response to big valuation changes. If Shiller is right, the demonstrably false claims made in the Old School SWR studies are in the process of causing millions of failed retirements.

    I hope that helps a bit. Please ask follow-up questions if I have not been entirely clear.



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