Valuation-Informed Indexing #128 — It’s Irresponsible Not to Urge Higher Stock Allocations at Times of Low Stock Prices

I’ve posted Entry #128 of my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called It’s Irresponsible Not to Urge Higher Stock Allocations at Times of Low Stock Prices.

Juicy Excerpt: I remember when John Walter Russell informed me of the 9 percent number. It shocked me. I had felt comfortable saying that taking a 4 percent withdrawal was dangerous in retirements beginning at times of insanely dangerous valuations. This was something different. Could a 9 percent withdrawal ever truly be safe? For a time, I downplayed the 9 percent number. I didn’t want to be responsible for anyone going with such a withdrawal rate and then experiencing a failed retirement.

The reality is that a 9 percent withdrawal rate taken in a retirement beginning at a time when valuations are one-half of fair value is every bit as safe as a 1.5 percent withdrawal rate taken in a retirement beginning at a time when valuations are three times fair value. The safe withdrawal rate that applies for the former retirement has to be six times larger than the one  that applies for the latter retirement since the valuation level that applies for the latter retirement is six times larger. Why are we all so reluctant to acknowledge this obvious truth?

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