“There’s Another Story Here — The Story of Why This [The Errors in the Old School Safe Withdrawal Rate Studies] Is Only Coming Out Now”

The Wall Street Journal on March 1 published an article titled Say Goodbye to the 4% Rule for Retirement.

Juicy Excerpt: Conventional wisdom says you can take 4% from your savings the first year of retirement, and then that amount plus more to account for inflation each year, without running out of money for at least three decades….In recent years, the 4% rule has been thrown into doubt.

Set forth below is the text of an e-mail that I sent to Kelly Greene, the author of the article. The subject box for the e-mail reads: “It’s More Than Just the SWR Studies That Need to Be Corrected.”


My name is Rob Bennett. My bio is here.

Congratulations on your article “Say Goodbye to the 4% Rule for Retirement.” This is important stuff.

There’s another story here — the story of why this is only coming out now (I have been writing about the errors in the Old School safe withdrawal rate studies going back to May 2002). The problem with the old studies is that they do not adjust the safe withdrawal rate for valuations. That same error is made in all other areas of investing analysis.

The error carries over from the days when there was a widespread belief in the Efficient Market Theory (EMT). If the EMT were legitimate, the Old School SWR studies would work. Yale Economics Professor Robert Shiller discredited the EMT with his 1981 research showing that valuations affect long-term returns. If valuations matter (there is now 32 years of peer-reviewed academic research confirming Shiller’s 1981 finding), it is not possible to make ANY investment decision without taking the valuation level that applies at the time the choice is being made into account.

For example, a regression analysis of the historical return data shows that the most likely 10-year annualized return in 1982 was 15 percent real. In 2000, the number was a negative 1 percent real. There is no one stock allocation that makes sense in both sets of circumstances. Those who follow Buy-and-Hold strategies (strategies in which the investor keeps his stock allocation stable at all times) are thereby permitting their risk profile to get wildly out of whack. Investors must CHANGE their stock allocations in response to big shifts in valuations to have any realistic hope of long-term investing success.

I have a calculator at my web site (“The Retirement Risk Evaluator”) that identifies the SWR that applies at all possible P/E10 levels.

I also have a calculator (“The Stock-Return Predictor”) that performs the regression analysis needed to identify the most likely annualized 10-year return starting from any possible P/E10 level.

I have done research with Wade Pfau showing that investors who take valuations into consideration when setting their stock allocations thereby reduce the risk of stock investing by 70 percent (Please see the graphic on Page 11 which shows that the Maximum Portfolio Drawdown drops from 60 percent to 20 percent for investors who take valuations into consideration). The reason why we have as a society not yet moved away from promotion of Buy-and-Hold strategies is not that the research-supported case is not strong. It is that this change is so big that it is hard for those who are schooled in the conventional thinking to accept the far-reaching (and very exciting) implications of the change.

Please let me know if you have questions.

I wish you the best of luck in all your future endeavors.



  1. The Pink Unicorn says


    The biggest problem for America is the fact that most have not saved enough for retirement, including you, Rob. You are busy debating the paint color on a house, when the roof is on fire. Meanwhile the house (your retirement) is burning to the ground.

    You just want to sit here and blame everyone else for your lack of planning. The people that banned you from their boards are not responsible for your poor planning. SWR means nothing when you don’t have a pot to piss in.

    Face reality, Rob.

  2. Rob says

    We don’t agree, Pink.

    People cannot save effectively if they do not know how much money they have. That’s basic.

    Back in 2000 the Buy-and-Holders were telling people that their portfolios were worth three times what they truly were worth. If someone had a portfolio of $200,000 in real worth, the Buy-and-Holders were saying that that person had a portfolio of $600,000 in real worth.

    That obviously has a big effect on that person’s motivation to save. Someone who is trying to save $1 million to support a middle-class retirement is going to save more if he realizes that he is $800,000 short of the goal than he is if he is tricked into thinking that he is only $400,000 short of the goal.

    In any event, if someone fails to save enough through his own fault, it is his problem, not yours.

    But if someone’s retirement fails because you practiced financial fraud by covering up errors in a retirement study, you go to prison.

    So it makes sense to post honestly REGARDLESS of the cause of the saving problem.

    That’s my sincere take, in any event, Pink.

    I wish you all good things, my old friend.


  3. The Pink Unicorn says


    Sorry, but you are wrong. Argue all you want on SWR. A couple points makes little difference when your nest egg is pathetic. Look at the data as to what people have saved. They arent missing the target based on some assumption of SWR. They are missing the target because our average savings rate in America is too low. For the past year, it has averaged less than 4%. Further, people have not even figured their expenses correctly. Look at how many lack a plan for Ng term care and other health related expenses.

    Your retirement has been a failure because you did not save enough. Take a look at the posts when you announced your plan to retire with only $400k. The people that you bash all told you that you were crazy thinking that your plan would be successful, yet you now treat them like they are responsible for your failure. It is YOUR fault, Rob. Not some “goon” as you call them.

    Every day, your posts are the same. You continue to talk about how someone else is wrong and how the goons are the responsible ones. You ate playing the victim card justvlike all the takers in our society. When you finally figured out that your plan was a failure, why didn’t you go get a real job that pay a regular income? You have had the opportunity all along to fix your situation, but now you have made yourself less marketable by staying out of the workforce for so long as well as hurting your reputation online. Go do something. Get an entry level job and work your way back up, deliver pizzas, take a retail job. Do something to earn a living and stop trying to blame someone else for what is the real cause of retirement failure for you and millions of Americans.

  4. Rob says

    If safe withdrawal rates don’t matter, why doesn’t Greaney correct the errors in his study?

    What harm could it do to report things honestly if none of it matters in the first place?

    If he truly believed that safe withdrawal rates don’t matter, he never would have published the study.

    Give me a friggin’ break.

    Greaney shows by his ACTIONS that it matters to him. You are just putting forward words.


  5. The Pink Unicorn says


    You are not paying attention. You and a large percentage of Americans haven’t saved enough. That is your core problem. You are still looking to find blame and fault with someone else, when you are the source of the problem. Focus, Rob. Once you come to grips with this, maybe you can fix your problems.

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