Valuation-Informed Indexing #146 — What’s Missing from the Wall Street Journal Article Saying “Goodbye” to the 4% Rule

I’ve posted Entry #146 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called What’s Missing from the Wall Street Journal Article Saying “Goodbye” to the 4% Rule?

Juicy Excerpt: Making mistakes need not be such a terrible thing. It is often by making mistakes that we learn new things. But the learning process is short-circuited if we never ask the “Why?” question. The error in these studies are not hard to uncover. I saw it the first time I looked at one of them (the error is that the studies do not adjust for the valuation level that applies on the day the retirement begins). Should the author of the article not be interviewing people in this field to learn whether they have learned from the mistake and are taking steps to see that it is not repeated?


  1. bannwd plop contributor says

    Thank goodness that the author of that rather dated WSJ article, the sources cited within, and the commenters to it, all seem to understand perfectly well the basic premise, and the application/limitation of the “4% rule”. Very much UNLIKE the shrill and misdirected Rob Bennett.

    Here is just one of the dozens of thoughtful, helpful, and germane comments made to the article:

    451 days ago

    Cheryl Krueger Wrote:

    The 4% rule is a great guideline for retirees to help them get their arms around how much they need to save for retirement. I do find that it is sometimes misunderstood in application. It’s important for retirees to have a portfolio that supports draw-down rather than accumulation, which is a shift in mindset. The portfolio shown in this article give some overall guidance on the risk profile and selection for a retirement portfolio, but taxation and withdrawal strategies are critical for retirees. The 4% rule provides the “what”. Nearly as important is the “how”.

    When I advise on portfolios for retirees, I draw significantly on my experience with asset/liability management from my actuarial days. I don’t do the same level of technical analysis (no, I don’t know the duration and convexity of each individual’s portfolio), but use strategies based on cash flow matching and immunization to determine the amount to hold in various asset classes. I use the 4% rule as a reasonableness check of some of the projections I do.

    The Society of Actuaries has developed a series of decision briefs for managing retirement decisions, found at this link: These briefs address issues including designing a paycheck for retirement, which reviews some of the tradeoffs made when deciding on how to draw down the portfolio.

    Cheryl Krueger, CFP(r), FSA

  2. Deleted plop contributor says


    SWRs are not the big problem for you and most of the unprepared people entering retirement. It is the low level of savings that is the problem. Therefore, why don’t you shift your focus to money saving ideas to help stretch those meager dollars.

  3. Rob says

    No one has ever pressured me to commit financial fraud on the subject of the low savings rate, Deleted. That’s the big difference.

    People say all sorts of things about the low savings rate. Just as people say all sorts of things about baseball and movies and politics and fashions. People do NOT say all sorts of things about safe withdrawal rates. The Buy-and-Hold Mafia sees to that.

    That’s what makes this issue different. It is the only issue I know of re which ONLY dishonest or uninformed posting is permitted. That’s not acceptable. People use retirement studies to plan retirements. We MUST permit honest posting on the topic. It is absolutely imperative.

    If this were not a big deal, there never would have been a single death threat, Deleted. The behavior of the Buy-and-Holders shows that they know that this matters. They are of course right about that.

    The problem is that Valuation-Informed Indexing is such a huge advance that it makes them feel bad that they did not come up with it themselves. The full truth here is that the Buy-and-Holders DID come up with much of it themselves. Valuation-Informed Indexing IS Buy-and-Hold except for the one thing re which the Buy-and-Holders made a mistake. We naturally fix the mistake. But the Buy-and-Holders are entitled to the credit re all the rest and “all the rest” is a very big deal indeed.

    I cannot help it that VII is a huge advance. If I could honestly say that it is some small thing, I would say that. But it is obviously not a small thing. It reduces the risk of stock investing by 70 percent. That’s obviously huge.

    We don’t want to stop working this. We want to work it hard enough to get us all to the other side of the Big Black Mountain, where it all turns into good stuff. Once we are all enjoying the good stuff, no one is ever going to want to go back to Buy-and-Hold ever again. Why would anyone want that?

    But the Buy-and-Holders WILL get credit for their huge contributions. I will see to it.

    I wish you all good things.


  4. Deleted plop contributor says

    Rob says: “People say all sorts of things about the low savings rate.”

    The low savings rate is the greatest issue that will cause people to fall short in retirement funding, Rob. The SWR will be minor, in comparison. The FACTS show the pathetic amounts in accounts and the ongoing savings rate is way short of what is needed. With such low balances, a SWR of 2,4,6,8, whatever won’t matter one bit. People will run through their cash in very short order due to the low levels to begin with.

    Look at the basic math. For people that earn between $40,000 and $100,000 (middle class America), the median 401K account at retirement is $105,000. Even with Social Security, the retirement account will be wiped out in a matter of a few years, regardless of the market and the associated SWR.

    Even though it is a moot point, the SWR discussions continue to be had on many boards. People are all able to give various opinions. You are not welcome as your behavior caused you to be banned.

  5. Rob says

    The same error that caused the Old School safe withdrawal rate studies to get the numbers wildly wrong caused the numbers in every other study conducted pursuant to the Buy-and-Hold Model to get the numbers wildly wrong, Deleted.

    The direct losses from Buy-and-Hold are $12 trillion.

    The total losses (direct and indirect) are in excess of $20 trillion.

    That’s more than all of the annual budget deficits we have had going back to the time of George Washington all added together.

    We need to open the internet up to honest posting on stock investing issues.

    That’s my sincere take re this one, in any event.

    My best wishes to you and yours.


  6. Deleted plop contributor says


    Back up your numbers with facts. Secondly, The vast majority of stock is held by the top 5%. The top 5% are not hurting. Third, you did not address my points. Fourth, the Internet is open to honest posting. You can find plenty of opinions on every subject, including SWR. What you mean is that some people have banned you and we know why.

    The majority of American will fall short in retirement due to lack of savings. Provide one link that proves otherwise.

  7. Rob says

    All you have to do is look at the numbers, Deleted.

    The dollar amount of overvaluation in January 2000 was $12 trillion.

    That’s not a Rob Bennett number. That’s a John Bogle number.

    And it is John Bogle who says that Reversion to the Mean is an “Iron Law” of stock investing.

    If you weren’t in such emotional pain over having been taken, you could acknowledge what the numbers say.

    The fact that Buy-and-Hold causes such emotional pain is a strike against it, not a strike for it. Yes, the fantasy-stuff wins it supporters during an out-of-control bull market. But how many people do you think there are going to be “defending” Buy-and-Hold following the next price crash?

    That’s when people like you will be going off to prison.

    And not because I didn’t try over and over and over again to help you out.


  8. Deleted plop contributor says

    And look where the market is now, Rob. Your $12 Trillion fantasy just flew out the window. The 5% that own the stock are doing well. Middle class America is not. The 5% don’t need help. Middle class America is not saving enough. Rob, you fail to show ANY proof that Middle Class America will fall short of retirement needs due to SWR calculations. The fact is, and remains, the poor savings rates.

    Your prison comment shows once again that you fall into the default of throwing out your little threat in the face of losing a debate.

  9. Rob says

    And look where the market is now, Rob. Your $12 Trillion fantasy just flew out the window.

    “Now” is the key word in the lines above, Deleted.

    I am a long-term investor. I don’t give a fig where the market is NOW. I care where it will be in the long-term. Following a bull market, prices always end up at one-half fair value. There has never in U.S. history been a single exception. That’s 65 percent price drop from where we stand today. There is not one middle-class person alive who can afford a 65 percent loss on top of the losses already suffered in recent years. Not me. Not you. Not anyone.

    Now doesn’t matter.

    If I were looking for a three-word tag-line to describe why Valuation-Informed Indexing is such a huge advance, those are the three words I would choose.

    Now doesn’t matter.

    That’s the entire story, Deleted. That’s the message we need to get out to millions of middle-class investors to pull ourselves out of this economic crisis.

    Today Sells.

    That’s the Buy-and-Hold tag line.

    That’s b.s. That’s marketing mumbo jumbo.

    Now doesn’t matter.

    That’s the real deal.


  10. Rob says

    Your prison comment shows…

    What is shows is that I care about my friends, even those friends who have participated in an 11-year smear campaign against me because I committed the terrible “crime” of telling them 10 years before any of the hot shot “experts” in this field that the Old School SWR studies get all the numbers wildly wrong.

    The reason why it upset you so much to hear that is that you were taken by the Wall Street Con Men’s ruthless promotion of a Get Rich Quick investing strategy.

    I am not the one who promoted Buy-and-Hold, Deleted. That was the other fella.


  11. Deleted plop contributor says

    Rob said: ““Now” is the key word in the lines above, Deleted.”

    Rob, you are making a case for buy and hold.

    Rob said: “What is shows is that I care about my friends”

    The people you say are going to prison are not your friends. They are also not going to prison. You bring up the prison line every time you are losing a debate. You try and leverage it as a threat.

  12. Deleted plop contributor says


    You keep avoiding the main point. Middle class America owns very little stock. It matters very little that the market goes up and down for most people. The vast majority of stock is owned by the top 5%.

    You and middle class America are standing on the deck of the Titanic. Stop arguing over which deck chair you get to sit in.

  13. Rob says

    The people you say are going to prison are not your friends.

    You are wrong, Deleted.

    They are my friends.

    And they are hurting.


  14. Rob says

    Middle class America owns very little stock

    The middle-class owns a small percentage of all the stock because the middle-class owns a small percentage of all the wealth.

    The less you have, the more important it is that you hold on to what you’ve got.

    One of the Wall Street Con Men might be able to lose $10 million and not feel the pain. For a middle-class person, losing $500,000 might mean losing a big percentage of his or her accumulated wealth of a lifetime.

    I will continue insisting on my right to post honestly, Deleted.


  15. Rob says

    You and middle class America are standing on the deck of the Titanic. Stop arguing over which deck chair you get to sit in.

    We are only on the Titanic if we fail to work up the courage to stand up to the Wall Street Con Men and watch our economy descend into the Second Great Depression.

    The peer-reviewed research that I did with Wade Pfau shows us all how to reduce the risk of stock investing by 70 percent. We are the luckiest group of investors ever to walk Planet Earth.

    The only thing we have to fear is The Buy-and-Hold Mafia and our unwillingness to stand up to them when they push their smelly Get Rich Quick garbage.

    My take.


  16. Deleted plop contributor says


    Your prison line is silly and once again shows you are wrong as the facts are not on your side.

    Middle class american can’t lose what they don’t have. Your $500K loss scenario is WRONG. The average for middle class American will not be much more than 100K and they will blow through that in short order. Any market changes will hardly impact what they have as it will be gone from spending.

  17. Rob says

    I will continue posting honestly on SWRs and on other critically important investment-related topics all the same.

    I wish you all good things, Deleted.


  18. what says

    If you don’t care about where the market is now, why do you care so much about where it was when it ‘lost 12 trillion dollars’?

  19. Rob says

    You know the answer, What.

    I obviously care that there is going to be an economic crisis.

    I don’t care what the numbers are at any given moment in the way that the Buy-and-Holders do, The Buy-and-Holders count the Pretend Money as real. That’s financial suicide.

    I don’t care to commit financial suicide. I prefer to use real (valuation-adjusted) numbers.

    You do too on some level of consciousness. What holds you back is your pride. You don’t want to admit having been taken by the Wall Street Con Men. You pay a big price for that false pride over the long term, in my assessment.

    I wish you well.


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