I’ve posted Entry #289 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called Is It Possible That the 4 Percent Rule Still Applies Even Though the Safe Withdrawal Rate Varies With Changes in Valuations?
Juicy Excerpt: I engaged in extensive e-mail correspondence with him re this topic a number of years back. He took the same position then that he takes in his recent article — he believes that the SWR can climb higher than 4 percent at times of low valuations but that it can never drop below 4 percent no matter how insanely high valuations go. But his mind is not entirely closed. He said: “If Russell’s [the reference is to John Walter Russell, my partner in development of The Retirement Risk Evaluator, the first New School SWR calculator, one that adjusts for the valuation level that applies on the day the retirement begins] projections of a sub-2% withdrawal rate prove to be true, or are anywhere close, those who retired back in 2000 may ultimately find that the ‘4% safe withdrawal rate’ was still far too aggressive, making the point once again about how critical it is to incorporate market valuation into retirement projections!” Kites told me that: “I’m quite encouraged with John Russell’s results” and that “I’m not saying that the New School is wrong, I’m just saying that I don’t think it’s appropriate to state that the New School has proven the Old School wrong to the point that the Old School should be utterly and completely dismissed.”