I’ve posted Entry #371 to my weekly Valuation-Informed Indexing column at the Value Walk site. It’s called The Biggest Problem With Buy-and-Hold Is the Questions It Takes Off the Table — Part Three.
Juicy Excerpt: The full reality here is that the 1.1 percent withdrawal rate that applies for retirees who insist on retention of the full starting-point portfolio value is not that much less than the 2.0 percent number that applies for retirees who are okay with seeing the portfolio balance reduced to $1 over the course of 30 years. That’s not much of a price to be paid for the benefit attained by paying it. Say that the investor began retirement with a portfolio of $1 million. The difference here is that the investor taking an annual withdrawal of $11,000 is assured of being able to pass along at least $1 million to heirs or charities while the investor taking an annual withdrawal of $20,000 is assured of being able to pass along nothing. The retiree who wants to pass along $1 million instead of zero needs to reduce his annual withdrawal by $9,000. That’s not a bad deal!