My good friend Wade Pfau’s conscience must be bothering him. He has recently worked up the courage to begin posting honestly again on at least some critically important investment-related topics.
It gets better.
Motley Fool, the site at which I posted my famous post of May 13, 2002, pointing out the errors in the Old School safe-withdrawal-rate studies (SWRs) and which for years now has prohibited honest posting on SWRs (after John Greaney, the author of one of the discredited retirements studies, threatened to kill family members of anyone who dared to “cross” him by posting honestly re this matter), is now permitting at least a limited amount of honest posting on the subject.
A recent article at the site titled Retiring Now? How the 4 Percent Rule Could Hurt You, states: “Recent research using current market data shows that the rule could be far from safe.” Hmmmm….
The article adds that: “In the current market environment and a 40/60 equities and bonds split, a 4% withdrawal rate has over 50% chance of failing over 30 years.” Sounds familiar somehow!
It points to research done by Wade showing that: “To get the failure rate down to 10% in the “worst case” conditions, the authors had to reduce their hypothetical withdrawal rate to 2.5%, with a portfolio mix of 45% stocks and 55% bonds.” So it turns out that retirement plans calling for a 4 percent withdrawal are NOT “100 percent safe” (as Greaney’s study — uncorrected to this day — claims) afterall!
The article explains that: “It’s just that those age-old rules about what is safe or not safe are not set in stone: the market changes, and so should your rules of thumb. Just because 4% was determined to be safe at one point doesn’t mean it will stay that way forever. ” The 4 percent rule really worked until you used it to plan your retirement. Only after you retired and stocks continued to perform as they always have in the past did the 4 percent rule become insanely dangerous. Too bad for you, you foolish middle-class investor you! You believed that the Wall Street Con Men were shooting straight! The joke’s on you!
I noticed a helpful note at the beginning of the comments section asking readers to: “Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. But please don’t feel any hesitation to threaten to kill family members of posters who post honestly re the numbers that their friends use to plan their retirements.”
Actually, that last sentence is mine, not Motley Fools’. The owners of the Motley Fool site are not any more willing to tell you how they really administer the board than they are to tell you the true safe withdrawal rate in time for it to help you plan your retirement effectively.
All that said, we should be thankful today that we are beginning to see tiny shoots of honestly burst up through the cold hard ground that has come to dominate the investing advice field in the Buy-and-Hold Era. Let’s hope that Motley Fool and Wade Pfau and lots and lots of others make it more of a habit to offer honest investing advice in days to come. I believe that we will be seeing a lot of this sort of thing following the next price crash. I am sure of it!
I wish you a very happy Thanksgiving!
Backatcha, Grandpop.
Rob