“Knowing the Safe Withdrawal Rate Is of Huge Value. In January 2000, the Safe Withdrawal Rate for an 80 Percent Stock Portfolio Was 1.6 Percent. The Safe Withdrawal Rate for a 100 Percent TIPS Portfolio Was 5.8 Percent. Those Are Shocking Numbers That Would Help Every Investor on the Planet Understand the Dangers of Following a Buy-and-Hold Strategy (Which Would Not Call for Market Timing When Stock Prices Reached Insanely Dangerous Levels).”

Set forth below is the text of a comment that I recently posted to the discussion thread for another blog entry at this site:

<i>“ The Greaney study (and other similar studies) were very clear in what they were calculating. They calculated the inflation adjusted withdrawal rate that survived 30 year periods in the past.

The rate you are looking for (I believe) is what rate is going to survive in the future. Those are two different things.”

Uh, oh. There goes the $500 million.</i>

I don’t think so, Anonymous.

There have been many occasions on which people have visited our boards and asked if someone could tell them the safe withdrawal rate. I cannot recall a single time when someone asked to know the surviving withdrawal rate. It is certainly true that Greaney calculated that number accurately. But that number is not much more than a curiosity. What people need to know when planning a retirement is what withdrawal rate is safe. Greaney clearly understood that. He referred to the 4 percent number as the “safe withdrawal rate” on thousands of occasions. In fact, he often claimed that a 4 percent withdrawal rate is “100 percent safe” (he even said this when the safe withdrawal rate was 1.6 percent and when the odds of a retirement plan calling for a 4 percent withdrawal surviving 30 years were only 30 percent. When a fellow community member (BenSolar) suggested that we bring all the nastiness to a close by agreeing to refer to the 4 percent number as the “Historical Surviving Withdrawal Rate,” Greaney refused to even consider the idea.

Knowing the safe withdrawal rate is of huge value. In January 2000, the safe withdrawal rate for am 80 percent stock portfolio was 1.6 percent. The safe withdrawal rate for a 100 percent TIPS portfolio was 5.8 percent. Those are shocking numbers that would help every investor on the planet understand the dangers of following a Buy-and-Hold strategy (which would not call for market timing when stock prices reached insanely dangerous levels). We need to be discussing these matters in civil and reasoned and honest discussion.

My sincere take.

Rob