Backtesting a 7% Withdrawal Rate w/ a 100% Stock Portfolio

PFR Nation,

Last week we dove into the 7% rule back tested to see how it held up over the last 10 and 20 years. Overall, it held up pretty well with a 50/50 and 75/25 asset allocation (stocks/bonds). However, one of the questions I received was, “Why not 100% in stocks?!” And it’s a great point. After all, the S&P 500 has returned 10.5% over the last century. 10.5 – 7 = a 3.5% SURPLUS annually, right? Well, that ignores the sequence of returns. This is the TIMING of when you get hit with a downturn in stocks, regardless of what the long-term average is.
In this Whiteboard Fireside Chat, we’ll dive into the 7% withdrawal rate over the last 20 years, the last 10 years, and then finally, a “special” 10 year period that you won’t want to miss.
I’d love to hear from you. What kind of rate of withdrawal will you start with in retirement? What are you doing to protect against sequence of returns risk?
Thanks for tuning in!
Kevin


00:00 Introduction
01:28 Why the 7% Rule over the 4% Rule?
04:49 Back test #1: $1million with a 7% rate of withdrawal using a 100% S&P 500 allocation over the last 20 years
20:56 Back test #2: Same scenario, but using the last 10 years
22:18: Back test #3: 7% Rate of Withdrawal during the Lost Decade
26:07: For retirees, the sequence of returns matters MORE than the average returns
27:17: Summary and teeing up next week’s episode!

Are you interested in learning more about working with me on your retirement plan? You can start with visiting my firm's website at https://imaginefinancialsecurity.com/

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I look forward to hearing from you and seeing how we can help fire your boss, maximize retirement impact, minimize your lifetime tax bill, and worry less about money. -Kevin

*This is for general education purposes only and should not be considered as tax, legal or investment advice