I enjoy reading the discussions and debates on investment forums such as Bogleheads.org, and one very frequently discussed and debated topic is the Safe Withdrawal Rate (SWR).  

The SWR is defined as the quantity of money that can be withdrawn from a portfolio over time, including inflation adjustments, without leading to a complete depletion (i.e. failure) of the portfolio during the investor’s lifetime. 

Last week, Professor Kenneth French addressed the subject of the sustainable withdrawal rate in a video post on the Fama/French Forum website, and I’ve posted the video here:

Most SWR discussions are based on historical data or Monte Carlo simulations, which I think can be very valuable.   However, Professor French’s approach of starting with the simplest case (long-term TIPS) and building from there helps to highlight that we are taking on real risk when we stretch for higher withdrawal rates. 

Leave a Reply

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

(required)

(required)