What’s the ideal annual withdrawal rate?
September 3, 2019 by Craig L. Israelsen
There is one question asked by all planners’ clients: “How much can I safely withdraw from my retirement portfolio?”
There are so many personal variables to factor in for each client that it might seem impossible to approach any sort of sensible answer. But we actually can — premised on several assumptions. Here I’ll show you how.
The analysis I’ll present is based on a portfolio composed of four primary asset classes: large U.S. stock, small U.S. stock, U.S. aggregate bonds and U.S. cash. Large stock is represented by the S&P 500, while small U.S. stock is represented by the Ibbotson Small Stock Index from 1961 to 1978 and the Russell 2000 Index from 1979 to 2018. U.S. bonds are represented by the SBBI U.S. Intermediate Government Bond Index from 1961 to 1975 and the Barclays Aggregate Bond Index from 1976 to 2018. U.S. cash is represented by 90-day Treasury bills.