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Other  Withdrawal Targets
Home Ending Value Graph Income Volatility Graph Worst Year Graph Average Income Graph


The Methodology
Fixed Annuity Issue
Market Risk
Combining It all
Other  Withdrawal Targets
Withdrawals Forever
Efficient Frontiers
Simple and Efficient
Alternatives/Next Steps
Omega Strategy (not)
About the Author

Next I did a quick analysis to find out just what it would take to generate a "zero volatility" withdrawal scenario for the case described in Market Risk. I defined "zero volatility" to be no years in any of the 54 different 30 year withdrawal scenarios where the withdrawal amount was less than 90% of $44,000 (inflation adjusted). I did not change the withdrawal rules (this included keeping the withdrawal cap at 4.4% through 7% of the portfolio value). The answer was simple - just add a cool $390,000 to your initial $1M portfolio and you now have zero volatility (as I defined it) in all cases for the Market Risk scenario.   As the statistician would say to the engineer "My job is done - now it is simple matter of implementation." 

Next I repeated the Market Risk study but I increased the withdrawal target by 25% to 5.5% of the initial $1M portfolio.  I also increased the final year withdrawal limit used in the previous Market Risk study from 7% to 8%. Otherwise the parameters of the study were the same (same asset allocations, etc.). The results of this analysis are available via the links below (and at the top of the page). The 4.4% results are shown along side the 5.5% results for ease of comparison.

The ending value of the portfolio (after adjustment for inflation) after 30 years. Click Here.

The number of times that the annual withdrawal had to be reduced by more 10% of the original withdrawal amount (after inflation adjustment). Click Here.

The largest income drop encountered in each of the 30 year retirement scenarios. Click Here.

The average inflation adjusted withdrawal amount. Click Here.  

My fundamental conclusion after seeing this data is that if you are willing to accept the additional potential volatility of this more aggressive withdrawal target, and are willing to use more aggressive equity allocations, 5.5% it is not unreasonable. I come to this conclusion primarily from the Ending Value graph which shows that even in the worst starting year you still had over half of your initial portfolio (after inflation adjustments) at 30 years. I have included a few additional comments inside the four comparative graphs.

Next Chapter.