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The advice I keep seeing says that you can safely withdraw 4% a year (adjusted for inflation) from a 60-40 portfolio over 30 years. This is all well and good, if your portfolio is 60-40 and you start withdrawing at age 70 – or 65 if you are more pessimistic about your longevity. I have always planned based on living to 100, without really hoping to make it that long, so this advice would have worked if I had started drawing on my portfolio at 70. However, I am now 78, and only started withdrawals two years ago. So far I have withdrawn less than 1% a year and the portfolio has increased by more than that. However, my withdrawals will increase as my CCRC fees increase, plus I am planning to travel this year.
I was going to write a post asking whether I could increase the percentage, because the portfolio only needed to last 22 years, or should reduce it because my withdrawals would increase more in line with the increase in health care costs than general inflation and because the portfolio is 50-50.
Now Morningstar has weighed in with a handy chart covering multiple portfolio allocations and multiple years. It tells me that a 50-50 portfolio should sustain a 5.3% withdrawal rate over 20 years – a significant increase. However, I don’t feel inclined to go that high, given the likely trend in health care costs and my CCRC fees. But maybe I should feel more comfortable with 4%? Thoughts?
BTW, although I asked for opinions about my own situation, I was also making a more general point. The 4% SWR only applies to someone in a very specific situation. If you are 60 years old, plan to live to 100 and have an 80-20 portfolio, you need a different percentage. Etc.
I’ve tried to post twice already links to articles on the kitces website, but apparently they aren’t getting approved. So I wont link to them. If you go to his website and search “4%” you will find a number of posts which address SWR for different situations. Some are long but they are quite informative.
Try posting a single link and then the second link on a separate comment.
When I’m logged in – I can see them with a comment in orange that says “! Awaiting for approval”. I’m assuming someone has to look at the links and approve them.