Withdrawal Rules of Thumb Seductively Simple, Yet with Limitations

Stolz, Richard F.
March 2009
Journal of Financial Planning;Mar2009, Vol. 22 Issue 3, Special section p22
Academic Journal
The article discusses rules for the withdrawal of retirement funds. The four percent drawdown rule popularized by William P. Bengen in his study "Determining Withdrawal Rates Using Historical Data" and his book "Conserving Client Portfolios During Retirement" is analyzed. The question on how useful general rules are for financial planners advising individual clients is addressed. It is noted that such rules are based on historical data and Monte Carlo analysis, but there are intrinsic limits to the usefulness of probabilistic recommendations.


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