Sunday, December 8, 2013

Wall Street Journal Spreecast: Does the 4% Rule Still Work?


On Monday, December 9, at 3pm Eastern, Anne Tergesen of the Wall Street Journal will be hosting a 30 minute webcast called, "Does the 4% Rule Still Work?"  I will be joining her panel along with (my frequent co-author) David Blanchett, and the original creator of the 4% rule, William Bengen. If you can't make it live, replays are available. 

4 comments:

  1. Nice webcast - I didn't get a chance to ask my question, but if you're so inclined, perhaps you can address it here. Regarding your advice to reduce equities early in retirement and increase as you get older, if you were planning a 40 year retirement (retiring early) to what level would you reduce equities and at what point? I am 3 years from my projected retirement date and wondering when and how much to reduce my equity exposure in order to give me the best result for the long term.

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    1. Tara,

      Thanks. It's hard to answer your question without more background on your situation. Based on the article, we are not suggesting to make any sudden jumps in stock allocation. It's more of a gradual process over time with the lowest stock allocation occurring right around the retirement date. How low? For a 40 year horizon, I'd be thinking somewhere in the neighborhood of 20-60% depending on your risk tolerance and risk capacity, but it could be justifiable for you to go outside these bounds in either direction as well. Hopefully after the big run-up in the stock market this year, you are that much closer to your retirement goals and rebalancing will take some of the risk off the table on help you more toward "locking in" your retirement spending goal.

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  2. Thanks - I am indeed looking to rebalance and take some risk off the table and move toward locking in my gains. Just not sure how far to go. My risk tolerance is quite high, but due to not having a lot of margin above my target number, I am feeling my risk capacity is much lower than my tolerance. I was thinking to go 50/50, which sounds like it is within the realm of a reasonable allocation for my goals.

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    1. Tara,

      I can't really say one way or the other whether I would support that choice without a lot more information, but at least I do not see any obvious reason to reject your choice. It is within the realm of reason.

      Best wishes, Wade

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