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El
I know how poorly cash does as an asset class over the long term. I know that.
A lot of studies about the 4% rule put it through different market environments ie cape>20, etc.
Has any study been done about retiring in a relatively high rate, high cash return environment?
Like if someone retired now or in the past 6 months or so what their SWR would be?
MarkWhat’s a “high” cash return environment. It will never beat inflation
FrankI am not aware of “a lot of studies” that show a CAPE ratio can actually be used as a crystal ball for anything useful with respect to the 4% rule (or really predicting much of anything prospectively).
In fact, it has not worked at all since it became “the next greatest thing” around 2011 and everyone writing those articles then said it meant we were about to have a lost decade.
Remember that lost decade in the 20-teens? Yeah, me neither.
It didn’t work. At all.
The problem is that it is not a stable mean to revert to and is much higher on average in the post-internet world than it was in the last century.
So, if it “works” as a crystal ball in the future, it will be due to random chance and not via any magical predictive powers.
“Not spending much money” always works, though. But you don’t need a crystal ball to apply that strategy.
BTW, this is not a “high rate, high cash return” environment.
It is a very average one by historical standards, just higher than the extremely low one after the GFC.
As Bengen found in the original 1994 SWR study and everyone has found since, holding more that 10% of cash or t-bills in a portfolio tends to degrade the safe withdrawal rate.
Nobody has ever contradicted that finding with any historical analysis.
ChristopherProbably no studies, but periods where cash outpaces inflation are generally short lived.
Selecting for it is likely no different from market timing, or sequence risk overall – if you hold cash, and it’s doing well, your SWR is marginally higher.
If you hold stocks, and the do well, your SWR is marginally higher. Holding X when X does well means you do well, for all values of X.
I’d skip the study, and start asking for funding
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