Now, since you’re using the bucket of money strategy, then I’d have to take in a much lower assumption of average return. Since I’d be in retirement, my fixed income bucket will be the largest bucket. Looking at CD rate today, I’d be lucky to get 2%. Stocks is negative YTD and negative for 2011.
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No, your fixed income bucket should not be the largest bucket. But then again, there is no such thing as a one-size-fits-all solution.
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Are you ignoring the example I gave of a retiree in 2000 with $2.4M? If you use the bucket strategy, you’d be much better off than putting 100% into S&P and DOW, but your total nest egg is still greatly depleted.
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Yes, I ignored it because I am not sure what you’re trying to show here. With $2.4M at retirement and you chose to w/d $100K/year? Why $100K? How long do you plan to have your nest egg last?
How much you should w/d a year should not only be determined by how much you have but also how long you plan to live off of that nest egg. If you’re worrying about depleting the nest egg too quickly then reduce your withdrawal or increase your nest egg. As for me, if I want that $2.4M to last 30 years then I would withdraw no more than $80K on my first year. During the subsequent years, how much I can take out will determined by how well my portfolio is doing. The withdrawal RATE is constant not the withdrawal AMOUNT. It’s called fluctuations.
