How Would a Stock Market Crash Affect Your Safe Withdrawal Rate?

Posted on August 19th, 2013 by admin in How to Invest, Quant, Retirement, Safe Withdrawal Rate

We recently searched Google for “Safe Withdrawal Rate’ and discovered over 30 million links. Even a search restricted to just the past 30 days revealed thousands of links. It seems retirement planning is still a hot topic, so we decided to publish some of our own recent advances on the subject.

We previously solved a version of the SWR problem and published it on this site . We also published a simpler, descriptive version on Advisor Perspectives. We showed how your own beliefs about your investing performance would influence the SWR you could use.

But what happens to your withdrawal plans if sometime over your planning horizon there’s another financial crash like the one during 2008?  This question gets to the heart of investor attitudes and plans for retirement. We quantitatively answer that question in our most recent analysis of how a crash affects the Safe Withdrawal Rate.

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