In my March 22nd article on how much you needed to retire I mentioned the 4% Rule based on the Trinity Study . Below I offer you an exhibit that provides a framework for which to allocate your assets, based on the likelihood that your money will outlive you. You certainly don’t want to outlive your money.
Along the top of the chart are a range of withdrawal rates. Along the left-side are various asset allocations. The rest is pretty self explanatory. In my opinion you can take this information to the bank! I believe this provides an accurate and probable prediction, based on the fact that this is based on the time period between January 1926 to December 2009. How many recessions, bear markets, market crashes, and panic occurred during this 83-year period? Don’t forget major wars, the oil embargo and hyper-inflation.
Regardless of this study, the chart provided, or anything an Certified Financial Planner will tell you; you must allocate based on your personal risk tolerance. Any financial expert will offer you rules to follow and they will offer up a retirement calculations based on the Monte Carlo Method. That’s all well and good, but at the end of the day you must allocate based on your risk tolerance. I provided the above chart to give you a guideline. Carpe Diem!