Drawdown: safe withdrawal rates

Something for me to integrate later because at the moment it's mainly covered via links.

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The US Dow fell by 89% between the 1929 peak and 1932 trough with the great depression accompanying it until WW2 and that's not even the case which sets the US SWR.

The UK worst case starts just before WW2 and includes much physical destruction, huge costs and national debt with food rationing until July 1954, 16 years in. With milk restrictions into the 80s limiting cheese production this retiree would expect to be dead before food restrictions ended.

The US worst case was high inflation in the 1960s and Bill Bengen of the 4% rule has written that it's what concerns him most. Looking at historic UK inflation and using the BoE calculator to buy in 1983 what £1 bought in 1970 would cost £4.58. That's comparable to bonds as well as equities dropping to just 21.8% of their initial value.

Those situations were far worse than a 50% equity drop that never recovers in say a 50:50 portfolio that retains 75% of its value but it's quite common for a 50% drop to be used as an example that's thought of as bad.

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I've updated the end of the first post with a new date:
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Investment highlight: July 2020 December 2018 August April 2017: You should have lower than usual equity investments at the moment because cyclically adjusted price/earnings ratios (PE10) are above average in some major markets, particularly the US. You might also favour lower PE10 markets with higher than their usual equity weights.  I like P2P lending rather than corporate or government bonds for this. See Guyton's sequence of return risk reduction and Bengen's interesting timing thought in the last paragraph of his 2016 small cap paper. But remember that while this has good predictive value for ten year investment returns it has none for one year so it can't tell you specifically when to change, just when conditions are less favourable for equities.

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With restoration  of market values after March's drop comes expected lower returns and drop risk. At least until a month before the next US election I expect "Don't fight the Fed" to rule many markets due to huge stimulus programs. US markets tend not to like Democrat Presidents or the potential for them.

Governments overall clearly have learned from the events of 2008 and the desirable and often larger spending seems to have mostly been delivered without big political fights.

This is what Bengen wrote in that September 2016 paper: "One thing seems fairly clear to me: This is likely a poor time to be frisky with one’s retirement withdrawal strategy. Valuations seem so stretched, and economic prospects so limited, that a sizable stock market correction seems likely. When that correction will occur, I can’t say. But given the cyclicality of markets, an opportunity will inevitably present itself, and the best time for implementing these asset allocation concepts might be following such an adjustment in prices".

March offered such a brief opportunity that I doubt many retirees exploited it.