From an article about adjusting assumptions for retirement withdrawal rates in a ‘yield-free’ world.

http://www.advisorone.com/2012/06/27/retirement-in-a-yield-free-world?t=the-retiree

The author makes some important points about the rule-of-thumb that so many use for planning the level of withdrawals that’s “safe” from a given portfolio (or flipping it around, the level of savings that will be necessary to support a given level of spending in retirement).

In short, given the high ultra-low “real” interest rate – and how that impacts long-term expected returns of both bonds and stocks, it seems that the old studies do not give us a great prediction of future “safe” withdrawal rates.

And he finishes up with a suggestion for one means of adding some safe yield – one which we often discuss with clients as a potential alternative should portfolio performance not meet our expectations.  It’s a good article, thought-provoking, and worth reading.