The statistician says rigid withdrawal rates often cause retirees to underspend. He has a formula that balances secure income with flexible spending.
Our guest on the podcast today is Stefan Sharkansky. Stefan is a Ph.D. statistician who specializes in finance. He wrote a provocatively titled paper, “The Only Other Spending Rule Article You Will Ever Need,” which was published in the Financial Analyst Journal. Stefan has also developed a related website called, The Best Third, designed to help people with their retirement spending plans and portfolio structures. In addition, he developed and operates the website PersonalFund.com, which provides proprietary cost analysis of mutual funds to financial advisors. Stefan has a B.A. in mathematics from the University of Wisconsin-Madison, an M.S. in computer science from Stanford University, and an M.S. and a Ph.D. in statistics from the University of Washington.
00:00:00 Introduction
00:02:43 Why the 4% Rule Can Lead to Underspending
00:07:23 TIPS Ladders vs. Retirement Annuities
00:08:48 Reducing Fixed Spending and Stock Allocation
00:12:09 Why Individual TIPS Beat TIPS Funds
00:18:53 A Formula for Stock Portfolio Withdrawals
00:23:54 Historical Returns vs. Monte Carlo Simulations
00:29:30 Should Retirees Diversify Globally?
00:32:23 Leaving a Bequest Without Underspending
Brett Arends: Worried About Outliving Your Money? There’s an Answer
Dana Anspach: Don’t Let Fear Ruin Your Retirement
Bill Bengen: ‘Inflation Is the Greatest Enemy of Retirees’
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