Monday, October 1, 2012

Save Withdrawal Rates

The subject of a save withdrawal rates from an investment portfolio keeps coming up. Someone I was reading over the weekend pointed to this research paper.

Before I stopped working in 1999, I had read a lot about save withdrawal rates. I decided to go with the theory you should earn 8% and withdrawal 4%. Since until that time I had average rates of return over 5, 10 and 15 years above that, I thought I would be fine.

Of course, along came 2001 and I lost a lot. I decided to change my withdrawal to what I earned and no more. It took me to 2006, but I reduced my withdrawal to income earned. I also adjusted my portfolio to earn more. My income yield, mostly from dividends, was under 3% and I got it to over 3%. I reduced my withdrawals to 3%. What also help is that I am into dividend growth stocks and my income did grow nicely.

I number of people remarked that I would be leaving an estate because I would not be touching my capital. That is fine with me. What I really care about is having money to whatever age I live to. Mortality tables only give average life expectancies and they are based on people who are dying now. There have been a number of women in my family that lived into their 90's, so I do have the possibility of living quite a while longer.

On my Investment Talk blog I am today writing about Organic Resource Management (TSX-ORI). Today, I am discussing the stock. To read about this stock go here....

This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. See my website for stocks followed and investment notes. Follow me on twitter.

1 comment:

  1. Just when everyone thinks we have hit bottom when it comes to interest rates they go lower. Mortage rates are now at 3.5% how much lower can they go.