Why does the safe withdrawal rate drop with bonds?
Nominal bonds do not adjust for inflation over long periods, which causes the safe withdrawal rate to plummet to 1 percent if you go all in on bonds. This realization catches retirees by surprise and ruins strategies that rely solely on high nominal yields.
What people tried
Every workaround mentioned in the threads below. We haven’t tested any of them — and nobody here is claiming they worked.
- 1Allocating a portion of assets to TIPS (Treasury Inflation-Protected Securities)
- 2Maintaining a diversified portfolio mix of stocks and bonds rather than 100% bonds
In their words
Unedited, most upvoted first, each linked to the thread it came from.
Where this came up
People with this problem also raised
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- 3How to rebalance a concentrated stock portfolio without a huge tax bill
- 2Keep defined benefit pension or roll over to an IRA?