Reasonably Safe, Not Safe

I have repeated attempted to withdraw 6% (plus inflation) for 60 years using a traditional liquidation strategy in today’s market. All of my attempts have failed. They have been Reasonably Safe. There is about a 20% chance of failure.

Withdrawing 6% of the original balance pushes a portfolio into danger rapidly when the market goes against you. Limiting the 6% to the current balance instead of 6% of the original balance (plus inflation) is one approach that assures survival, but your income may fall in half.

A much better approach is to take advantage of high dividend Exchange Traded index Funds. DVY is already delivering an income stream (distribution yield) of 6.9%. This gives you a nice cushion if prices continue to drop. Lower prices would allow you to buy at even higher yields.

Diversifying strategies pays off. Include dividend investments.

Have fun.

John Walter Russell
February 16, 2009