Retirement Savings

The general misconception is that as we enter and proceed in our retirement years, we should be more conservative and have a higher percentage of binds rather than stocks. Nothing could be more wong. As the tables below shows, the 70 years of data show that the portfolio with the best chance of maintaining itself over a period of 30 years were the portfolio with more than half stocks

For example, A portfolio with the owners tasking 8% annually had a 78% chance of lasting for 30 years but the portfolio of 75% bonds had only a 5% chance of lasting. In other words, the advice to stock with "safe" fixed income investments would not have been safe at all.

In fact, an experienced and knowledgeable retirement planner will tell you something that you have never heard before: wealthy people can afford to keep their money in the bank at low rates. It's middle income people who cannot afford to do so--they must have exposure to equities if they want their money to last over long periods.

The Trinity Study Tables

Table 1: Portfolio Success Rate: Percentage of all Past Payout Periods From 1926 to 1995 That are Supported by the Portfolio

Note: Numbers in the table are rounded to the nearest whole percentage. The number of overlapping 15-year payout periods from 1926 to 1995, inclusively, is 56; 20-year periods, 51; 25-year periods, 46; 30-year periods, 41. Stocks are represented by Standard and Poor's 500 Index, and bonds are represented by long-term, high-grade corporates.
Data source: Calculations based on data from Ibbotson Associates.

Portfolio Composition/ Payout Period	Withdrawal Rate as a % of Initial Portfolio Value
Portfolio Composition/ Payout Period	3	4	5	6	7	8	9	10	11	12
100% Stocks
15 Years	100	100	98	98	93	91	88	77	63	55
20 Years	100	98	96	94	92	84	73	61	47	43
25 Years	100	98	96	91	87	78	70	50	43	35
30 Years	100	98	95	90	85	78	68	54	49	34
75% Stocks-25% Bonds
15 Years	100	100	100	100	96	95	91	79	63	46
20 Years	100	100	100	96	94	88	71	51	41	33
25 Years	100	100	98	96	91	78	57	46	33	26
30 Years	100	100	98	95	88	73	54	46	37	24
50% Stocks-50% Bonds
15 Years	100	100	100	100	100	98	91	71	50	36
20 Years	100	100	100	100	96	88	61	41	25	10
25 Years	100	100	100	98	96	70	43	22	7	0
30 Years	100	100	100	98	90	51	37	15	0	0
25% Stocks-75% Bonds
15 Years	100	100	100	100	100	100	91	50	21	14
20 Years	100	100	100	100	100	71	24	12	4	2
25 Years	100	100	100	100	78	22	9	0	0	0
30 Years	100	100	100	100	32	5	0	0	0	0
100% Bonds
15 Years	100	100	100	100	100	79	43	38	14	7
20 Years	100	100	100	96	47	35	16	6	0	0
25 Years	100	100	98	52	26	7	2	0	0	0
30 Years	100	100	51	27	0	0	0	0	0	0