Typically, higher risk investments yield higher interest rates. Risk implies a greater potential for loss. There should be a shift to a more conservative portfolio. Figure 3 should be analyzed in the context of reasonable interest rates. It would be foolish for a retiree to count on an historic high return to reach investment horizon.
Retirees are concerned with how much they can draw annually.
Figure 5 provides a clear table of annual withdrawal levels given different investment horizons and interest rates. At any given investment horizon, increasing the interest rate one percent causes a noticeable increase in the withdrawal level. Once again, the time factor greatly increases the compounding effect. Certainly, the calculation itself shows that increasing the interest rate at a given investment horizon allows for a greater withdrawal level. Increasing the investment horizon at a given interest rate reduces the possible withdrawal level.