Contrary to what most of us would expect, the worst periods to retire weren't those that included the Great Depression. They were the sizzling 1960s. Several years ago, Peter Lynch suggested that a retiree could safely withdraw 7 percent a year from an all-stock portfolio. It seemed like a reasonable idea. This happens for the same reason that a man can drown in a river with an average depth of one foot if he falls in one of the places where the river is eight feet deep.
Some years are good.
Some years are bad. Do the calculations year by year with actual returns and the results are quite different from the average return for the period. The result seems logical enough, since the actual annualized return on large-company stocks was 12.6 percent for the period. Actual experience, however, tells another story. That's a withdrawal rate of more than 14 percent.