#119: Once upon a time, in southern California in 1994, there lived a man named William Bengen. He read many claims, widespread at the time, that said that since the markets return at least 7-9 percent compounding rates on average, retirees could withdraw and spend 7 percent of their portfolio. William had a hunch that this was misguided. He decided to prove it. He looked at 30-year timespans in U.S. history, starting from 1926. The first timespan ranged from 1926 to 1955. The second timespan ranged from 1927 to 1956. And so forth. He assumed that the retiree held 50 percent stocks, in the form of an S&P 500 Index, and 50 percent bonds, in the form of intermediate-term government bonds. Then he asked two questions: First, what was the worst-case scenario? Retiring in 1966. The 16-year timespan from 1966 to 1982 was extra-rough, and experiencing this sequence of returns at the start of retirement made for one sad, sad puppy. Second, how much could an investor sustainably withdraw from her portfolio during that worst-case scenario? The answer was 4.15 percent in the first year, and 4.15 percent, adjusted for inflation, every subsequent year. And thus, the 4 percent rule-of-thumb was born. And we all retired happily ever after. ____ Or did we? This week's episode features an interview with Dr. Wade Pfau, who offers counterintuitive ideas about retirement income. Dr. Pfau is a Professor of Retirement Income at The American College of Financial Services. He holds a Ph.D. in economics from Princeton. He's a chartered financial analyst. He won two awards for "most outstanding contribution" from the Journal of Financial Planning. He won another award for "best paper in retirement planning" from the Academy of Financial Services. This guy knows his stuff. And he's ... *cautious* ... about the 4 percent rule of thumb. What are his concerns? What can we expect? And how much money can we spend in retirement -- whether we enjoy a traditional or early retirement? Find out in today's episode. ____ For resources mentioned, visit https://affordanything.com/episode119 Learn more about your ad choices. Visit podcastchoices.com/adchoices