I am confused when you say things like “4% is a safe withdrawal rate” but then later say during a bear market “if your withdrawal rate gets to 5% or higher reduce your income”

This implies to me you are looking at their retirement on day 1, say they have 1 million, and then tell them they are safe to take out 40k for life.

Why shouldn’t a client just plan to take out 4% of their retirement fund each year? If it’s up, then they got a bonus that year! Save it or take another trip. If the market is down, gotta trim some spending

What am I missing?

I recently listened to your discussion regarding remaining 100% invested in equities throughout retirement, and I found your “Go Kart Strategy” perspective very compelling.

I was curious to get your thoughts on a slightly modified approach for retirees who are no longer earning employment income.

For example, suppose a retiree has approximately a $3 million portfolio and maintains a relatively small allocation (perhaps 7–8%) in short-term bonds, with the remainder invested in broad equity index ETFs.

The idea would not necessarily be to reduce volatility materially or to market-time, but rather to create a modest liquidity buffer that could potentially be used during major market drawdowns (for example, used for 20%+ declines). During those periods, the retiree could temporarily draw from the short-term bond allocation and portfolio distributions instead of selling equities at depressed prices.

Even if the bond allocation did not fully cover an extended downturn, it could still reduce the amount of equities sold during the worst parts of the decline and potentially help the retiree remain fully invested emotionally and behaviorally.

I also recognize that, mathematically, a 100% equity portfolio should outperform over the long term under ideal conditions. However, real life is not always mathematically perfect, particularly during retirement when there is no ongoing employment income. In that context, I wonder whether a relatively small allocation to short-term bonds may have some practical value despite the modest long-term drag on returns.

For example, would the long-term outcome difference between a retiree remaining 100% invested in equities versus maintaining a 7–10% short-term bond allocation actually be materially significant in practice? Especially if that small bond allocation helps the retiree stay disciplined and avoid selling equities during severe market downturns.

To me, this seems less about market timing and more about maintaining optionality and staying the course during difficult periods.

In some ways, this also seems conceptually similar to the liquidity reserves maintained by institutions or even aspects of Warren Buffett’s philosophy regarding cash reserves and staying invested during periods of market stress.

I would genuinely appreciate your thoughts.

Thank you again for your excellent content.

Hi Pablo,

With “self-made dividends” you just withdraw the cash for your lifestyle from your investments each month. You may be able to automate it to send you the same amount on the same day each month.

They are not actually dividends. When you sell an investment each month to get your cash, you may trigger a capital gain for the amount above the book value. You get a combination of capital gain and your own money back.

You can use this same method for all your accounts, including RRSP & TFSA, although the tax is different.

This process allows you to stay invested for growth through your entire retirement, which provides a signficantly more comfortable retirement for you.

Ed