← The Long View
The Long View
Bill Bengen: ‘Inflation Is the Greatest Enemy of Retirees’
00:45:13
The author and creator of ‘the 4% rule’ discusses the pros and cons of various withdrawal strategies and key risk factors facing retirees today.
Loading summary
Transcript99 lines
- [00:00]
Vanguard Narrator
Lots of firms throw a couple flashy funds your way and call it a day. But not Vanguard. Vanguard bonds are institutional quality. Institutional quality isn't a tagline. It's a commitment to your clients. It means top grade products across the board. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself@vanguard.com audio. That's vanguard.com audio all investing is subject to risk. Vanguard Marketing Corporation Distributor Please stay tuned
- [00:28]
Morningstar Disclaimer Reader
for important disclosure information at the conclusion of this episode.
- [00:34]
Amy Arnott
Hi, and welcome to the Longview. I'm Amy Arnott, Portfolio strategist for Morningstar.
- [00:39]
Christine Benz
And I'm Christine Benz, Director of personal finance and Retirement Planning for Morningstar.
- [00:44]
Amy Arnott
Our guest on the podcast today is William Bangan. Bill has been a prolific researcher of retirement planning matters over his career, and he pioneered the exploration of safe withdrawal rates with his groundbreaking 1994 research that gave birth to what's now called the 4% rule. His new book, A Richer Supercharging the 4 Percent Rule to Spend More and Enjoy More, was published in August 2025. Bill is the former owner of Bengen Financial Services, an independent register investment advisor that he launched in 1989 after his family sold the soda bottling business that he had helped manage. He received his Bachelor of Science degree in Aeronautics and astronautics from MIT. Bill retired from his financial planning practice in 2013, but continues to conduct research on retirement planning and withdrawal rates. Bill, welcome to the Longview.
- [01:43]
William Bengen
Glad to be here.
- [01:45]
Amy Arnott
Well, thank you so much for joining us. So the last book, Conserving Client Portfolios During Retirement, came out in 2006. And you write that A Richer Retirement, which was published in August 2025, is more than just an update to that book. What did you want to accomplish with this book?
- [02:08]
William Bengen
Basically, my purpose was to provide a complete overview of my methodology for determining safe withdrawal rates and written for the non professional. The first book was written for professionals. I thought after all the communications I've received from folks all over the world, I owe them a book for them. So that's what I did.
- [02:33]
Christine Benz
So what were the most common approaches to retirement withdrawals before 1994, when you published your seminal research paper about safe withdrawal rates, did most advisors assume a constant rate of return along the lines of what Bill Sharpe criticized in his speech and paper, which he called financial planning and fantasy land?
- [02:56]
William Bengen
Yeah, I think back in 94, it was still a very new topic for a lot of advisors because they had just like I had started getting clients who were, you know, early baby boomers that were just starting to think about retirement 20, 25 years away. So I did kind of informal survey of my fellow advisors in San Diego back then, and their answers were all over the map. Really hard to find any kind of consistent approach in there. That's why I ended up doing the research myself.
- [03:27]
Amy Arnott
And what was the early reception to your article that was published in 1994, determining withdrawal rates using Historical Data? Did it kind of start generating a lot of interest right away?
- [03:42]
William Bengen
Yeah, surprisingly so. And generally it was overall positive. Although I did get some hate mail. Some people were not happy with my conclusions for some reason, and so they vented at me. But for the most part it seemed like the profession developed a strong interest in it, which surprised me. And I started getting invited to conferences and speaking.
- [04:05]
Christine Benz
So Bill, you previously added small cap stocks to your benchmark for historical testing, which boosted the old 4% rule to the 4.5% rule. You recently added four new asset classes to your sample portfolios, which included microcap stocks, mid cap stocks, international stocks, and treasury bills, which allows for a 4.7% withdrawal rate based on historical data. Some people have questioned some of the historical return data for microcaps especially, and whether that performance is sustainable going forward. What's your take on that?
- [04:42]
William Bengen
Yeah, it's a fair question. Historically, they've generated higher returns in large cap stocks. The problem is in today's world, a lot of the best small companies get siphoned off from venture capital before they even reach the public market and therefore they are not included in funds which supposedly hold microcaps and small caps. So it's a problem. I don't know how big it is yet. I think next year or two will probably tell us a lot about that. But there's definitely change in the wind that we have to be aware of.
- [05:22]
Amy Arnott
So the book has a wealth of data about historical safe withdrawal rates. And you point out that the safe max, which is the term that you use for the safe maximum withdrawal rate, has actually been as high as 16.2% for people who started retirement back in July 1932 and as low as 4.7% for people who retired in October 1968 with a long term average of 7.1%. But that safe max number has been trending lower in recent decades. Can you talk a bit about why that is?
- [06:07]
William Bengen
Yeah. The safe act is very closely correlated with stock market valuations. And over the last 35 years the stock market has gone from about shortcape of about 7, which is very cheap, to its current level about 37, which is very expensive. That has created a tailwind for investments. But, you know, future returns are very closely correlated with the valuation of the market today. So the story the market is telling us is that stocks are overvalued and that you shouldn't expect the returns and the safe withdrawal rates that were possible in the past.
- [06:45]
Christine Benz
So you've also looked at the impact of inflation on safe withdrawal rates. In fact, I remember when Jeff and I spoke with you last, it was during that period when inflation was really soaring. And I recall that you were quite pessimistic about the impact of inflation, especially if it persisted for a long time at those levels for retirees. Can you talk about how retirees should approach inflation? And should they be worried if inflation remains about where it is now, sort of in the neighborhood of 2.4, 2.5%, or should they only really stress out if it starts trending much higher again?
- [07:25]
William Bengen
Well, current levels are not worrisome. There's the trend that's concerning. Indications I see in the macro data is that inflation is starting to heat up a little bit. And my research over the last 30 years has clearly indicated that inflation is the greatest enemy of retirees because it forces them to increase their withdrawals and therefore damages their portfolios. So people need to be aware of the inflation trends. If inflation starts becoming like it did in the 1960s or 70s where it was double digit for over a decade on average, then probably we're all going to have to cut back on our withdrawals substantially to preserve capital or else run out of money.
- [08:12]
Amy Arnott
So the base case number that you discuss in the book is what you call the COLA method, which is an inflation adjusted withdrawal amount. But you also cover many different, more flexible approaches to retirement withdrawals or alternatives to the fixed approach of adjusting withdrawals for inflation. One of the methods you discuss in the book is what you call the fixed annuity method, where you take a constant dollar amount from the portfolio each year. What are some of the pros and cons of that approach?
- [08:54]
William Bengen
Well, for one thing, you know, if your costs increase with inflation, as it does for most of us, that will not provide, you know, an increasing stream of income for you. You'll basically be restricted to a fixed dollar amount. And for some people, that might work. I mean, some people have so many resources, they don't really need to depend on their portfolios. But that's not the case for most people. So that's something that needs to be paid attention to.
- [09:23]
Christine Benz
How about the fixed percentage approach? I sometimes Hear from retirees that they're just taking out say 4%, 5% year after year of their portfolio, whatever the value is. Why does this end up being the biggest loser in the withdrawal derby, in your opinion?
- [09:39]
William Bengen
Well, when you analyze it, it's a very peculiar animal because if you look at various withdrawal rates, the peak for the safe withdrawal rate for that particular approach, fixed percentage varies dramatically. You know, there's no one single period which has a clear advantage over all the others. So it's very, very odd. Plus, you know, I think it's subject to extreme valuation. If your account, let's say it happened in 2008, would have dropped 30%, then your withdrawal for the next year would be forced to go down 30%. I don't know how many people have the flexibility in their budget with all their fixed expenses to deal with a 30% decline in income.
- [10:27]
Amy Arnott
Another method you cover in the book is a front loaded withdrawal scheme, which involves making annual cost of living adjustments, but then taking kind of a big cut in withdrawals where spending gets cut after the first 10 years, which is sort of a withdrawal cliff at that point. What type of safe withdrawal rate did you find that method could support?
- [10:55]
William Bengen
Well, the idea is to start with a higher withdrawal rate than you would use with a cola, so you have some advantage, some gain in spending power. But when that Cliff comes after 10 years, generally you have to make a pretty substantial reduction in expenses. So you have to be prepared for that up front. Be aware that if you take, let's say 10% or 20% more than you would be under a COLA system, that you may have to cut your spending by 20 or 25% in year 11. And if we prepare for it and understand it, that shouldn't be a problem, but it must be understood.
- [11:34]
Christine Benz
Can you discuss the intuition behind that idea of taking higher withdrawals in the first 10 years? What would that aim to address?
- [11:43]
William Bengen
Well, I think it was based upon the idea that many retirees expect to have higher expenses early in retirement due to travel and entertainment and other activities, and as they age that those expenses will decline. Therefore, you could have kind of like a two tiered withdrawal system. Like that system. Of course, that doesn't agree with everybody. There's a. David Blanchard, for example, developed what's called a smile model, where expenses decrease immediately and then increase later in retirement, primarily because of medical expenses. So you have to understand the model you're using for withdrawals to make sure it really fits how you anticipate you'll be spending.
- [12:26]
Amy Arnott
You also cover in the book a couple of different approaches that are based on portfolio performance and one of them is a floor and ceiling withdrawal method. Can you talk a little bit about what that approach is and what type of retiree might want to follow that approach?
- [12:46]
William Bengen
Yeah, it's essentially a system which tends to limit the upside and the downsides for withdrawals to the rate of inflation. And it's an attempt therefore to be more conservative of capital. And generally it doesn't perform badly. There may be better systems out there though, for that. For example, I was exploring a use of Tobin's Rule recently as a withdrawal scheme. Tobin's Rule basically increases withdrawals each year, but not by inflation. 80% of it is inflation and the other 20% is related to the growth of the portfolio. So the portfolio falls, your goals can actually fall. And that's designed basically for large institutions who have endowments. They want to protect their capital for many, many years and they need to have an approach that'll work. And for example, MIT, I think use a withdrawal rate of 5.1%. So recently published analysis I did indicates that if you go above 4.8% in recent years, you might start getting into trouble. So it's going to be interesting to see how that all works out.
- [14:00]
Christine Benz
In the book, you note that you believe that a two factor system, which is based on the consumer price index as well, a cyclically adjusted PE ratio, that a method that derives withdrawals based on those two things offers the best chance for above average withdrawal performance. Wondering if you can talk a little bit about that method and why it works so well and then also talk about where it gets us in terms of a safe starting withdrawal rate today.
- [14:30]
William Bengen
Sure. You need to begin the process with evaluating what I call elements, eight elements which you can use to customize your withdrawal plan. That includes planning, horizon, type of account you were drawing from, and asset allocation, whether or not you want to leave an inheritance at the end of the time horizon. Once you have those ACE factors defined, then you need to determine your safe withdrawal rate. In my method, you need to consider both stock market valuation and the likelihood of inflation in the next five to 10 years. Those are both very important factors and they work together as part of a two factor model to give a number that ulysses a good starting point.
- [15:16]
Christine Benz
So where are we today, Bill?
- [15:20]
William Bengen
We are right now. Let's say, for example, if you had a 65% asset allocation and you want to last for 35 years, you're drawing from a tax advantaged account, you didn't want to leave an inheritance My research indicates about 5.8% was appropriate for that environment. That assumes moderate inflation and very high stock market valuations.
- [15:47]
Amy Arnott
We also wanted to talk about some of the other considerations that come into play. And you mentioned eight elements that people need to take into account before they start looking at numbers for what a safe withdrawal rate might be. And one key consideration is longevity. And the default assumption in the retirement literature is typically a 30 year time horizon. Is that a reasonable estimate for the average retiree or do you think people should try to use a number that's more specific to their own health and likelihood of living shorter or longer than average?
- [16:36]
William Bengen
That's a very important question because I think many folks are not using a long enough plan on horizon. They're assuming they'll live to 95, perhaps if they retire at 65. So they use a 30 year planning horizon. But what if they live to 105? The last 10 years are going to be very uncomfortable if they have no money left. So I recommend that people build a martian safety into their withdrawal plan. Take your life expectation, which you can determine over the Internet, and add maybe 25, 30, 35% to that. So if you're looking at 30 year life expectancy, make it 40, 35 or 40, and that'll give you a margin of safety so you won't have to deal with some really ugly issues later in life.
- [17:24]
Christine Benz
Wanted to ask about the role of taxes in all of this. Maybe you can talk about what you think is the best way for retirees to plan for tax efficient withdrawals? And why should people use an average or effective tax rate for planning purposes instead of using their marginal tax rate?
- [17:44]
William Bengen
Yeah, the marginal tax rate would tend to overstate the effect of taxes on their portfolio, you know, versus a tiered system or tax system. So that I determined that the average tax rate made more sense than to use the marginal rate. Taxes are important. If you have a taxable portfolio, they significantly reduce withdrawals. Because I assume that as the years go on, you're accumulating wealth or else spending it down, that the portfolio will provide the source of funds to pay those taxes. So a taxable portfolio gets hit with a lot more charges than a tax deferred portfolio and therefore has a significant lower draw rate, maybe 10, 15 or 20% lower than the rates for tax deferred accounts.
- [18:33]
Amy Arnott
One of the other factors you talk about is legacy and whether the retiree wants to leave something behind for family members or charity. And you mentioned in the book that you plan to add more charts and data related to this issue to your website to help retirees who do have that as a priority. What have you found so far with that research?
- [18:58]
William Bengen
Yeah, in general, if you want to leave an inheritance at the end of the planning horizon, it's going to have a very significant effect on your withdrawal rate. The larger the inheritance you leave, the more draconian the effect. I just posted to my website recently a scenario where there was a 20% legacy. In other words, 20% of the starting value of the portfolio was planned to be Left behind after 35 years in nominal terms, not real terms. So that money obviously be worth a lot less than it was at the start of retirement. And that did not have a major effect upon the doll rates. I think it reduced them by about 2%. But as you start getting up to 50 or 100% that you want to leave of your original balance, the riddle rate can take a pretty big hit and you have to be aware of that.
- [19:49]
Christine Benz
Bill, what do you think about the idea of kind of hiving off a portion of the portfolio for various goals? Whether it be quest or maybe someone doesn't have long term care insurance and is worried about needing to pay for long term care? What do you think about just sort of segregating pools of the portfolio for those potential needs and then your spendable portfolio is what it is. Does that approach work?
- [20:15]
Amy Arnott
Do you think it could?
- [20:18]
William Bengen
I guess that's a variation of bucket strategy. We try to set long term, short term, midterm money if it gives the individual comfort, emotional comfort, knowing that that particular portion of expenses is covered no matter what, I think it could be valuable.
- [20:36]
Amy Arnott
You also did a lot of research about different asset allocation approaches and how they have worked historically and you found that there's sort of a sweet spot for safe withdrawal rates for a two asset portfolio when the equity weighting is between 35% and 75% of the whole portfolio. Can you expand on why higher or lower stock weightings haven't worked as well historically?
- [21:06]
William Bengen
Sure, there's a battle going on in your portfolio between the low returns but stability of bonds and the volatility and higher returns of stocks. And if you have too many stocks or too few, either you won't have enough fuel in your portfolio or else you'll be subject to severe downturns, which is not desirable. I just completed a study and I posted my website of a 95% stock allocation and that really blows up. During something like the Great Depression where you have a 90% decline, I think withdrawal rates were about 30% lower. The rest of the time, it's surprisingly good. There are only small penalties be paid even in some of those 50% drawdowns we had after the Great Depression. I'm reviewing that and saying it may be possible to use a higher asset allocation. If one, you don't have a 90% decline, I don't know how you can be sure of that. And the other is perhaps if you use risk management procedures to reduce your equity allocation according to the determinations of a third objective, third party that might help you escape the worst of a very big stock market decline and preserve your portfolio.
- [22:27]
Vanguard Narrator
Lots of firms throw a couple flashy funds your way and call it a day, but not Vanguard. Vanguard bonds are institutional quality. Institutional quality isn't a tagline, it's a commitment to your clients. It means top grade products across the board. So if you're looking to give your clients consistent results year in and year out, go see the record for yourself@vanguard.com audio. That's vanguard.com audio all investing is subject to risk Vanguard Marketing Corporation distributor.
- [22:55]
Christine Benz
You've probably heard the buzz about the Scott Cederberg paper that advocates for maintaining a 100% equity weighting both before and during retirement. What are your thoughts about that advice?
- [23:09]
William Bengen
Well, that's the reason why I did that 95% allocation study. I always have 5% cash in there to fund withdrawals, so I couldn't go to 100%. It would have the same problem that I encountered with my analysis of the 95% situation. If you get a large decline, let's say 85, 90%, it's really going to decimate your portfolio and may not survive it. So I'm not completely convinced it's correct to say that under all conditions the 100% is the better alternative. I think there are some circumstances where it might be very detrimental, although it probably works for 90% of the time.
- [23:50]
Amy Arnott
We've also recently spoke to Wade Pfau, who's done some research on a reverse glide path where equity allocations increase as the retiree gets older. And you have also looked at that approach. What's your take on that approach of increasing the equity allocation as you progress through retirement?
- [24:13]
William Bengen
When I study that for my recent book, I use an house allocation of 55% for fixed income to compare it to the glide path approach, which basically starts with a much lower equity allocation and raises it periodically during retirement for that particular fixed allocation, 55%. The glide path was superior when I got to 65% fixed allocation, though they were very close. It wasn't that much of a difference. So at this point, it's something if you want to use it probably won't hurt you. But if you use the 65% fixed allocation, it's probably not going to benefit you that much either.
- [24:54]
Christine Benz
How about the traditional glide path? You found that the safe withdrawal rate actually declines if you reduce the equity weighting during retirement. And that's kind of the standard approach for many target date funds. Should people who own a target date fund prior to retirement consider switching into something else when they retire?
- [25:14]
William Bengen
I really think that's the case because you want to be able to control your asset allocation according to your plan. And if you have a fund that does it arbitrarily with a different methodology, it's going to be detrimental for you. So I think they should replace those funds. Retire. Actually, I'm not even sure they're really that useful before retirement because my research indicates that in the accumulation stage up to within five years of the retirement date, investors are best served by holding 100% in stocks at all times and just ride the ups and downs because that'll compound very nicely over long periods of time.
- [25:56]
Amy Arnott
So in your most recent test portfolios, the portfolio includes, as we mentioned earlier, an 11% weighting in micro cap stocks. I'm curious why you decided to kind of divide up the equity portion into equal chunks with 11% each in large cap, small, mid micro and international, instead of taking more of a market cap weighted approach, which would tilt more toward large cap stocks.
- [26:29]
William Bengen
Yeah, well, if I did that, I would probably have a much smaller allocation to smaller micro cap stocks. And in the past they've generated higher returns. So I think it would be detrimental to the overall plan. As to why I used the same allocations for each stock asset class, because I tested variations on it and that seemed to work the best. If you weigh too heavily one category, you know, you kind of become a slave to that category and your portfolio owner. That doesn't help the results.
- [27:03]
Amy Arnott
So with that approach, you're rebalancing each year. So you would be selling the assets that have performed the best and shifting into things that have underperformed.
- [27:13]
William Bengen
That's right. And that turns out to be a very beneficial effect because essentially you're selling investments which have done well and are probably about ready to do less well and buying investments which have done poorly and are about to do much better. And that, I found, adds very significantly to the overall return of your portfolio and consequently increases the withdrawal rate as well.
- [27:37]
Christine Benz
I wanted to ask about that bill, whether that Whole idea of what you sell in a given year, whether that's been maybe under discussed in the safe withdrawal rate discussion. Can you talk about how people could add kind of a logic around where they go for their withdrawals on a year to year basis?
- [27:57]
William Bengen
Yeah. Well, I like to build into my portfolios a cash component. I usually use 5%, but you could probably get away with considerably less. I think personally I use less than 1%, so it maximizes my returns. You need a place to take money from to fund your withdrawals. And I typically have all my funds pay their dividends into that account. So it's constantly being replenished. And of course, during rebalancing you have to buy and sell things to bring the portfolio up to stuff. And that's when you hopefully will replenish your cash component if it's needed.
- [28:38]
Amy Arnott
So one of the things you mention in the book is that you no longer consider yourself a buy and hold investor. What made you reconsider your approach? And was it as you were writing this book that you changed your thinking about that or was it before you started working on the book?
- [28:56]
William Bengen
Yeah, I think it makes sense prior to retirement, buy and hold. But it was pretty clear to me from my research that preserving your capital is very important during retirement because that money is going to fund your income. And if you have a lot less money, you're going to have a lot less income. So I felt the best way to do that was to employ risk management techniques. Use a third party service. There's a number of very good ones that will help you change your equity allocation based upon their perception of risk in the market market. So that when markets are risky, you'll have a lower equity allocation and when they're healthy, you'll go to your full allocation.
- [29:40]
Christine Benz
A lot of retirees tend to panic if there's a bear market that temporarily increases their withdrawal rate. Is it better to get more conservative if that happens or stay the course?
- [29:51]
William Bengen
You know, if it gives you emotional comfort to sell off a little bit, that's fine. But chances are that you could do more harm than good to your portfolio by doing so. If you do it too large a move and sustain it for too long a time. I think that using that third party service is very important because it removes the emotion from the process. And it's very easy to get emotionally involved with your investments as you see their value fluctuate.
- [30:22]
Amy Arnott
And so the third party service that you mentioned, is that like a firm that does market commentary or would it be just working with an Independent Financial Advisor.
- [30:33]
William Bengen
The firm I use is actually a registered investment advisor and they have the subscription service for the public for a very reasonable annual cost to recommend investments and how the allocation works. Sound very satisfactory. I think there are a number of the services. Some who write newsletters will also provide such a service.
- [30:57]
Christine Benz
I'm curious, Bill, on the withdrawal rate front, it seems like you very much like to run your own numbers, but are there any systems that you've seen, any software programs that you think do a nice elegant job of helping people model in the major variables that they should be considering when they determine their portfolio withdrawals?
- [31:18]
William Bengen
Well, you know, I'm not totally familiar since I'm not a practicing advisor anymore with all the software available, I understand it's gotten a lot, lot more sophisticated and with the use of AI becoming more powerful. So I don't know of any software that I could recommend simply because I'm not familiar with most of it. Sorry.
- [31:37]
Christine Benz
No, that's okay.
- [31:39]
Amy Arnott
I was curious that, you know, since the book has so many detailed charts and graphs and since you've already done all of that work with compiling the data and running historical scenarios, I'm wondering if you have ever thought about creating software or an online tool that retirees and advisors could use to help manage their withdrawals.
- [32:06]
William Bengen
Yeah, I've thought about it, but I mean there's software out there that does that already, so I would have to be able to have an edge of some sort. I'm not certain that I do at this point.
- [32:19]
Christine Benz
It I'm curious with what's called the 4% rule, are you frustrated about how people have taken that and run with it or are you pleased that it's part of your legacy? How do you reflect on that?
- [32:32]
William Bengen
Well, initially I was very concerned because people were taking my gospel as that would apply to everyone. And clearly it's a rule that applies with very, very small number of retirees, perhaps 1/4 of 1% of retirees who expect to face high inflation and high stock market valuations. We're not there yet. I hope we don't get there. So the withdrawal rates you derive from that are just extremely conservative. And I feel people internally can do much better if they use the methodology in my book, the eight Elements and then consider stock market valuations, inflation level, if they determine a withdrawal rate and not use a one fit all approach.
- [33:15]
Amy Arnott
Do you think that you will write any more books about retirement planning or withdrawal rates?
- [33:22]
William Bengen
I'll probably have another edition of this book in a few years because I continue to do my Research, get new results, and there are already things I'd like to tell people about. So definitely in a couple of years. My publisher's been very happy with the book and they've invited me to write another book. I just haven't decided other than a second edition of the current book. What else I could do in the
- [33:46]
Christine Benz
context of small cap stocks and the backward looking data that suggests that they've outperformed, do you think that we can reasonably carry that forward or is there a risk that maybe there was a point in time when small caps performed really well, but we may not capture it again?
- [34:03]
William Bengen
Yeah. As I alluded to earlier, the marketplace may be changing and a lot of the best small companies may not be available to the funds we purchase. I don't know enough about individual stocks to purchase an individual small company stock. I think that's a pretty risky approach for somebody like myself. I'm hoping that performance will pick up and I think it has recently. But whether they'll achieve the glory that they had earlier is yet to be deterrened. We'll just have to wait and see. They've gone through a long period of underperformance, but so have international stocks. Still have value stocks. You know, investing is highly cyclical and things go in and out of favor like hats, right?
- [34:51]
Amy Arnott
Yeah. And it's probably when things are out of favor for a long time that people start giving up right before the prospects start improving.
- [35:00]
William Bengen
Yeah. And emerging markets was a category like that which has underperformed for quite a while. And looking at my portfolio today, I see my best performer is my Embroidery Markets fund which is up over 6%. I'll take that any day of the week. Yeah.
- [35:17]
Amy Arnott
I'm curious about your thoughts on private investments. We've heard a lot of asset managers saying that people should carve out a portion of their portfolios for private equity and private credit. Is that something that you think people should allocate to?
- [35:38]
William Bengen
Well, I guess that falls in category of alternative investments. And been told alternative investments are well beyond just simply private credit or private equity. I think you should invest in something that you're comfortable with that you understand. I'm not sure I understand private credit and private equity well enough to attempt investing in them. And right now, private credit area, there seems to be a lot of risk. Maybe a good time to sit back and wake a little bit on that category. It's really important for folks to recognize that once they do their plan and they come up with a number, a withdrawal rate, let's say five and A half percent they're going to use. That is not the end of the process. They basically have a plan which is dead to last 30 years, 35, 40 years or longer. And a lot of things can happen in that period of time which might cause them to alter their plan. So they need one to have a benchmark to measure the performance of their portfolio against year by year to see if they're on plan. And they need to understand a couple of things that a stock market decline, a bear market can temporarily raise withdrawal rates to scary levels, might go from 5%, maybe to 10 or 11%. But the best strategy with simple bear markets is probably to let them run their course and not do anything. And the subsequent market recovery will most likely bring your withdrawal plan back into line with its original intent completely. The opposite logic applies to sustained high inflation as we had in the 70s. People who retired in the early 60s were hit with that 10 years after they retired, and it devastated them. And lesson I've learned from that is when you enter a period where inflation is likely to be sustained over a number of years at a high level, you need to cut your withdrawals immediately to preserve capital, even if it pinches, because at least you will have some money left. Inflation is terrifying what it can do to a portfolio.
- [37:42]
Amy Arnott
Yeah, it's interesting that people tend to spend so much time worrying about market returns and what is going to happen with the market. But in some ways, inflation is even more dangerous.
- [37:55]
William Bengen
It is, and it's something we just need to be mindful of and watch it very closely and talk with our representatives in Congress about, because it's extremely damaging to retirees because they have no way of making up for that lost income.
- [38:12]
Christine Benz
You've been retired now for more than 10 years, although you're still very, very busy and engaged in this type of work. What was the most surpr about making that transition?
- [38:24]
William Bengen
Oh, I suppose just simply the change in the rhythm of my life where work, you know, previously occupied a large chunk of my life, and to a certain extent my life revolved around the work that's changed in retirement. I still do my research, but it's not 40 hours a week. Maybe it's 39, but no, it's not 40 hours anymore. And you need then to find other things to fill your time. That's why I believe it's important to have hobbies, avocations, good relationships with your family and friends to fill that time and make it meaningful.
- [39:05]
Christine Benz
What are your favorite hobbies?
- [39:08]
William Bengen
Well, I love astronomy. I spent quite a bit of Time with my telescope. We have beautiful, clear skies here in Arizona. So it's wonderful. I do a little coin collecting, a little stamp collecting. I collect, and this may sound kind of weird, my Weekly Reader, if you remember that publication that existed years ago and was like a news magazine for school kids, I collect Those from the 1950s, only I've been building up a large collection of them. And they're kind of fun to read because, you know, 1950s, our culture was completely different than it is today. Attitudes are different. And I find it fascinating, charming, and maybe a little disconcerting to see the way we all thought, you know, 70 some years ago.
- [39:56]
Amy Arnott
Yeah. And of course, kids these days, you know, don't really have a paper newsletter. Everything is online.
- [40:05]
William Bengen
Yeah. I remember as a kid I used to enjoy getting my Weekly reader. You know, that was a high point of my day to school.
- [40:12]
Amy Arnott
So you mentioned living in Arizona, and I'm curious about how you decided on that as a place to live in retirement.
- [40:22]
William Bengen
Yeah. Well, my first wife and I were living in the California desert, and we noticed that it was starting to become uncomfortably warm in the summers over the, let's say, 10 or 11 years or maybe 15 years. We lived there in various homes. I find that my walking schedule was being affected because in July and August, the temperatures would really go below the low 80s day or night. And it's really hard to go out walking when it's 85 degrees and spend an hour and so walking, come back and it's 95. It's really tough. So we're looking for a cooler climate. We checked Tucson out. The area we live in is at around 3,500ft. So it's high desert. We were desert rats, so we wanted to stay within the desert context. And we just fell in love with this particular area. It's very beautiful and definitely much cooler than, you know, from a Kinto, which I lived in before.
- [41:20]
Christine Benz
In addition to your nonfiction writing, you're also an aspiring novelist. You didn't list that among your hobbies, but it sounds like you've been busy writing fiction. So what type of books have you been working on?
- [41:34]
William Bengen
I wrote a trilogy of books that concerned an Indian tribe that was seeking to open a casino, but not on its reservation, on another piece of land, in another town. And I've been involved in that issue a lot. I knew a lot about it back in early 2000s. And I wrote a trilogy, basically about the tribe, the struggles they faced, why this additional wealth was important to it, but also can have a very negative effect. On surrounding communities. So I try to present a balanced point of view in the article and eventually end up with a very, you know, glorious conciliatory ending, which I think is important for us to survive.
- [42:18]
Amy Arnott
Are you still working on future novels and do you spend a certain amount of time each day or each week working on that?
- [42:27]
William Bengen
Yeah, the three novels are completed. They were completed three, four years ago and you know, I hired a writing coach to help me market them and you know, he provided me lists of agents to contact and I spent three years contacting agents. Got a lot of compliments about the quality of my writing, but no takers. So frankly I got discouraged and I decided it was better off to spend more time on the 4% rule where at least people seem to have some appreciation for it.
- [43:00]
Amy Arnott
Well, thank you so much for joining us and I really enjoyed reading the book book. It's packed with information and a lot of great food for thought for people who are already retired or planning for retirement.
- [43:14]
William Bengen
My pleasure to be here. Thank you so much for having me.
- [43:18]
Christine Benz
Thank you so much Bill.
- [43:24]
Amy Arnott
Thank you for joining us on the long view. If you could please take a moment to subscribe to and rate the Up Pop podcast on Apple, Spotify or wherever you get your podcasts, you can follow me on social media, AmyArnot on LinkedIn
- [43:40]
Christine Benz
and hristinebenz on LinkedIn or hristinebenz on
- [43:45]
Amy Arnott
X. George Cassidy is our engineer for the podcast. Jessica Bebel produces the show Notes each week and Jennifer Garrett copy edits our transcripts. Finally, finally, we'd love to get your feedback. If you have a comment or a guest idea, please email us@thelongvieworningstar.com until next time. Thanks for joining us.
- [44:10]
Morningstar Disclaimer Reader
This recording is for informational purposes only and should not be considered investment advice. Opinions expressed are as of the date of recording and are subject to change without notice. The views and opinions of guests on this program are not necessarily those of Morningstar, Inc. And its affiliates, which together we refer to as Morningstar. Morningstar is not affiliated with guests or their business affiliates unless otherwise stated. Morningstar does not guarantee the accuracy or the completeness of the data presented herein. This recording is for informational purposes only and the information, data analysis or opinion it includes or their use should not be considered investment or tax advice and therefore is not an offer to buy or sell a security. Morningstar shall not be responsible for any trading, decisions, damages or other losses resulting from or related to the information, data analyses or opinions or their use. Past performance is not a guarantee of future results. All investments are subject to investment risk, including possible loss of principal. Individuals should seriously consider if an investment is suitable for them by referencing their own financial position, investment objectives and risk profile. Before making any investment decision, please consult a tax and or financial professional for advice specific to your individual circumstances. MorningStar Investment Management, LLC is a registered investment advisor and subsidiary of Morningstar, Inc. The Morningstar name and logo are registered
- [45:39]
Amy Arnott
marks of Morningstar Ink.