I recently learned an interesting new way to abuse statistics using regressions.  (I’ll describe it first in a way that requires no math background, and give some math details at the end.)  It can be difficult to tell if those who abuse statistics are dangerous and well-intentioned or dangerous and know fully what they’re doing.  Either way, they’re dangerous. Suppose we conducted a study of retirees in their 60s to find out what percentage of their portfolios they spend each year.  Even though this percentage varies across retirees, we want to get an overall sense of whether they’re spending too little or too much. For the raw data of the study, I’m going to choose unrealistically simple numbers to make the calculations easier.  The purpose here is to illustrate abuse of statistics.  Here’s the raw data: 1000 retirees have $100,000 saved and spend $6000/year. 100 retirees have $1 million saved and spend $40,000/year. 10 retirees have $10 million saved and ...

On episode 289 of the Rational Reminder podcast, the guests were retirement spending researchers, David Blanchett, Michael Finke, and Wade Pfau.  The spark for this discussion was Dave Ramsey’s silly assertion that an 8% withdrawal rate is safe .  From there the podcast became a wide-ranging discussion of important retirement spending topics.  I highly recommend having a listen. Here I collect some questions I would have liked to have asked these experts. 1. How should stock and bond valuations affect withdrawal rates and asset allocations? It seems logical that retirees should spend a lower percentage of their portfolios when stocks or bonds become expensive.  However, it is not at all obvious how to account for valuations.  I made up two adjustments for my own retirement.  The first is that when Shiller’s CAPE exceeds 20, I reduce future stock return expectations by enough to bring the CAPE back to 20 by the end of my life .  These lower return expec...