Newfound on withdrawal rates and path-dependency

It's hard to convey how refreshing it is to see asset managers and quants show respect for decumulation analytics.  It is a lot more rare than you think it is.  Here is a recent post from Newfound Research on path dependency and perfect withdrawal rates (The Path-Dependent Nature of Perfect Withdrawal Rates). I have no comment other than "I'm glad." Some selected excerpts (some redundancy due to excerpting from the summaries and conclusions but it's worth it to emphasize key points) below but you can read it for yourself:

• 4% is the commonly accepted lower bound for safe withdrawal rates, but this is only based on one realization of history and the actual risk investors take on by using this number may be uncertain. [why is this not taught in middle school? ;-) ]

• We find that simple assumptions commonly used in financial planning Monte Carlo simulations do not seem to reflect as much variation as we have seen in the historical PWR.  

• Financial planning for retirement is a combination of art and science. The problem is highly multidimensional, requiring estimates of cash flows, investment returns and risk, taxation, life events, and behavioral effects. Reduction along the dimensions can simplify the analysis, but introduces consequences in the applicability and interpretation of the results. This is especially true for investors who are close to the line between success and failure.  

• The sequence risk term, however, is not so friendly to closed-form methods.  

• This tendency toward larger magnitude returns and returns that are skewed to the left can obscure some of the risk that is inherent in the PWRs. Additionally, returns are not totally independent. While this is good for trend following strategies, it can lead to an understatement of risk  

• The 4% rule is a classic example where we may not be aware of the risk in using it. It is the commonly accepted lower bound for safe withdrawal rates, but this is only based on one realization of history. The actual risk investors take on by using this number may be uncertain. 

• The simple assumptions (expected return and volatility) commonly used in financial planning Monte Carlo simulations do not seem to reflect as much variation as we have seen in the historical PWR. .. relying on these assumptions can be risky for investors who are close to the “go-no-go” point; they do not have much room for failure and will be more likely to have to make cash flow adjustments in retirement.