Subject: Re: OT- Guy Spier on Podcast/ limited BRK discussion
If things remain much as they have been since 1995 in terms of growth of S&P 500 smoothed earnings and valuation levels, I'd expect something like inflation + 2.8%/year real total return from the S&P 500 in the next 7 years.

Just a PS on that thought---
Such forecasts are very error prone. You can guess, but nobody knows what the markets will really do. However this forecast real total return number is probably a very good number for input to a SWR calculation. For example, each year you could spend inflation-adjusted 2.8% of initial portfolio value starting today. If the forecast is right, and you own a portfolio that does as well as the S&P 500, the portfolio should be worth about the same amount around 7 years later in real terms, so you definitely won't run out of money.

Here's another way to calculate it, from the same data set.
Using my smoothing method, I estimate the on-trend real earnings of the S&P is $152.54 right now. This has risen at inflation + 3.85%/year since 1995. (I think it will definitely be slower in future, but let's use that figure since I can't justify any other specific number). Seven years from now, the on-trend real earnings trend level would then be $198.71 in today's dollars. The average earnings yield since 1995 using this same smoothed earnings figure has been 4.04%. Thus, if things remain about the same as they have been, you'd expect the S&P 500 to be at around 4918.62 seven years from now, in today's dollars. The current number is 4405.71, so that is a real rise of 11.64% or 1.59%/year in gains from the rise in the level of the index. Add the dividend yield, say 1.45%. This exercise suggests you could do a seven years SWR of 3.05%/year (percentage of starting value today, rising with inflation) and end up with a portfolio that's worth about the same amount. This is quite similar to the 2.8% from the return forecast above.

If you know how long you would live it would be more: you could run your portfolio down slowly. But trying to estimate how long you will live and running down your portfolio is not a calculation that can be done with reliability. The "tail" outcomes are too important, too dire, and too hard to predict for most of the usual methods to be prudent, so I recommend people avoid them like the plague. Ultimately the amount you can withdraw from any portfolio is a function of the increase in the real value of that portfolio. We just don't know exactly what the function is. My conclusion: Either plan for both you and your portfolio to live forever (portfolio intrinsic value never decreasing in real terms), or buy longevity insurance to handle "bonus" lifespan long past your actuarial expectation and spend the rest of your portfolio between now and then.

Jim