It's the eternal question, speculating about future data.
>> You can hope that he revisits his partitioning of CAPE ranges in a few years when he has more high CAPE data points to work with.
Yup. I wonder what the wisest advisers are telling clients now and for the last several years of CAPE needle jamming. 'Sure, go ahead and plan w 5%? 4.5%' -- ?
>> One's "feeling" about immutable historical numbers does not change.
Har, not the case, or not invariably, with historians I read, including science historians.

>> I wonder if he still feels this way.'
One's "feeling" about immutable historical numbers does not change. Though one can add more historical data as time passes. What I illustrated is that today, all the historical data, including the additional dozen data points since Kitces' piece, (probably) does not change the Kitces' result. Of course all the additional data since Bengen's original work does not change his conclusions, as he reiterated them (with refinements) in his current work.
>>My curiosity, as I said, is about what the scenario might look like
That's a different question. You're asking what they would speculate about future data. I addressed that in writing "Bengen doesn't make market predictions."
The curiosity is understandable. The closest you're going to come to an answer is Bengen's observation: "Unfortunately, as Michael observed in his 2008 article, the “CAPE needle” has been jammed against the upper valuation stops for almost all of the last 25 years. As a result, almost the only choice for safe withdrawal rates has been the highest CAPE value in each table."
That means that there are now a few 30 year spans that started with high CAPE ratios. Obviously not enough for Bengen to break out into a separate (higher CAPE) bucket, else he would have done so in his current paper. You can hope that he revisits his partitioning of CAPE ranges in a few years when he has more high CAPE data points to work with. Though as I've tried to show, the 4.5% withdrawal rate still works with the first few periods that have rolled in since Kitces' paper.
I expect the 4.5% withdrawal rate to succeed with the next data point (1991-2020) as well. PV shows that after 29 years (1991-2019) one would be left with 4.2x one's starting value.. For the annual inflation-adjusted withdrawal at year end (Dec 31, 2020) to exhaust that portfolio would require an incredible market swoon in the last two months of the year.

>> showing that 4.5% works for 1979-2008.
of course; whoever has said otherwise?
>> the mid 80s were a good time to start
of course, the best ! Thank goodness.
My curiosity, as I said, is about what the scenario might look like ...
>> [4.5%] can be increased if the ratio at the start of retirement is under 20.
... when ratios are ~25%-50% and more above 20. So I will monitor PV going forward to get a sense. Are you thinking Kitces et alia would maintain their 4.5% SWR view starting now?
Obviously anyone who thought otherwise in March has been shown the wisdom of staying the course and the foolishness of doing the opposite.

The results are all historical. The latest current 30 year period is Jan 1990 - Dec 2019. The last 30 year period in 2008 was Jan 1978 - Dec 2007.
No need to wonder. Just check whether any of the following additional periods would have failed with a 4.5% withdrawal rate, inflation adjusted:
1979-2008, 1980-2009, 1981-2010, 1982-2011, 1983-2012, 1984-2013,
1985-2014, 1986-2015, 1987-2016, 1988-2017, 1989-2018, 1990-2019.
Portfolio Visualizer can give you a good sense on the second row (its data starts with 1985). I don't believe there was a bond index fund around then, but FBNDX can serve as a proxy.
Here's 1985-2014 to start with. As you can see, the mid 80s were a good time to start, even with the 1987 crash.
As far as the starting in one of the previous six years (1979-1984) is concerned, you can find the figures for those years here.
For 1979, $5K stocks rise to $5,926. $5K in bonds, worst case (using the worst performing bonds in the table) fall to $4,899.50. Total is $10,826. WIthdraw $450, leaving $10,376. Rebalance into stocks and bonds: $5,188 each. Adjust next year's withdrawal for inflation: $500.63.
For 1980, stocks rise to $6,834. Bonds, worst case, drop 3.32%, to $5,016. Total is $11,850. Withdraw $500, leaving $11,350. Rebalance into stocks and bonds: $5,675 each. Adjust next year's withdrawal for inflation: $568.47.
For 1981, stocks fall to $5,408. Bonds, worst case, rise to $6,140. Total is $11,548. Withdraw $568, leaving $10,980. Rebalance into stocks and bonds: $5,490. Adjust next year's withdrawal for inflation: $627.19.
For 1982, stocks rise to $6,611. Bonds, worst case (3 mo. T-bills), rise to $6,072. (T bonds and Baa bonds rose around 30%) Total is $12,683. Withdraw $627, leaving $12,056. Rebalance into stocks and bonds: $6,028. Adjust next year's withdrawal for inflation: $665.64.
For 1983, stocks rise to $7,375. Bonds, worst case, rise to $6,221. Total is $13,596. WIthdraw $666, leaving $12,930. Rebalance into stocks and bonds: $6,465. Adjust next year's withdrawal for inflation: $687.01.
For 1984, stocks rise to $6,863. Bonds worst case (3 mo T-bills), rise to $7,080 (T bonds and Baa bonds rose around 14%) Total is $13,943. Withdraw $687, leaving $13,260. Adjust next year's withdrawal for inflation: $716.55.
At this point, we can use PV, with a starting balance of $13,260 and a starting withdrawal of $717. It goes from Jan 1985 through Dec 2008. The early 2000s are not good, and 2008 is not good, but by then the mountain of cash has risen so high that it hardly matters.
That takes care of showing that 4.5% works for 1979-2008. The five other 30 year periods are left as an exercise for the reader. Also, make sure to check my arithmetic, I wasn't too diligent here.

>> never less than 4.5%, and can be increased if the ratio at the start of retirement is under 20.
I wonder if he still feels this way. I could check. The link is from spring of 2008, a wonderful time to be writing about anything financial, and the p/e he cites has not been <20 since like ~1993 except for that sharp 08-09 dip, and much if not most of the time it's been way >25 if not >30.
So like most (esp those of us out of equities) I am hoping this time, meaning since the 1980s, it's different.
https://www.multpl.com/shiller-pe

Just keeps getting better!!
Fidelity® Q2 2020 Retirement Analysis: Steady Contributions Combined With Market Performance Lead to Double-Digit Rebound Across Retirement Account Balances
Retirement account balances rebound in Q2. The average IRA balance was $111,500, a 13% increase from last quarter and slightly higher than the average balance of $110,400 a year ago. The average 401(k) balance increased to $104,400 in Q2, a 14% increase from Q1 but down 2% from a year ago. The average 403(b) account balance increased to $91,100, an increase of 17% from last quarter and up 3% from a year ago.
https://www.businesswire.com/news/home/20200811005276/en/Fidelity®-Q2-2020-Retirement-Analysis-Steady-Contributions#:N^P]™\˜YÙILŒ™]\™[Y[LŒXØÛÝ[LŒ˜[[˜Ù\ÉLŒLŒLŒLŒLÍÉLÍŒLŒLŒLŒLLÍŒLŒLŒLŒLÉLÌLŒ

Michael Kitces is my favorite writer: a better choice is to start with lower % in stocks in early retirement years and increase the % with age.
As I've posted before, this work by Pfau and Kitces work breaks down when rates are low. Dr. Pfau acknowledged this, writing that

It does indeed seem that retiring at times with particularly low bond yields, which can be expected to increase over time, may not favor rising equity glidepaths during retirement. It essentially causes the retiree to lock in low bond returns and even capital losses on a bond fund as bond yields gradually increase (on average) over time.

Kitces, incorporating CAPE P/E 10 data, concluded that the safe withdrawal rate is never less than 4.5%, and can be increased if the ratio at the start of retirement is under 20.
The only enhancement that Bengen made to Kitces' work was to incorporate inflation, i.e. part of what you are concerned about.

Inflation directly affects the periodic withdrawals, as it is assumed that dollar withdrawals are increased annually by CPI. If inflation is high, it results in rapidly increasing withdrawals. ... the inflation trend hints at a reliable cause-and-effect relationship. As inflation (defined as the trailing 12-month Consumer Price Index at retirement) increases from top to bottom, SAFEMAX correspondingly declines.

Now he says SP500 performance will be around 7%.
You may have misread Marketwatch's writing: "Historically, he says, the average safe withdrawal rate has turned out to be about 7%." Bengen doesn't make market predictions.

I should also issue the usual cheerful disclaimer that this research is based on the analysis of historical data, and its application to future situations involves risk, as the future may differ significantly from the past. The term “safe” is meaningful only in its historical context, and does not imply a guarantee of future applicability.

Also on point regarding predictions, he writes: "if you have strong feelings that the inflation regime will change in the near future, you can choose another [presumably more conservative] chart".
Thanks to @bee for having posted Bengen's article yesterday, so that one could read what he actually wrote.
https://mutualfundobserver.com/discuss/discussion/57156/william-bengen-revisits-the-safe-withdrawal-rate-at-retirement

Thanks to all for the discussion about HVDC transmission.
The first major HVDC transmission line in the US has been sending renewable hydropower from Bonneville Dam to the Los Angeles area via an 846-mile long overhead line for about 50 years.

https://new.abb.com/news/detail/45972/abb-completes-upgrade-of-first-major-hvdc-link-in-us-transmission-history

Bengen doesn't make sense and why the rule should definitely be under 4% and not 5%.
From 1992 to 2005-6 inflation(link) was around 2.5-3%. In the last several years it's about 2%. When the long term performance of the SP500 was about 10%, Bengen used 4%. Now he says SP500 performance will be around 7% and inflation is lower (at 2%), the rule should be under 4%.
In the past it was 10-3 = 7% performance(after inflation) and now it's lower 7 - 2 = only 5%. Lower performance means lower withdrawal rate.
Our portfolio withdrawal rate would be under 2% long term. This will keep our current standard of living and our portfolio for the next 4-5 decades similar to today.
Michael Kitces is my favorite writer: a better choice is to start with lower % in stocks in early retirement years and increase the % with age.
BTW, The withdrawal rule has nothing to do with distributions. Higher distributions isn't a guarantee for better performance or volatility but it's being promoted for years as the best solution.

I've found the subject of ultra-high voltage power transmission lines to be very interesting. In the early days, as Catch22 mentions, the DC voltages involved were quite low, so to increase the deliverable power the transmission lines had to be extremely thick, expensive, and heavy. Because AC voltage can be easily increased or decreased by transformers, it became the transmission method of choice.
To greatly simplify, the effective power that can be delivered through a circuit is the product of the voltage x the amperage (current). So to deliver more power through the same set of transmission lines the voltage can be increased. If a resistive load such as an electric heater needs 1000 watts of power, that can be delivered by supplying 100 volts at 10 amps, or alternatively by 200 volts at 5 amps, etc. The 200 volt supply would be preferable from the standpoint of power transmission, as the power lines need only be 1/2 as thick, saving copper, weight, and therefore expense.
However, as AC voltage is increased to extremely high values, other complex issues come into play, causing significant losses in power transmission. Because of advances in electronic switching apparatus, it is now also possible to transmit extremely high DC voltages.
The voltage generated is still actually AC, and transformers are used to increase that voltage to extremely high values. That high voltage is then converted to DC, and sent over typically long transmission lines. At the receiving end, the DC is reconverted to AC for local distribution. The terminal equipment for the DC lines is expensive, but the transmission lines are much thinner, and the transmission losses are much smaller.
As Davfor's post illustrates, this transmission mode is especially useful for long underwater transmission lines.
If interested, good information on all of this is available at Wickipedia.

Average balances are 2-2.5 times higher than they were in Q1 2009 thru Q1 2019. Many own primarily Target Date Funds
FIDELITY® Q1 2019 RETIREMENT ANALYSIS: ACCOUNT BALANCES REBOUND

This isn't the change I would have expected....

Bengen says based on the current environment he thinks a new retiree should be safe if they start with a withdrawal rate of…no more than 5%.
“That’s what I use myself,” Bengen told me when we spoke by phone.
....retirees right now have one saving grace: Very low inflation.

https://marketwatch.com/story/the-inventor-of-the-4-rule-just-changed-it-11603380557

FD - So you know more about investing than the professionals quoted in Barron’s?

It's not about knowing more, it's about backing up a "new" concept with real numbers. The best teacher is the market.
I posted the following list several times:
1) US stocks are over value, the rest of the world is undervalue. US stocks did better in the last 10 years.
2) The GMO team and Arnott have been wrong for 10 years.
3) Gundlach was way wrong when he predicted the 10 year will be at 6% in 2021. Gundlach, the bond king, and his fund DBLTX was beaten by TGLMX for 1-3-5-10 years.
4) Bogle was wrong when he predicted stocks/bonds performance based on the past and averages.
5) Inflation and interest rates can only go up. Both wrong for years.
6) inverted yield signals recession = wrong. High PE, PE10 signal the end of the bull market...wrong again for years.
7) There is no way stocks will have a V recovery in March 2020 based on blah, blah, whatever...and they did.
8) The economy is bad, unemployment is high, the debt is huge = bad future stock market. The reality? Stocks are still up.
I can add more.
9) Investing in value, high yield, low SD are better just to find that the "stupid" SPY beat all/most of them;-)
10) There is no way to have a better risk-adjusted performance. I have done it for years.
Basically, I was always questing many "experts", research and rule of thumps. Most investors would do better with simple, very cheap indexes (Bogle) + hardly trade. The following is optional: use 20% (maybe 30%) to find better risk/reward funds, this task isn't easy and very limited. Examples: PRWCX,VLAIX,VWINX,PIMIX for several years.

msf, great explanation but this is what I have learned about bonds and bond funds
1) "A duration of five years means that you're "driving" at 5% per 1% rate change." that formula only works for treasuries but you can find it in so many articles. It does not even work for a common index such as BND which also have Corp+MBS bonds.
2) I'm mainly a bond investor and most of the money I made was in MBS/securitized where skilled managers can find nuggets in different categories within securitized, especially after a meltdown. I also made more money in Muni HY which act differently.
3) Most investors use high-rated bonds as ballast and dampen volatility but even these go down in a black swan and why I sell to cash. This year from peak to trough the following investment grade bond lost the following: VSIGX(Treasuries) 2.5%... VBTLX(US tot bond index) over 6%...VCIT(Corp IG)=over 13%.
So only "pure" treasury fund is a real ballast but even that was down. These high-rated funds recovered within weeks but in the last 3 months the above 3 indexes are down while the lower-rated funds are still making money.

Legg Mason Funds (including Clearbridge and Western Asset, but not Brandywine, Royce):
https://www.leggmason.com/content/dam/legg-mason/documents/en/tax-information/capital-gains-distribution/lm-2020-year-end-distribution-estimates.pdf
JPMorgan Funds:
https://am.jpmorgan.com/blob-gim/1383694733933/83456/jpmorgan-mutual-funds-2020-estimated-capital-gains.pdf

Nikola Tesla changed all the early theories about electron flows and AC electricity.
Mr. Thomas Edison and friends were attempting to figure how to move "dc" electricity throughout a community for electric lighting. A very costly proposition at the time and not efficient for the use of electrons.
I recall studying the early course material for electronics in the late 1960's. A fairly common question among the students revolved around electron flow in various materials, which is the basis for causing AC or DC current/voltage potentials.
The instructor suggested that one could pursue studies at a PhD level to obtain a better understanding.
I decided at my young age, for my purposes of learning and passing this early class and the more advanced classes to follow, that I would accept the fact that electrons exist and some very brilliant folks had discovered way before my time how to "manipulate" the electrons.
I also recall that several of my large text books contained the common title words of "theory of"; which for me was a "I'll take your word for it" moment. I took the authors at their word and that I needed to concentrate on how to discover (trouble-shoot) why a group of electrons started at point "A" and didn't finish their mission at point "B" or other locations.
Hole flow was interesting for our young minds, as we did not have a prior need for such pondering.
Today, of course; few seldom consider the power of electrons at their fingertips via their phones and personal computers.

4,500-kilometre (2,800 miles) high-voltage direct current (HVDC) network.
This shows how far behind the times I am. I had thought (and it used to be true) that AC was better than DC for power transmission. From National Geographic, 2012:

An updated, high-voltage version of DC, called HVDC, is being touted as the transmission method of the future because of its ability to transmit current over very long distances with fewer losses than AC. And that trend may be accelerated by a new device called a hybrid HVDC breaker, which may make it possible to use DC on large power grids without the fear of catastrophic breakdown that stymied the technology in the past. ...
[HVDC is] better suited to places where electricity must be transmitted extraordinarily long distances from power plants to urban areas. It also is more efficient for underwater electricity transmission. ...
Far-flung arrays of wind farms and solar installations could be tied together in giant networks. Because of its stability and low losses, HVDC could balance out the natural fluctuations in renewable energy in a way that AC never could.

https://www.nationalgeographic.com/news/energy/2012/12/121206-high-voltage-dc-breakthrough/
"If you have the transmission of electricity over very large distances between countries, then the flow of energy changes from liquid fuels – oil and LNG – to electrons." (Original article.)
Electrons "flow" only in DC. "The electrons in an AC circuit don’t really move along with the current flow. Instead, they sort of sit and wiggle back and forth." At least the basic laws of physics haven't changed.
https://www.dummies.com/education/science/science-electronics/electronics-basics-direct-and-alternating-current/

Another sign renewables are worth paying attention to.....

.....the Power Link doesn't just involve building the world's largest solar farm, which will be easily visible from space. The project also anticipates construction of what will be the world's longest submarine power cable, which will export electricity all the way from outback Australia to Singapore via a 4,500-kilometre (2,800 miles) high-voltage direct current (HVDC) network.

https://sciencealert.com/world-s-largest-solar-farm-to-pipe-power-internationally-from-australia-under-the-sea

Bengen says based on the current environment he thinks a new retiree should be safe if they start with a withdrawal rate of…no more than 5%.

https://fa-mag.com/news/choosing-the-highest-safe-withdrawal-rate-at-retirement

@Baseball_Fan, I haven’t followed many of @FD1000‘s posts as members’ reputed past performance doesn’t interest me. However, I do enjoy learning about new innovative funds, the trends among various markets, changes at the fund houses where I invest, Fed policy, and different ways of constructing portfolios. So those who have studied FD’s performance posts are the ones that may want to respond. I do enjoy reading Barrons. It may well be that some here are better investors than the ones quoted there. But, I don’t feel Barrons is a waste of money either. I think it’s been helpful to me over many years. Have read it since the early 70s (which pre-dates MFO) :)
Here’s the quote I earlier referenced. My recollection as to the specific article may have been incorrect. This is from an article that appeared in April 2020 in Barrons. However, I think there has been more said in Barrons. I just don’t have the wherewithal to go back and reread every copy.
- “Industrial analyst Deane Dray also believes safety is important, but he recommends investors take a so-called barbell approach. He suggests an 80% weighting in safer stocks, while reserving 20% for more-cyclical names.” (Article posted online by Barrons April 1, 2020)
-
Here’s what I was able to dig up on Dray’s experience. Doesn’t mean he knows more than any of us. But he doesn’t sound like a lightweight either.
Experience
RBC (Royal Bank of Canada) Capital Markets Managing Director Since Sep 2014 - (tenure 6 years 2 months) - Sellside equity research analyst covering the Multi-Industry & Electrical Equipment sector.
Citi Global Research Director - Jun 2010 - Sep 2014 (4 years 4 months)
New York City Senior equity research analyst covering the Multi-Industry & Electrical Equipment sector. Global sector leader of Industrials. Global sector leader of the water sector
FBR Capital Markets Senior Industrials Analyst
FBR Jan 2009 - Jun 2010 (1 year 6 months)
New York Senior equity research analyst covering the Multi-Industry & Electrical Equipment Sector.
Goldman Sachs Vice President
Goldman Sachs 1997 - 2009 12 years
Greater New York City Area Senior equity research analyst covering
the Multi-Industry & Electrical Equipment Sector.
Lehman Brothers Vice President
Lehman Brothers 1987 - 1997 10 years
Greater New York City Area
Education
New York University - Leonard N. Stern School of Business
Master of Business Administration (M.B.A.)Finance
1980 - 1982
Brown University
Bachelor's DegreeDouble major: Political Science and Law & Society
1976 - 1980
Activities and Societies: Cum Laude Deerfield Academy Deerfield Academy
Deerfield Academy 1972 - 1976
Licenses & Certifications Chartered Financial Analyst
Sourced from Linkedin https://www.linkedin.com/in/deane-dray-cfa-1b1b53a2