Generation 1

The first generation in safe withdrawal rate research was naively based on mortgage amortization—but in reverse. Rather than pay down a mortgage (like your home), you would draw down an asset account (like your retirement savings). The idea seemed intuitively correct even though it was fatally flawed (due to volatility and returns sequencing risks as shown below).

Even the venerable Peter Lynch (1995) succumbed to the intuitive appeal of the mortgage-style model when he falsely stated a 7% withdrawal rate would be prudent for an all-stock portfolio. He was forced to retract this obviously incorrect statement when 2^nd Generation research proved conclusively how such a withdrawal rate could land you in the poor house.