Retirement Income: Natural Yield and Free Dividend Fallacy
This research compares two approaches to withdrawing income in your retirement. The natural yield income approach, which relies on dividends and interest for income, and the Sustainable Withdrawal Rate framework, which makes no distinction between drawing from dividends or capital for income.
This research, which uses market data back to 1924, shows that the natural yield approach leads to much greater volatility in monthly income. This means the retirees income needs are not guaranteed to be met. On the other hand, the Sustainable Withdrawal Rate, framework and rules mean a less volatile income and higher chance of meeting a retirees needs.
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