This is Michael Finke's first appearance on the IA 25. Click here to view the complete list and Special Report schedule for extended profiles for each of the 2013 IA 25 honorees.
The traditional 4% withdrawal rule is fine in a static world, but when was the last time the world was static?
For this reason, Dr. Michael Finke, professor of personal financial planning at Texas Tech and frequent contributor to our sister publication, Research magazine, called the success of the traditional 4% rule a "historical anomaly" in a working paper published in mid-January.
"The 4% rule was based on the historical asset return in a market environment that doesn't look like the one that exists today," Finke told Investment Advisor in March.
It's caused something of a stir.
"Our intention with the paper was to acknowledge the reality of lower returns moving forward," Finke recently explained, which in and of itself isn't controversial (see PIMCO's New Normal). But the methodology used and the conclusions he and his co-authors arrived at started a healthy debate over the best way to ensure clients' money lasts.
"Asset returns are a random walk. No one knows what bond returns will be in the future, but the market believes they will be negative," he said. "TIPS for instance are already negative. Nominal returns might go up, but real returns will be negative. It will either be a situation where they will be 0% for 20 years or slightly negative for 10 years."
So how did he arrive at such a bleak outlook? Not how one would think.