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A silhouette of a retired couple sitting in deck chairs on a dock in the Florida keys looking out at the Gulf of Mexico, watching a beautiful sunset, enjoying a couple of beers, and dreaming of what the future will bring.

jerrynettik/Getty Images/iStockphoto

Norman Rothery is the value investor for Globe Investor's Strategy Lab. Follow his contributions here and view his model portfolio here.

If Linus is to be believed, the Great Pumpkin will appear in pumpkin patches across the land this Halloween. But odds are he'll be disappointed yet again. Such is the tyranny of annual TV specials.

The feeling of disappointment when belief turns into disbelief also plagues academic research. Too many once-heralded studies fail the replication test when they're redone. Others falter when they're tested in different parts of the world.

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Stock market studies aren't immune from such problems and the venerable 4-per-cent retirement rule is a case in point.

But first a little background is in order. Financial planner William Bengen wrote a paper in 1994 called Determining Withdrawal Rates Using Historical Data. He figured that, for a balanced portfolio of stocks and bonds, a 4-per-cent initial annual withdrawal rate, subsequently adjusted for inflation, could be maintained safely for at least 30 years without running out of money.

Problem is, his results were based on U.S. data, and the U.S. market was one of the best-performing ones in the world since 1900.

When applied to international markets, the 4-per-cent rule runs into trouble, according to a new paper called The Retirement Glidepath by Prof. Javier Estrada of the IESE Business School in Barcelona, Spain.

But let's start with the good news. Prof. Estrada's work explored many different asset allocation strategies including those where the fraction of the portfolio devoted to stocks grew, or shrank, over time.

He concluded that one of the best options for retirees was also one of the simplest because it provided a combination of high returns along with a relatively low risk of running out of money over the course of 30 years. He favoured 60/40 portfolios where 60 per cent was devoted to stocks and 40 per cent to bonds with annual rebalancing.

As an aside, 100-per-cent stock portfolios also fared quite well in his analysis. They had a lower frequency of failure than the 60/40 portfolios both in the United States and, on average, internationally.

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Problem is, the majority of investors would likely be unable to stick with such highly volatile portfolios over the long term.

Prof. Estrada's work confirms earlier studies that pointed to the success of the 4-per-cent rule in the United States, where a 60/40 portfolio failed in only 4.9 per cent of the 30-year periods from 1900 through 2009. Failure in this case means that the portfolio was exhausted before reaching the 30-year mark.

Bad news is, the 30-year failure rate jumps to 16.0 per cent when the 60/40 portfolio was invested in a portfolio of global stocks and bonds.

Even worse, the average failure rate across the 19 countries in the study was a whopping 31.2 per cent.

For instance, the failure rate for a 60/40 portfolio in Norway was 53.1 per cent, a Swiss one collapsed 27.2 per cent of the time, and a U.K. one perished 23.5 per cent of the time. Those aren't great odds.

Like the United States, Canada was unusually kind to investors. The failure rate north of the border was just 1.2 per cent based on data from 1900 through 2009.

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But I hasten to add that the next century might not be as friendly to Canadians as the last one was.

Over all, while simple asset allocations proved to be strong relative performers, the study found the 4-per-cent rule wanting when tested in international markets. Even worse, it did not include the corrosive impact of taxes, fees and other frictions investors face.

In much the same way that Lucy yanks the football away from Charlie Brown at the last moment, the study's findings suggest that prospective retirees should save more, spend less, and delay leaving the work force.

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