As a hunter, I know first-hand what animals are capable of.

On any piece of land, there is a carrying capacity. That is the number of animals (let's say white-tailed deer) that the land can support before they start to hurt the land.

The optimal number of deer on a piece of property is half the carrying capacity, because if the land is at or near carrying capacity, and there's a drought or some other calamity, then the land has less food, cover, and water, and the animals have to "eat the seed corn."

For instance, if you go into a patch of woods and notice that all the vegetation from five feet down is gone, then that land is almost certainly holding more deer than it should.

What then occurs is similar to what happens when a retiree is drawing income from a portfolio: he has to go into their principal (seed corn). Once you start tapping into principal (the food supply of the land) to draw income (the food source of the land), it becomes more and more likely that you will have a die off (or kill off).

Once the animals start tapping into their seed corn/principal the land/portfolio can't recover. There is now less food/principal and then it becomes harder to access, too. In the wild the deer eat all the low-hanging fruit, off the ground, up to eye level, until they have to stand on their hind legs to access the food higher up.

And the higher up food is less nutritious, desirable and palatable –like a portfolio's tanking and a retiree's having to sell off stock from the portion of his portfolio he had viewed as his longer term holds.

This is why it is so important for deer, and humans, to follow the simple axiom, "live below your means."

Many retirees had to go back to work because they "stressed" their portfolios too much during the downturn of 2000-2002. And yes, the market has recovered since then, but they haven't and likely won't. They ate their seed corn, hoping that we would return to the glory days of the 1990s.

John de Regt adds:

This makes great sense. That's the problem I have with annuities to fund retirement. To the degree that an annuity payment draws on principal, a person is getting older, poorer, and less capable of generating income, all at the same time. Not good.

I have as a savings and investment principle that in retirement I will live on a portion of the income from my capital, and will set my standard of living to whatever that income permits. I won't eat my seed corn, and to the extent that a portion of the income is reinvested, will be hedged from inflation.


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