Last Update: 30 September 2024
You decided on a 2.5% withdrawal strategy and invested in the All World ex-US Stock Market asset class: how likely, so far, your investment would have been enough for your retirement?.
In this post, we will simulate different retirement timeframes and check the sustainability of the withdrawal rate, using actual historical series.
Success Rate of a 2.5% Withdrawal Strategy
Let's calculate the success rate of a 2.5% Withdrawal Strategy, on the All World ex-US Stock Market asset class. Would you have also saved a portion of your invested capital, at the end of your retirement?
As usual, the withdrawal is expressed as a yearly rate and refers to the initial capital. After that, the withdrawal amount is monthly adjusted for inflation.
For instance, assuming a 20 years retirement, the algorithm will cover each 20 year timeframe starting at every possible month in the given period between the start and end month.
Here's how simulations work (each simulation is based on actual asset class returns, in US dollars):
- At the beginning, you start with a certain amount of money invested in the portfolio (i.e. the initial invested capital).
- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.
- Each month, portfolio value is updated, based on the asset classes returns (dividends are supposed to be reinvested).
- Each month, portfolio is rebalanced, to reset to the original weight of the assets (applicable only if portfolio contains at least 2 assets).
- Each month, the withdrawal is adjusted for inflation (US Inflation is used for simulation).
The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.
Learn more about Withdrawal Rate simulation
Data Sources and Credits
We are calculating the success rate over all the past N-year timeframes, on actual historical data, also focusing on how much capital (inflation adjusted) will remain after the retirement.
2.5% Withdrawal Rate |
% Success
|
||
---|---|---|---|
10 Years | 20 Years | 30 Years | |
Success Rate (%) At least 0% Preserved Capital |
100.00
|
100.00
|
100.00
|
Fail Rate(%) |
0.00
|
0.00
|
0.00
|
Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | ||
At least 25% |
100.00
|
100.00
|
100.00
|
At least 50% |
100.00
|
98.34
|
96.27
|
At least 75% |
89.19
|
91.97
|
85.48
|
At least 100% |
61.12
|
68.70
|
73.86
|
2.5% vs Perpetual/Safe Withdrawal Rates
Let's compare a 2.5% withdrawal with the Safe and Perpetual Withdrawal Rates, over different timeframes.
In the table below, the guaranteed thresholds of Success/Preserved Capital are highlighted in green, elsewhere in red. To focus on a specific timeframe for this portfolio, click on the links in the table.
PWR (%) - Perpetual Withdrawal Rate
|
SWR (%) - Safe Withdrawal Rate
|
||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Preserved Capital (Infl.Adj) | 100% | 75% | 50% | 25% | 0% | 0% | 0% | 0% | 0% | ||
Success Rate | 100% | 100% | 100% | 100% | 100% | 95% | 90% | 80% | 50% | ||
Timeframes |
10 Years Worst Period (from) |
0.000 Oct 1988 |
0.126 Mar 1999 |
3.482 Nov 2007 |
5.421 Nov 2007 |
7.361 Nov 2007 |
8.619 | 9.259 | 10.033 | 11.760 | |
20 Years Worst Period (from) |
0.000 Nov 1988 |
0.000 Mar 1989 |
1.558 Mar 1989 |
3.131 Mar 1989 |
4.476 Jan 1990 |
4.934 | 5.235 | 5.782 | 7.465 | ||
30 Years Worst Period (from) |
1.230 Jan 1989 |
1.815 Jan 1989 |
2.374 Jan 1990 |
2.875 Jan 1990 |
3.376 Jan 1990 |
3.620 | 3.849 | 4.383 | 7.327 |
Related Pages
Asset Class Main Page:
All World ex-US Stock Market Asset Class
For the All World ex-US Stock Market Asset Class, we have prepared a report for each available timeframe:
10-Year
20-Year
30-Year
if you want to learn more about the statistics of a specific withdrawal rate, we suggest these in particular:
2%
2.5%
3%
3.5%
4%
4.5%
5%
Website Homepage:
BestRetirementPortfolio.com