Last Update: 31 October 2024
You decided on a 5% withdrawal strategy and invested in the US Large Cap 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 5% Withdrawal Strategy
Let's calculate the success rate of a 5% Withdrawal Strategy, on the US Large Cap 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.
The algorithm calculates the chance of success of a initial withdrawal rate, whose amount in dollars is adjusted monthly for inflation.
The algorithm tries a retirement simulation, starting at every possible month in the given period.
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):
The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.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
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- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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.
Swipe left to see all data
| 5% Withdrawal Rate |
% Success
|
|||||||
|---|---|---|---|---|---|---|---|---|
| 10 Years | 20 Years | 30 Years | 40 Years | 50 Years | 60 Years | 70 Years | 80 Years | |
|
Success Rate (%) At least 0% Preserved Capital |
100.00
|
92.78
|
82.38
|
74.10
|
68.16
|
71.69
|
74.18
|
69.79
|
| Fail Rate(%) |
0.00
|
7.22
|
17.62
|
25.90
|
31.84
|
28.31
|
25.82
|
30.21
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
98.20
|
84.01
|
78.35
|
71.76
|
66.32
|
70.81
|
73.78
|
69.79
|
| At least 50% |
85.76
|
77.35
|
74.45
|
69.64
|
64.80
|
70.01
|
73.29
|
69.11
|
| At least 75% |
77.19
|
69.51
|
69.54
|
66.57
|
63.03
|
68.94
|
72.99
|
69.00
|
| At least 100% |
63.29
|
63.35
|
64.16
|
63.28
|
61.03
|
67.26
|
72.59
|
68.88
|
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Swipe left to see all data
| 5% Withdrawal Rate |
% Success
|
|||||||
|---|---|---|---|---|---|---|---|---|
| 10 Years | 20 Years | 30 Years | 40 Years | 50 Years | 60 Years | 70 Years | 80 Years | |
|
Success Rate (%) At least 0% Preserved Capital |
100.00
|
88.14
|
79.79
|
71.98
|
62.40
|
72.77
|
82.83
|
73.86
|
| Fail Rate(%) |
0.00
|
11.86
|
20.21
|
28.02
|
37.60
|
27.23
|
17.17
|
26.14
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
97.32
|
80.23
|
77.41
|
70.18
|
60.73
|
72.35
|
82.83
|
73.86
|
| At least 50% |
83.16
|
73.47
|
74.44
|
68.38
|
59.73
|
71.93
|
82.55
|
73.03
|
| At least 75% |
75.86
|
68.47
|
70.39
|
66.71
|
58.07
|
70.69
|
82.27
|
72.61
|
| At least 100% |
62.53
|
62.02
|
68.13
|
65.19
|
56.91
|
70.06
|
81.72
|
72.61
|
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Swipe left to see all data
| 5% Withdrawal Rate |
% Success
|
||
|---|---|---|---|
| 10 Years | 20 Years | 30 Years | |
|
Success Rate (%) At least 0% Preserved Capital |
100.00
|
94.46
|
100.00
|
| Fail Rate(%) |
0.00
|
5.54
|
0.00
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | ||
| At least 25% |
98.34
|
91.41
|
100.00
|
| At least 50% |
92.10
|
88.92
|
100.00
|
| At least 75% |
88.77
|
86.15
|
100.00
|
| At least 100% |
71.31
|
82.55
|
100.00
|
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Simulations are calculated with actual returns of US Large Cap Asset Class | Preserved capital and withdrawals are considered adjusted for inflation | Withdrawals happen monthly | Performances are calculated in USD dollars, considering reinvestment of dividends when applicable | Inflation is updated at October 2024
5% vs Perpetual/Safe Withdrawal Rates
Let's compare a 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.
Swipe left to see all data
|
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 Jun 1908 |
0.000 Jun 1910 |
0.757 Mar 1999 |
3.632 Sep 1929 |
5.559 Sep 1929 |
8.250 | 8.888 | 10.354 | 13.857 | |
|
20 Years Worst Period (from) |
0.000 May 1901 |
0.819 Sep 1929 |
1.647 Sep 1929 |
2.474 Sep 1929 |
3.301 Sep 1929 |
4.830 | 5.294 | 6.071 | 8.794 | ||
|
30 Years Worst Period (from) |
1.529 Jun 1902 |
2.337 Jun 1902 |
2.595 Sep 1929 |
2.731 Sep 1929 |
2.868 Sep 1929 |
4.176 | 4.588 | 5.154 | 7.340 | ||
|
40 Years Worst Period (from) |
2.454 Sep 1929 |
2.529 Sep 1929 |
2.605 Sep 1929 |
2.681 Sep 1929 |
2.756 Sep 1929 |
3.885 | 4.190 | 4.628 | 6.444 | ||
|
50 Years Worst Period (from) |
2.309 Sep 1929 |
2.398 Sep 1929 |
2.486 Sep 1929 |
2.574 Sep 1929 |
2.663 Sep 1929 |
3.664 | 3.960 | 4.362 | 5.908 | ||
|
60 Years Worst Period (from) |
2.474 Sep 1929 |
2.504 Sep 1929 |
2.535 Sep 1929 |
2.565 Sep 1929 |
2.596 Sep 1929 |
3.875 | 4.120 | 4.646 | 6.014 | ||
|
70 Years Worst Period (from) |
2.539 Sep 1929 |
2.548 Sep 1929 |
2.557 Sep 1929 |
2.565 Sep 1929 |
2.574 Sep 1929 |
3.872 | 4.107 | 4.692 | 6.135 | ||
|
80 Years Worst Period (from) |
2.515 Sep 1929 |
2.527 Sep 1929 |
2.539 Sep 1929 |
2.551 Sep 1929 |
2.563 Sep 1929 |
3.789 | 4.046 | 4.568 | 5.815 | ||
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
Swipe left to see all data
|
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 Apr 1928 |
0.000 Sep 1929 |
0.757 Mar 1999 |
3.632 Sep 1929 |
5.559 Sep 1929 |
7.927 | 8.681 | 10.114 | 13.900 | |
|
20 Years Worst Period (from) |
0.000 Sep 1929 |
0.819 Sep 1929 |
1.647 Sep 1929 |
2.474 Sep 1929 |
3.301 Sep 1929 |
4.633 | 4.921 | 5.728 | 8.805 | ||
|
30 Years Worst Period (from) |
2.322 Sep 1929 |
2.458 Sep 1929 |
2.595 Sep 1929 |
2.731 Sep 1929 |
2.868 Sep 1929 |
3.914 | 4.264 | 4.937 | 7.893 | ||
|
40 Years Worst Period (from) |
2.454 Sep 1929 |
2.529 Sep 1929 |
2.605 Sep 1929 |
2.681 Sep 1929 |
2.756 Sep 1929 |
3.661 | 3.928 | 4.468 | 6.772 | ||
|
50 Years Worst Period (from) |
2.309 Sep 1929 |
2.398 Sep 1929 |
2.486 Sep 1929 |
2.574 Sep 1929 |
2.663 Sep 1929 |
3.488 | 3.674 | 4.137 | 5.966 | ||
|
60 Years Worst Period (from) |
2.474 Sep 1929 |
2.504 Sep 1929 |
2.535 Sep 1929 |
2.565 Sep 1929 |
2.596 Sep 1929 |
3.715 | 4.129 | 4.686 | 6.523 | ||
|
70 Years Worst Period (from) |
2.539 Sep 1929 |
2.548 Sep 1929 |
2.557 Sep 1929 |
2.565 Sep 1929 |
2.574 Sep 1929 |
3.649 | 4.294 | 5.540 | 7.466 | ||
|
80 Years Worst Period (from) |
2.515 Sep 1929 |
2.527 Sep 1929 |
2.539 Sep 1929 |
2.551 Sep 1929 |
2.563 Sep 1929 |
3.302 | 3.897 | 4.629 | 6.469 | ||
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
Swipe left to see all data
|
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 Jul 1998 |
0.000 Dec 1998 |
0.757 Mar 1999 |
4.439 Sep 2000 |
7.185 Sep 2000 |
8.755 | 9.956 | 10.832 | 14.853 | |
|
20 Years Worst Period (from) |
1.769 Apr 2000 |
2.440 Apr 2000 |
3.110 Apr 2000 |
3.780 Apr 2000 |
4.450 Apr 2000 |
4.953 | 5.792 | 7.462 | 9.971 | ||
|
30 Years Worst Period (from) |
5.904 Sep 1987 |
6.142 Jul 1976 |
6.340 Apr 1976 |
6.536 Apr 1976 |
6.732 Apr 1976 |
7.015 | 7.525 | 8.146 | 8.941 | ||
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
Simulations are calculated with actual returns of US Large Cap Asset Class | Preserved capital and withdrawals are considered adjusted for inflation | Withdrawals happen monthly | Performances are calculated in USD dollars, considering reinvestment of dividends when applicable | Inflation is updated at October 2024
Related Pages
Asset Class Main Page:
US Large Cap Asset Class
For the US Large Cap Asset Class, we have prepared a report for each available timeframe:
10-Year
20-Year
30-Year
40-Year
50-Year
60-Year
70-Year
80-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
