US Small Cap: 2.5% withdrawal simulation

Last Update: 30 April 2023

You decided on a 2.5% withdrawal strategy and invested in the US Small 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.

Key Points

You invested in the US Small Cap asset class.

With a 2.5% withdrawal strategy, you would have lived on your investiment for 30 years in the 100% of cases, and for 50 years in the 100% of cases.

Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.118% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.

Success Rate of a 2.5% Withdrawal Strategy

Let's calculate the success rate of a 2.5% Withdrawal Strategy, on the US Small 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.

Methodology and Definitions
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):
  • 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  • Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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 Withdrawal Rates calculated here are annualized and refer to the initial capital (not the current!). The first month withdrawal is 1/12 of that annualized withdrawal and it's adjusted for inflation for each subsequent month.

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. In this website, you can find PWRs with 100% Capital Protection, or less.

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. In this website, you can find SWRs with 100% Success rate, or less.

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.

Period: Jan 1871 - Apr 2023
Swipe left to see all data
2.5%
Withdrawal Rate
% Success
20 Years 30 Years 40 Years 50 Years 60 Years 70 Years
Success Rate (%)
100.00
100.00
100.00
100.00
100.00
100.00
Fail Rate(%)
0.00
0.00
0.00
0.00
0.00
0.00
Preserved Capital (infl. adj.) % Success, on % Preserved Capital
At least 0%
100.00
100.00
100.00
100.00
100.00
100.00
At least 25%
100.00
100.00
100.00
100.00
100.00
100.00
At least 50%
99.56
99.80
100.00
100.00
100.00
100.00
At least 75%
97.67
99.12
100.00
100.00
100.00
100.00
At least 100%
94.08
98.71
99.85
100.00
100.00
100.00
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Period: May 1923 - Apr 2023
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2.5%
Withdrawal Rate
% Success
20 Years 30 Years 40 Years 50 Years 60 Years 70 Years
Success Rate (%)
100.00
100.00
100.00
100.00
100.00
100.00
Fail Rate(%)
0.00
0.00
0.00
0.00
0.00
0.00
Preserved Capital (infl. adj.) % Success, on % Preserved Capital
At least 0%
100.00
100.00
100.00
100.00
100.00
100.00
At least 25%
100.00
100.00
100.00
100.00
100.00
100.00
At least 50%
99.90
100.00
100.00
100.00
100.00
100.00
At least 75%
99.58
100.00
100.00
100.00
100.00
100.00
At least 100%
98.86
100.00
100.00
100.00
100.00
100.00
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Period: May 1973 - Apr 2023
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2.5%
Withdrawal Rate
% Success
20 Years 30 Years
Success Rate (%)
100.00
100.00
Fail Rate(%)
0.00
0.00
Preserved Capital (infl. adj.) % Success, on % Preserved Capital
At least 0%
100.00
100.00
At least 25%
100.00
100.00
At least 50%
100.00
100.00
At least 75%
100.00
100.00
At least 100%
100.00
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 Small 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 April 2023

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.

Period: Jan 1871 - Apr 2023
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PWR (%) - Perpetual Withdrawal Rate
SWR (%) - Safe Withdrawal Rate
Preserved Capital 100% 75% 50% 25% 0% 0% 0% 0% 0%
Success Rate 100% 100% 100% 100% 100% 95% 90% 80% 50%
Timeframes 20 Years
Worst Period (from)
0.000
May 1901
0.000
Jun 1912
0.898
Jul 1912
2.920
Sep 1929
3.380
Sep 1929
5.549 5.950 7.560 9.962
30 Years
Worst Period (from)
0.000
Jun 1902
0.620
Jun 1902
1.970
Jun 1902
3.044
Sep 1929
3.118
Sep 1929
4.503 4.906 6.159 8.827
40 Years
Worst Period (from)
2.229
Jun 1892
2.958
Jun 1892
3.010
Sep 1929
3.034
Sep 1929
3.058
Sep 1929
4.129 4.509 5.451 8.034
50 Years
Worst Period (from)
2.972
Sep 1929
2.985
Sep 1929
2.999
Sep 1929
3.013
Sep 1929
3.027
Sep 1929
3.998 4.292 5.100 7.389
60 Years
Worst Period (from)
3.004
Sep 1929
3.007
Sep 1929
3.011
Sep 1929
3.014
Sep 1929
3.017
Sep 1929
3.940 4.214 4.921 7.092
70 Years
Worst Period (from)
3.009
Sep 1929
3.011
Sep 1929
3.012
Sep 1929
3.013
Sep 1929
3.014
Sep 1929
3.890 4.115 4.743 6.341
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
Period: May 1923 - Apr 2023
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PWR (%) - Perpetual Withdrawal Rate
SWR (%) - Safe Withdrawal Rate
Preserved Capital 100% 75% 50% 25% 0% 0% 0% 0% 0%
Success Rate 100% 100% 100% 100% 100% 95% 90% 80% 50%
Timeframes 20 Years
Worst Period (from)
1.538
Sep 1929
1.999
Sep 1929
2.459
Sep 1929
2.920
Sep 1929
3.380
Sep 1929
5.972 7.342 8.486 11.262
30 Years
Worst Period (from)
2.822
Sep 1929
2.896
Sep 1929
2.970
Sep 1929
3.044
Sep 1929
3.118
Sep 1929
5.427 6.590 8.009 10.615
40 Years
Worst Period (from)
2.963
Sep 1929
2.986
Sep 1929
3.010
Sep 1929
3.034
Sep 1929
3.058
Sep 1929
5.096 6.187 7.457 10.306
50 Years
Worst Period (from)
2.972
Sep 1929
2.985
Sep 1929
2.999
Sep 1929
3.013
Sep 1929
3.027
Sep 1929
4.827 5.753 7.077 9.316
60 Years
Worst Period (from)
3.004
Sep 1929
3.007
Sep 1929
3.011
Sep 1929
3.014
Sep 1929
3.017
Sep 1929
4.518 5.764 7.234 10.202
70 Years
Worst Period (from)
3.009
Sep 1929
3.011
Sep 1929
3.012
Sep 1929
3.013
Sep 1929
3.014
Sep 1929
4.272 5.074 6.621 10.352
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
Period: May 1973 - Apr 2023
Swipe left to see all data
PWR (%) - Perpetual Withdrawal Rate
SWR (%) - Safe Withdrawal Rate
Preserved Capital 100% 75% 50% 25% 0% 0% 0% 0% 0%
Success Rate 100% 100% 100% 100% 100% 95% 90% 80% 50%
Timeframes 20 Years
Worst Period (from)
5.094
May 2002
5.662
May 2002
6.173
May 1998
6.676
May 1998
7.179
May 1998
8.183 8.898 9.891 11.979
30 Years
Worst Period (from)
7.450
Sep 1987
7.632
Sep 1987
7.814
Sep 1987
7.996
Sep 1987
8.178
Sep 1987
8.860 9.434 10.247 12.095
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
Simulations are calculated with actual returns of US Small 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 April 2023

Related Pages

Asset Class Main Page:
US Small Cap Asset Class

For the US Small Cap Asset Class, we have prepared a report for each available timeframe:
20-Year    30-Year    40-Year    50-Year    60-Year    70-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

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