Last Update: 28 February 2023
You decided on a 4% 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.
Success Rate of a 4% Withdrawal Strategy
Let's calculate the success rate of a 4% 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.
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The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too. 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The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.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
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- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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. 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.
Swipe left to see all data
| 4% Withdrawal Rate |
% Success
|
|||||
|---|---|---|---|---|---|---|
| 20 Years | 30 Years | 40 Years | 50 Years | 60 Years | 70 Years | |
| Success Rate (%) |
99.68
|
99.18
|
97.03
|
94.95
|
94.13
|
92.91
|
| Fail Rate(%) |
0.32
|
0.82
|
2.97
|
5.05
|
5.87
|
7.09
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||
| At least 0% |
99.68
|
99.18
|
97.03
|
94.95
|
94.13
|
92.91
|
| At least 25% |
98.87
|
96.39
|
95.10
|
94.54
|
93.77
|
92.91
|
| At least 50% |
94.83
|
93.25
|
92.65
|
93.97
|
93.59
|
92.71
|
| At least 75% |
90.42
|
91.48
|
91.76
|
93.32
|
93.50
|
92.71
|
| At least 100% |
87.15
|
88.55
|
90.20
|
92.42
|
93.04
|
92.60
|
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Swipe left to see all data
| 4% Withdrawal Rate |
% Success
|
|||||
|---|---|---|---|---|---|---|
| 20 Years | 30 Years | 40 Years | 50 Years | 60 Years | 70 Years | |
| Success Rate (%) |
99.48
|
98.69
|
98.47
|
98.17
|
97.71
|
96.95
|
| Fail Rate(%) |
0.52
|
1.31
|
1.53
|
1.83
|
2.29
|
3.05
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||
| At least 0% |
99.48
|
98.69
|
98.47
|
98.17
|
97.71
|
96.95
|
| At least 25% |
98.86
|
98.69
|
98.47
|
98.17
|
97.71
|
96.95
|
| At least 50% |
98.13
|
98.69
|
98.47
|
98.17
|
97.71
|
96.95
|
| At least 75% |
97.09
|
98.45
|
98.47
|
98.17
|
97.71
|
96.95
|
| At least 100% |
96.57
|
97.98
|
98.47
|
98.17
|
97.71
|
96.95
|
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Swipe left to see all data
| 4% 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 January 2023
4% vs Perpetual/Safe Withdrawal Rates
Let's compare a 4% 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 | 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 | 9.954 | |
|
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 | 8.826 | ||
|
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 | 8.033 | ||
|
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 | 7.373 | ||
|
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 | 7.090 | ||
|
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 | 6.335 | ||
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 | 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 | 11.248 | |
|
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 | 7.966 | 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 | 10.241 | ||
|
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 | 9.259 | ||
|
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 | 10.195 | ||
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 | 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 | 9.852 | 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 | 9.346 | 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 January 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