Golden Butterfly Portfolio: 2.5% withdrawal simulation

Last Update: 31 October 2024

You decided on a 2.5% withdrawal strategy and implemented the Golden Butterfly Portfolio: how likely, so far, your investment would have been enough for your retirement?.

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Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.589% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.

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 Golden Butterfly Portfolio. 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Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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.

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.

Period: Jan 1871 - Oct 2024

Swipe left to see all data

2.5% Withdrawal Rate	% Success
2.5% Withdrawal Rate	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	100.00	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	0.00	0.00
Preserved Capital (infl. adj.)	% Success, on % Preserved Capital
At least 25%	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
At least 50%	99.19	98.82	99.80	100.00	100.00	100.00	100.00	100.00
At least 75%	94.38	91.29	95.76	99.56	99.20	99.82	99.80	99.77
At least 100%	79.27	86.31	85.41	94.51	96.15	98.67	99.01	99.55

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Period: Nov 1924 - Oct 2024

Swipe left to see all data

2.5% Withdrawal Rate	% Success
2.5% Withdrawal Rate	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	100.00	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	0.00	0.00
Preserved Capital (infl. adj.)	% Success, on % Preserved Capital
At least 25%	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
At least 50%	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
At least 75%	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
At least 100%	86.96	97.71	99.05	99.45	100.00	100.00	100.00	100.00

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Period: Nov 1974 - Oct 2024

Swipe left to see all data

2.5% Withdrawal Rate	% Success
2.5% Withdrawal Rate	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	100.00	100.00
At least 75%	100.00	100.00	100.00
At least 100%	99.58	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 Golden Butterfly Portfolio | Preserved capital and withdrawals are considered adjusted for inflation | Withdrawals happen monthly | Performances are calculated in USD dollars, considering reinvestment of dividends when applicable | Portfolio is rebalanced each month | Inflation is updated at October 2024

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 review a specific timeframe for this portfolio, click on the links in the table.

Period: Jan 1871 - Oct 2024

Period: Nov 1924 - Oct 2024

Period: Nov 1974 - Oct 2024

Table Chart

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		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 Jan 1908	0.000 Feb 1909	1.676 Jul 1911	4.831 Jul 1911	7.667 Dec 1915	9.252	10.321	11.241	12.553
	20 Years Worst Period (from)	0.000 Sep 1898	0.192 Jul 1901	1.780 Jul 1901	3.369 Jul 1901	4.543 Jun 1911	5.095	5.398	6.417	7.710
	30 Years Worst Period (from)	0.905 Jul 1890	1.720 Jun 1902	2.429 Jun 1902	3.091 Jul 1901	3.589 Jul 1901	3.983	4.222	4.615	5.978
	40 Years Worst Period (from)	1.848 Jun 1892	2.321 Jun 1892	2.662 Jul 1901	2.908 Jul 1901	3.153 Jul 1901	3.512	3.663	3.916	5.201
	50 Years Worst Period (from)	2.158 Jul 1901	2.343 Jul 1901	2.527 Jul 1901	2.712 Jul 1901	2.897 Jul 1901	3.211	3.358	3.583	4.758
	60 Years Worst Period (from)	2.340 Jul 1901	2.441 Jul 1901	2.541 Jul 1901	2.642 Jul 1901	2.742 Jul 1901	3.021	3.176	3.369	4.388
	70 Years Worst Period (from)	2.357 Jul 1901	2.431 Jul 1901	2.505 Jul 1901	2.579 Jul 1901	2.653 Jul 1901	2.895	3.056	3.226	4.058
	80 Years Worst Period (from)	2.409 Jul 1901	2.455 Jul 1901	2.501 Jul 1901	2.547 Jul 1901	2.593 Jul 1901	2.806	2.967	3.115	3.828

Legend:

SWR 100% Success

95% Success

90% Success

Legend:

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)	0.233 Dec 1938	2.602 Dec 1936	4.920 Dec 1936	6.927 Feb 1946	8.754 Feb 1946	10.365	10.963	11.625	12.643
	20 Years Worst Period (from)	1.758 Mar 1937	2.625 Mar 1937	3.492 Mar 1937	4.359 Mar 1937	5.216 Feb 1937	6.018	6.478	6.855	7.876
	30 Years Worst Period (from)	2.344 Dec 1936	2.790 Dec 1936	3.236 Dec 1936	3.674 Feb 1937	4.095 Feb 1937	4.758	5.060	5.499	6.174
	40 Years Worst Period (from)	2.458 Feb 1937	2.734 Feb 1937	3.009 Feb 1937	3.285 Feb 1937	3.560 Feb 1937	4.077	4.326	4.826	5.356
	50 Years Worst Period (from)	2.847 Feb 1937	2.956 Feb 1937	3.066 Feb 1937	3.176 Feb 1937	3.286 Feb 1937	3.747	3.947	4.299	4.973
	60 Years Worst Period (from)	2.908 Feb 1937	2.973 Feb 1937	3.038 Feb 1937	3.103 Feb 1937	3.168 Feb 1937	3.574	3.740	4.048	4.751
	70 Years Worst Period (from)	2.963 Feb 1937	2.999 Feb 1937	3.034 Feb 1937	3.069 Feb 1937	3.105 Feb 1937	3.429	3.597	3.792	4.470
	80 Years Worst Period (from)	2.983 Feb 1937	3.005 Feb 1937	3.026 Feb 1937	3.048 Feb 1937	3.069 Feb 1937	3.308	3.533	3.700	4.161

Legend:

SWR 100% Success

95% Success

90% Success

Legend:

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)	2.208 Nov 2013	4.684 Nov 2013	7.159 Nov 2013	9.603 Oct 2012	11.495 Aug 1987	12.042	12.206	12.461	13.077
	20 Years Worst Period (from)	4.552 May 1998	5.254 May 1998	5.957 May 1998	6.660 May 1998	7.357 Aug 1987	7.658	7.839	8.024	8.567
	30 Years Worst Period (from)	4.789 Aug 1987	5.114 Aug 1987	5.438 Aug 1987	5.763 Aug 1987	6.088 Aug 1987	6.388	6.581	6.762	7.357

Legend:

SWR 100% Success

95% Success

90% Success

Legend:

PWR 100% Capital Protection

75%

50% Protection

25%

Portfolio Main Page:
Golden Butterfly Portfolio

For the Golden Butterfly Portfolio, 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

Success Rate of a 2.5% Withdrawal Strategy

2.5% vs Perpetual/Safe Withdrawal Rates

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