Desert Portfolio: 5% withdrawal simulation

Last Update: 30 November 2024

You decided on a 5% withdrawal strategy and implemented the Gyroscopic Investing Desert Portfolio: how likely, so far, your investment would have been enough for your retirement?.

With a 5% withdrawal strategy, you would have lived on your investiment for 30 years in the 54.77% of cases, and for 50 years in the 15.79% of cases.

Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.565% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 5% Withdrawal Strategy

Let's calculate the success rate of a 5% Withdrawal Strategy, on the Gyroscopic Investing Desert 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Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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 - Nov 2024

Swipe left to see all data

5% Withdrawal Rate	% Success
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	96.52	54.77	31.36	15.79	12.41	10.91	11.04
Fail Rate(%)	0.00	3.48	45.23	68.64	84.21	87.59	89.09	88.96
Preserved Capital (infl. adj.)	% Success, on % Preserved Capital
At least 25%	99.94	72.57	40.99	25.66	13.62	10.46	10.22	10.25
At least 50%	89.99	56.28	36.56	22.51	11.14	9.40	9.62	9.80
At least 75%	63.31	36.63	29.10	19.08	8.57	8.60	8.83	9.12
At least 100%	32.70	26.00	18.41	14.91	6.49	7.98	8.23	8.90

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Period: Dec 1924 - Nov 2024

Swipe left to see all data

5% Withdrawal Rate	% Success
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	99.79	56.12	25.94	4.99	0.00	0.00	0.00
Fail Rate(%)	0.00	0.21	43.88	74.06	95.01	100.00	100.00	100.00
Preserved Capital (infl. adj.)	% Success, on % Preserved Capital
At least 25%	100.00	78.77	40.67	22.88	1.50	0.00	0.00	0.00
At least 50%	93.80	57.23	35.08	19.97	0.33	0.00	0.00	0.00
At least 75%	65.40	33.71	28.18	14.98	0.17	0.00	0.00	0.00
At least 100%	28.21	21.33	16.41	12.07	0.00	0.00	0.00	0.00

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Period: Dec 1974 - Nov 2024

Swipe left to see all data

5% Withdrawal Rate	% Success
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	99.45	99.59
At least 75%	91.48	75.90	85.48
At least 100%	42.83	48.48	56.43

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Simulations are calculated with actual returns of Gyroscopic Investing Desert 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 November 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 review a specific timeframe for this portfolio, click on the links in the table.

Period: Jan 1871 - Nov 2024

Period: Dec 1924 - Nov 2024

Period: Dec 1974 - Nov 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 1910	1.865 Jul 1911	4.988 Jul 1911	7.646 Dec 1915	9.066	9.895	10.540	12.037
	20 Years Worst Period (from)	0.000 Aug 1898	0.259 Jul 1901	1.826 Jul 1901	3.392 Jul 1901	4.557 Apr 1911	5.065	5.243	5.603	7.121
	30 Years Worst Period (from)	0.674 Jul 1890	1.780 Jul 1890	2.588 May 1901	3.076 May 1901	3.565 May 1901	3.889	4.013	4.283	5.235
	40 Years Worst Period (from)	1.392 Apr 1940	1.840 Apr 1940	2.287 Apr 1940	2.728 Mar 1937	3.126 Feb 1937	3.306	3.424	3.630	4.256
	50 Years Worst Period (from)	1.910 Feb 1899	2.152 Feb 1899	2.353 Feb 1937	2.544 Feb 1937	2.736 Feb 1937	2.951	3.069	3.270	3.858
	60 Years Worst Period (from)	2.091 Feb 1899	2.234 Jan 1899	2.353 Feb 1937	2.462 Feb 1937	2.570 Feb 1937	2.766	2.858	3.031	3.612
	70 Years Worst Period (from)	2.102 Jul 1901	2.211 Jul 1901	2.319 Jul 1901	2.418 Feb 1937	2.485 Feb 1937	2.644	2.715	2.874	3.398
	80 Years Worst Period (from)	2.043 Jul 1901	2.142 Jul 1901	2.240 May 1901	2.337 May 1901	2.431 Feb 1937	2.556	2.616	2.760	3.173

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)	0.000 Nov 1936	1.442 Jun 1939	4.142 Jul 1972	6.664 Feb 1946	8.611 Feb 1946	9.605	10.041	10.777	12.022
	20 Years Worst Period (from)	0.759 Oct 1961	2.003 Mar 1937	3.002 Mar 1937	4.000 Mar 1937	4.997 Feb 1937	5.300	5.513	5.868	7.118
	30 Years Worst Period (from)	1.379 May 1940	2.001 May 1940	2.622 May 1940	3.231 Jan 1940	3.757 Feb 1937	3.983	4.288	4.486	5.247
	40 Years Worst Period (from)	1.392 Apr 1940	1.840 Apr 1940	2.287 Apr 1940	2.728 Mar 1937	3.126 Feb 1937	3.284	3.431	3.857	4.350
	50 Years Worst Period (from)	1.966 Dec 1936	2.162 Feb 1937	2.353 Feb 1937	2.544 Feb 1937	2.736 Feb 1937	2.897	3.004	3.329	3.914
	60 Years Worst Period (from)	2.135 Mar 1937	2.244 Feb 1937	2.353 Feb 1937	2.462 Feb 1937	2.570 Feb 1937	2.705	2.793	3.043	3.678
	70 Years Worst Period (from)	2.219 Feb 1937	2.285 Feb 1937	2.352 Feb 1937	2.418 Feb 1937	2.485 Feb 1937	2.610	2.658	2.824	3.566
	80 Years Worst Period (from)	2.252 Feb 1937	2.297 Feb 1937	2.341 Feb 1937	2.386 Feb 1937	2.431 Feb 1937	2.534	2.565	2.648	3.020

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)	1.378 Oct 2012	3.911 Nov 2013	6.421 Nov 2013	8.861 Feb 1999	10.703 Jan 1977	11.256	11.443	11.739	12.464
	20 Years Worst Period (from)	3.079 Nov 2003	4.095 Jan 1999	4.946 Feb 1999	5.792 Feb 1999	6.639 Feb 1999	6.953	7.059	7.268	7.923
	30 Years Worst Period (from)	3.930 Nov 1993	4.462 Nov 1993	4.994 Nov 1993	5.526 Nov 1993	5.911 Jun 1975	6.056	6.135	6.258	6.685

Legend:

SWR 100% Success

95% Success

90% Success

Legend:

PWR 100% Capital Protection

75%

50% Protection

25%

Portfolio Main Page:
Gyroscopic Investing Desert Portfolio

For the Gyroscopic Investing Desert 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 5% Withdrawal Strategy

5% vs Perpetual/Safe Withdrawal Rates

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