Permanent Portfolio: 4.5% withdrawal simulation

Last Update: 30 November 2024

You decided on a 4.5% withdrawal strategy and implemented the Harry Browne Permanent Portfolio: how likely, so far, your investment would have been enough for your retirement?.

With a 4.5% withdrawal strategy, you would have lived on your investiment for 30 years in the 67.67% of cases, and for 50 years in the 19.87% of cases.

Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.304% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 4.5% Withdrawal Strategy

Let's calculate the success rate of a 4.5% Withdrawal Strategy, on the Harry Browne Permanent 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Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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

4.5% Withdrawal Rate	% Success
4.5% 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	99.75	67.67	35.89	19.87	10.90	10.62	10.81
Fail Rate(%)	0.00	0.25	32.33	64.11	80.13	89.10	89.38	89.19
Preserved Capital (infl. adj.)	% Success, on % Preserved Capital
At least 25%	100.00	76.87	49.06	29.39	13.94	9.93	10.12	9.91
At least 50%	90.51	60.88	37.84	21.78	11.06	9.22	9.13	8.45
At least 75%	65.74	42.85	28.49	16.30	8.73	8.33	8.13	7.77
At least 100%	34.61	25.75	14.52	11.40	6.25	7.62	7.14	7.21

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

4.5% Withdrawal Rate	% Success
4.5% 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	76.81	32.32	8.82	0.00	0.00	0.00
Fail Rate(%)	0.00	0.00	23.19	67.68	91.18	100.00	100.00	100.00
Preserved Capital (infl. adj.)	% Success, on % Preserved Capital
At least 25%	100.00	84.18	50.54	26.21	4.83	0.00	0.00	0.00
At least 50%	94.54	63.79	36.03	18.72	4.33	0.00	0.00	0.00
At least 75%	68.83	41.31	22.83	14.84	2.16	0.00	0.00	0.00
At least 100%	28.12	17.07	9.16	7.07	1.33	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

4.5% Withdrawal Rate	% Success
4.5% 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	94.61
At least 75%	96.67	88.37	63.07
At least 100%	41.37	36.01	28.63

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Simulations are calculated with actual returns of Harry Browne Permanent 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

4.5% vs Perpetual/Safe Withdrawal Rates

Let's compare a 4.5% 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

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 Oct 1907	0.000 Dec 1908	1.801 Dec 1910	4.932 Jul 1911	7.639 Dec 1915	8.867	9.821	10.619	11.703
	20 Years Worst Period (from)	0.000 Feb 1898	0.014 Jul 1900	1.728 Jul 1901	3.301 Jul 1901	4.392 Jun 1911	4.779	4.959	5.388	6.891
	30 Years Worst Period (from)	0.327 Jul 1890	1.184 May 1940	1.910 May 1940	2.637 May 1940	3.304 Feb 1937	3.546	3.706	3.929	5.028
	40 Years Worst Period (from)	0.976 Sep 1936	1.420 Nov 1936	1.845 Feb 1937	2.262 Feb 1937	2.679 Feb 1937	2.967	3.128	3.319	4.134
	50 Years Worst Period (from)	1.526 Feb 1936	1.737 Dec 1936	1.945 Dec 1936	2.152 Feb 1937	2.354 Feb 1937	2.617	2.764	2.919	3.681
	60 Years Worst Period (from)	1.635 Feb 1937	1.775 Feb 1937	1.914 Feb 1937	2.054 Feb 1937	2.193 Feb 1937	2.417	2.527	2.665	3.354
	70 Years Worst Period (from)	1.632 Jul 1901	1.793 Jul 1901	1.922 Feb 1937	2.008 Feb 1937	2.094 Feb 1937	2.272	2.370	2.481	3.060
	80 Years Worst Period (from)	1.738 Jan 1899	1.846 Jul 1901	1.924 Feb 1937	1.981 Feb 1937	2.038 Feb 1937	2.189	2.256	2.361	2.820

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 Sep 1936	0.864 Mar 1939	3.679 Jun 1939	6.258 Feb 1946	8.368 Feb 1946	9.475	10.036	10.760	11.618
	20 Years Worst Period (from)	0.042 Jul 1933	1.239 Mar 1937	2.367 Mar 1937	3.495 Mar 1937	4.590 Jan 1940	4.832	5.255	5.959	6.785
	30 Years Worst Period (from)	0.458 May 1940	1.184 May 1940	1.910 May 1940	2.637 May 1940	3.304 Feb 1937	3.482	3.713	4.291	5.032
	40 Years Worst Period (from)	0.976 Sep 1936	1.420 Nov 1936	1.845 Feb 1937	2.262 Feb 1937	2.679 Feb 1937	2.811	2.980	3.251	4.170
	50 Years Worst Period (from)	1.526 Feb 1936	1.737 Dec 1936	1.945 Dec 1936	2.152 Feb 1937	2.354 Feb 1937	2.474	2.604	2.848	3.746
	60 Years Worst Period (from)	1.635 Feb 1937	1.775 Feb 1937	1.914 Feb 1937	2.054 Feb 1937	2.193 Feb 1937	2.303	2.367	2.559	3.392
	70 Years Worst Period (from)	1.749 Feb 1937	1.835 Feb 1937	1.922 Feb 1937	2.008 Feb 1937	2.094 Feb 1937	2.194	2.237	2.370	3.072
	80 Years Worst Period (from)	1.811 Feb 1937	1.868 Feb 1937	1.924 Feb 1937	1.981 Feb 1937	2.038 Feb 1937	2.119	2.145	2.208	2.570

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)	0.720 Oct 2012	3.268 Oct 2012	5.817 Oct 2012	8.365 Oct 2012	10.788 Aug 1987	11.136	11.318	11.559	12.248
	20 Years Worst Period (from)	3.181 Aug 1987	3.986 Aug 1987	4.790 Aug 1987	5.595 Aug 1987	6.399 Aug 1987	6.761	6.874	7.078	7.431
	30 Years Worst Period (from)	3.455 Aug 1987	3.871 Aug 1987	4.286 Aug 1987	4.701 Aug 1987	5.117 Aug 1987	5.322	5.422	5.538	5.931

Legend:

SWR 100% Success

95% Success

90% Success

Legend:

PWR 100% Capital Protection

75%

50% Protection

25%

Portfolio Main Page:
Harry Browne Permanent Portfolio

For the Harry Browne Permanent 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 4.5% Withdrawal Strategy

4.5% vs Perpetual/Safe Withdrawal Rates

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