Last Update: 30 November 2024
You decided on a 2.5% withdrawal strategy and implemented the Short Term Treasury 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 97.18% of cases, and for 50 years in the 77.16% of cases.
Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 2.339% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 Short Term Treasury 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.
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- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.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.
2.5% Withdrawal Rate |
% Success
|
|||||||
---|---|---|---|---|---|---|---|---|
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
|
97.18
|
86.48
|
77.16
|
48.49
|
31.75
|
31.08
|
Fail Rate(%) |
0.00
|
0.00
|
2.82
|
13.52
|
22.84
|
51.51
|
68.25
|
68.92
|
Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
At least 25% |
100.00
|
94.84
|
87.50
|
76.97
|
55.13
|
32.54
|
27.28
|
28.15
|
At least 50% |
96.30
|
85.51
|
73.99
|
59.65
|
36.22
|
23.23
|
23.21
|
24.21
|
At least 75% |
73.26
|
56.59
|
47.45
|
37.79
|
22.68
|
19.59
|
19.05
|
20.16
|
At least 100% |
41.78
|
37.81
|
27.49
|
27.27
|
20.35
|
18.17
|
16.77
|
19.03
|
2.5% Withdrawal Rate |
% Success
|
|||||||
---|---|---|---|---|---|---|---|---|
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
|
95.01
|
74.34
|
63.73
|
34.93
|
2.49
|
0.00
|
Fail Rate(%) |
0.00
|
0.00
|
4.99
|
25.66
|
36.27
|
65.07
|
97.51
|
100.00
|
Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
At least 25% |
100.00
|
91.36
|
77.88
|
66.57
|
47.92
|
12.89
|
0.00
|
0.00
|
At least 50% |
94.08
|
76.59
|
61.24
|
53.54
|
23.29
|
0.62
|
0.00
|
0.00
|
At least 75% |
67.44
|
45.47
|
38.29
|
29.40
|
0.67
|
0.00
|
0.00
|
0.00
|
At least 100% |
30.25
|
24.87
|
20.10
|
14.98
|
0.00
|
0.00
|
0.00
|
0.00
|
2.5% Withdrawal Rate |
% Success
|
||
---|---|---|---|
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
|
90.30
|
93.78
|
At least 75% |
81.91
|
74.79
|
80.91
|
At least 100% |
50.94
|
55.96
|
56.43
|
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.
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 May 1910 |
1.352 May 1941 |
4.461 May 1941 |
7.569 May 1941 |
8.146 | 8.887 | 9.622 | 10.912 | |
20 Years Worst Period (from) |
0.000 Sep 1898 |
0.000 Apr 1932 |
0.618 Jul 1933 |
2.102 Aug 1939 |
3.462 Feb 1941 |
3.981 | 4.150 | 5.114 | 5.854 | ||
30 Years Worst Period (from) |
0.000 Dec 1930 |
0.000 Mar 1933 |
0.804 Jun 1933 |
1.573 Jun 1939 |
2.339 Jun 1939 |
2.560 | 2.820 | 3.761 | 4.187 | ||
40 Years Worst Period (from) |
0.000 Aug 1931 |
0.000 Apr 1939 |
0.466 Apr 1940 |
1.147 Dec 1940 |
1.793 Jun 1939 |
1.947 | 2.143 | 2.932 | 3.429 | ||
50 Years Worst Period (from) |
0.000 Dec 1930 |
0.203 Jun 1933 |
0.644 Jun 1933 |
1.085 Jun 1933 |
1.485 Jun 1939 |
1.571 | 1.782 | 2.388 | 2.925 | ||
60 Years Worst Period (from) |
0.444 Jun 1933 |
0.670 Jun 1933 |
0.896 Jun 1933 |
1.122 Jun 1933 |
1.347 Jun 1939 |
1.409 | 1.503 | 2.025 | 2.476 | ||
70 Years Worst Period (from) |
0.345 May 1911 |
0.691 May 1911 |
0.951 Jun 1933 |
1.100 Jun 1933 |
1.250 Jun 1933 |
1.313 | 1.368 | 1.732 | 2.174 | ||
80 Years Worst Period (from) |
0.588 Jun 1939 |
0.737 Jun 1939 |
0.887 Jun 1939 |
1.037 Jun 1939 |
1.180 Jun 1933 |
1.234 | 1.262 | 1.602 | 1.968 |
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 Aug 1932 |
0.000 Dec 1936 |
1.352 May 1941 |
4.461 May 1941 |
7.569 May 1941 |
8.073 | 8.939 | 9.552 | 10.571 | |
20 Years Worst Period (from) |
0.000 Aug 1930 |
0.000 Apr 1932 |
0.618 Jul 1933 |
2.102 Aug 1939 |
3.462 Feb 1941 |
3.814 | 4.004 | 4.927 | 5.697 | ||
30 Years Worst Period (from) |
0.000 Dec 1930 |
0.000 Mar 1933 |
0.804 Jun 1933 |
1.573 Jun 1939 |
2.339 Jun 1939 |
2.504 | 2.568 | 2.915 | 4.029 | ||
40 Years Worst Period (from) |
0.000 Aug 1931 |
0.000 Apr 1939 |
0.466 Apr 1940 |
1.147 Dec 1940 |
1.793 Jun 1939 |
1.903 | 1.951 | 2.156 | 3.332 | ||
50 Years Worst Period (from) |
0.000 Dec 1930 |
0.203 Jun 1933 |
0.644 Jun 1933 |
1.085 Jun 1933 |
1.485 Jun 1939 |
1.549 | 1.569 | 1.757 | 2.827 | ||
60 Years Worst Period (from) |
0.444 Jun 1933 |
0.670 Jun 1933 |
0.896 Jun 1933 |
1.122 Jun 1933 |
1.347 Jun 1939 |
1.392 | 1.405 | 1.448 | 2.248 | ||
70 Years Worst Period (from) |
0.653 Jun 1933 |
0.802 Jun 1933 |
0.951 Jun 1933 |
1.100 Jun 1933 |
1.250 Jun 1933 |
1.280 | 1.307 | 1.324 | 1.659 | ||
80 Years Worst Period (from) |
0.588 Jun 1939 |
0.737 Jun 1939 |
0.887 Jun 1939 |
1.037 Jun 1939 |
1.180 Jun 1933 |
1.204 | 1.224 | 1.237 | 1.394 |
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 2007 |
0.717 Oct 2013 |
3.621 Nov 2013 |
6.498 Dec 2014 |
9.243 Dec 2014 |
9.505 | 9.589 | 10.091 | 11.364 | |
20 Years Worst Period (from) |
0.000 Nov 2001 |
0.419 Jul 2003 |
1.919 Jul 2003 |
3.419 Jan 2004 |
4.879 Jan 2004 |
4.973 | 5.238 | 5.823 | 6.546 | ||
30 Years Worst Period (from) |
0.488 Oct 1993 |
1.431 Oct 1993 |
2.375 Oct 1993 |
3.318 Oct 1993 |
4.248 Feb 1994 |
4.315 | 4.394 | 4.835 | 5.097 |
Related Pages
Portfolio Main Page:
Short Term Treasury Portfolio
For the Short Term Treasury 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