Last Update: 31 October 2024
You decided on a 4.5% withdrawal strategy and implemented the US Stocks/Bonds 10/90 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 47.75% of cases, and for 50 years in the 11.63% of cases.
Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 2.929% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 US Stocks/Bonds 10/90 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- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.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.
4.5% 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
|
96.89
|
47.75
|
29.33
|
11.63
|
8.61
|
8.04
|
7.89
|
Fail Rate(%) |
0.00
|
3.11
|
52.25
|
70.67
|
88.37
|
91.39
|
91.96
|
92.11
|
Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
At least 25% |
100.00
|
63.47
|
40.28
|
20.78
|
8.90
|
7.36
|
7.25
|
6.76
|
At least 50% |
84.02
|
46.98
|
32.21
|
14.63
|
7.14
|
6.83
|
6.65
|
6.43
|
At least 75% |
53.68
|
33.35
|
21.65
|
12.80
|
5.93
|
6.30
|
6.16
|
5.86
|
At least 100% |
32.25
|
24.27
|
13.79
|
11.41
|
4.57
|
5.86
|
5.66
|
5.86
|
4.5% 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
|
95.01
|
42.93
|
21.50
|
0.00
|
0.00
|
0.00
|
0.00
|
Fail Rate(%) |
0.00
|
4.99
|
57.07
|
78.50
|
100.00
|
100.00
|
100.00
|
100.00
|
Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
At least 25% |
100.00
|
63.27
|
36.98
|
15.26
|
0.00
|
0.00
|
0.00
|
0.00
|
At least 50% |
84.09
|
41.62
|
27.82
|
11.51
|
0.00
|
0.00
|
0.00
|
0.00
|
At least 75% |
52.17
|
28.30
|
18.43
|
10.68
|
0.00
|
0.00
|
0.00
|
0.00
|
At least 100% |
25.90
|
16.44
|
10.46
|
9.71
|
0.00
|
0.00
|
0.00
|
0.00
|
4.5% 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
|
87.53
|
87.14
|
At least 75% |
87.94
|
65.10
|
64.32
|
At least 100% |
39.50
|
37.95
|
36.51
|
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.
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 Jun 1897 |
0.000 Feb 1910 |
2.054 May 1911 |
5.155 May 1911 |
7.618 Mar 1916 |
8.563 | 9.105 | 10.037 | 11.291 | |
20 Years Worst Period (from) |
0.000 Jul 1897 |
0.000 Jun 1900 |
1.689 Jul 1900 |
3.002 Aug 1939 |
4.145 Jan 1941 |
4.690 | 4.820 | 5.067 | 6.278 | ||
30 Years Worst Period (from) |
0.000 Jan 1940 |
0.620 May 1940 |
1.413 May 1940 |
2.190 Nov 1940 |
2.929 Jan 1941 |
3.306 | 3.452 | 3.756 | 4.299 | ||
40 Years Worst Period (from) |
0.000 Nov 1938 |
0.071 Sep 1941 |
0.823 Sep 1941 |
1.553 Aug 1941 |
2.255 Jan 1941 |
2.528 | 2.768 | 3.158 | 3.517 | ||
50 Years Worst Period (from) |
0.473 Jun 1934 |
0.921 Jun 1934 |
1.353 Jun 1939 |
1.636 Jun 1939 |
1.903 Jan 1941 |
2.118 | 2.239 | 2.766 | 3.084 | ||
60 Years Worst Period (from) |
1.175 Aug 1939 |
1.321 Aug 1939 |
1.466 Aug 1939 |
1.612 Aug 1939 |
1.758 Aug 1939 |
1.923 | 2.052 | 2.471 | 2.833 | ||
70 Years Worst Period (from) |
1.026 May 1911 |
1.312 May 1911 |
1.462 Aug 1939 |
1.568 Aug 1939 |
1.674 Aug 1939 |
1.807 | 1.930 | 2.231 | 2.578 | ||
80 Years Worst Period (from) |
1.140 May 1901 |
1.366 May 1901 |
1.461 Aug 1939 |
1.538 Aug 1939 |
1.616 Aug 1939 |
1.730 | 1.859 | 2.070 | 2.424 |
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 |
0.000 Jun 1941 |
2.504 Oct 1971 |
5.641 Aug 1941 |
8.103 Feb 1946 |
8.797 | 9.227 | 9.936 | 11.190 | |
20 Years Worst Period (from) |
0.000 May 1933 |
0.315 Oct 1961 |
1.768 Aug 1939 |
3.002 Aug 1939 |
4.145 Jan 1941 |
4.503 | 4.735 | 4.985 | 6.090 | ||
30 Years Worst Period (from) |
0.000 Jan 1940 |
0.620 May 1940 |
1.413 May 1940 |
2.190 Nov 1940 |
2.929 Jan 1941 |
3.138 | 3.330 | 3.680 | 4.143 | ||
40 Years Worst Period (from) |
0.000 Nov 1938 |
0.071 Sep 1941 |
0.823 Sep 1941 |
1.553 Aug 1941 |
2.255 Jan 1941 |
2.397 | 2.537 | 2.797 | 3.380 | ||
50 Years Worst Period (from) |
0.473 Jun 1934 |
0.921 Jun 1934 |
1.353 Jun 1939 |
1.636 Jun 1939 |
1.903 Jan 1941 |
1.988 | 2.112 | 2.233 | 3.025 | ||
60 Years Worst Period (from) |
1.175 Aug 1939 |
1.321 Aug 1939 |
1.466 Aug 1939 |
1.612 Aug 1939 |
1.758 Aug 1939 |
1.817 | 1.900 | 2.027 | 2.745 | ||
70 Years Worst Period (from) |
1.250 Aug 1939 |
1.356 Aug 1939 |
1.462 Aug 1939 |
1.568 Aug 1939 |
1.674 Aug 1939 |
1.721 | 1.774 | 1.878 | 2.376 | ||
80 Years Worst Period (from) |
1.306 Aug 1939 |
1.384 Aug 1939 |
1.461 Aug 1939 |
1.538 Aug 1939 |
1.616 Aug 1939 |
1.652 | 1.671 | 1.740 | 1.918 |
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 Jul 2012 |
1.927 Nov 2013 |
4.873 Nov 2013 |
7.689 Nov 2014 |
9.393 Dec 1976 |
10.024 | 10.698 | 11.099 | 11.839 | |
20 Years Worst Period (from) |
0.933 Nov 2003 |
2.238 Nov 2003 |
3.543 Nov 2003 |
4.810 Apr 2004 |
6.035 Apr 2004 |
6.264 | 6.378 | 6.499 | 7.449 | ||
30 Years Worst Period (from) |
2.418 Nov 1993 |
3.153 Nov 1993 |
3.888 Nov 1993 |
4.623 Nov 1993 |
5.123 Dec 1976 |
5.323 | 5.395 | 5.585 | 6.177 |
Related Pages
Portfolio Main Page:
US Stocks/Bonds 10/90 Portfolio
For the US Stocks/Bonds 10/90 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