US Stocks/Bonds 20/80 Portfolio: 2% withdrawal simulation

Last Update: 31 October 2024

You decided on a 2% withdrawal strategy and implemented the US Stocks/Bonds 20/80 Portfolio: how likely, so far, your investment would have been enough for your retirement?.

With a 2% 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Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.435% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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% Withdrawal Strategy

Let's calculate the success rate of a 2% Withdrawal Strategy, on the US Stocks/Bonds 20/80 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Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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% Withdrawal Rate	% Success
2% 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	99.55
At least 50%	100.00	99.88	100.00	95.68	96.07	98.58	97.02	96.62
At least 75%	88.07	85.87	91.59	88.88	90.78	94.50	93.05	91.21
At least 100%	66.36	66.21	71.76	87.49	82.52	87.84	86.89	86.36

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Period: Nov 1924 - Oct 2024

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2% Withdrawal Rate	% Success
2% 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	98.34
At least 50%	100.00	100.00	100.00	91.82	91.85	96.67	91.69	87.55
At least 75%	89.27	86.37	88.35	78.92	81.03	87.11	84.21	78.01
At least 100%	66.42	62.64	67.90	77.53	70.38	77.55	78.67	73.44

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% Withdrawal Rate	% Success
2% 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%	91.68	97.23	100.00

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Simulations are calculated with actual returns of US Stocks/Bonds 20/80 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% vs Perpetual/Safe Withdrawal Rates

Let's compare a 2% 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 1910	2.114 May 1911	5.204 May 1911	7.704 Jan 1916	8.674	9.423	10.276	11.632
	20 Years Worst Period (from)	0.000 Aug 1898	0.207 Jul 1900	1.967 May 1901	3.498 May 1901	4.601 Apr 1911	4.899	5.038	5.295	6.625
	30 Years Worst Period (from)	0.667 Oct 1945	1.394 May 1940	2.084 May 1940	2.773 Nov 1940	3.435 Jan 1941	3.687	3.829	4.009	4.711
	40 Years Worst Period (from)	0.227 Oct 1941	0.866 Apr 1940	1.493 Apr 1940	2.119 Apr 1940	2.726 Jan 1941	2.975	3.183	3.439	3.839
	50 Years Worst Period (from)	1.274 Jun 1934	1.625 Nov 1940	1.867 Nov 1940	2.107 Aug 1939	2.337 Aug 1939	2.531	2.771	3.088	3.425
	60 Years Worst Period (from)	1.687 Mar 1937	1.822 Feb 1937	1.949 Aug 1939	2.065 Aug 1939	2.181 Aug 1939	2.345	2.562	2.792	3.204
	70 Years Worst Period (from)	1.659 May 1911	1.827 Aug 1939	1.916 Aug 1939	2.006 Aug 1939	2.095 Aug 1939	2.225	2.426	2.578	3.094
	80 Years Worst Period (from)	1.697 May 1901	1.856 May 1901	1.918 Aug 1939	1.977 Aug 1939	2.037 Aug 1939	2.149	2.339	2.455	2.928

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 Oct 1936	0.000 Sep 1971	2.737 Oct 1971	5.767 Jul 1972	8.350 Dec 1972	9.062	9.547	10.180	11.528
	20 Years Worst Period (from)	0.000 Apr 1960	0.714 Oct 1961	2.281 Oct 1961	3.598 Jan 1940	4.646 Jan 1941	4.860	4.993	5.303	6.531
	30 Years Worst Period (from)	0.667 Oct 1945	1.394 May 1940	2.084 May 1940	2.773 Nov 1940	3.435 Jan 1941	3.595	3.804	3.959	4.616
	40 Years Worst Period (from)	0.227 Oct 1941	0.866 Apr 1940	1.493 Apr 1940	2.119 Apr 1940	2.726 Jan 1941	2.851	2.996	3.349	3.752
	50 Years Worst Period (from)	1.274 Jun 1934	1.625 Nov 1940	1.867 Nov 1940	2.107 Aug 1939	2.337 Aug 1939	2.428	2.530	2.751	3.361
	60 Years Worst Period (from)	1.687 Mar 1937	1.822 Feb 1937	1.949 Aug 1939	2.065 Aug 1939	2.181 Aug 1939	2.253	2.317	2.516	3.121
	70 Years Worst Period (from)	1.737 Aug 1939	1.827 Aug 1939	1.916 Aug 1939	2.006 Aug 1939	2.095 Aug 1939	2.146	2.192	2.325	2.956
	80 Years Worst Period (from)	1.799 Aug 1939	1.859 Aug 1939	1.918 Aug 1939	1.977 Aug 1939	2.037 Aug 1939	2.078	2.102	2.160	2.427

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)	0.090 Nov 2013	2.881 Nov 2013	5.672 Nov 2013	8.088 Jan 1977	9.645 Jan 1977	10.373	11.008	11.253	12.094
	20 Years Worst Period (from)	1.693 Nov 2003	2.876 Nov 2003	4.060 Nov 2003	5.187 Mar 2004	6.292 Mar 2004	6.439	6.499	6.636	7.756
	30 Years Worst Period (from)	3.100 Nov 1993	3.753 Nov 1993	4.406 Nov 1993	5.059 Nov 1993	5.409 Jan 1977	5.646	5.736	5.931	6.487

Legend:

SWR 100% Success

95% Success

90% Success

Legend:

PWR 100% Capital Protection

75%

50% Protection

25%

Portfolio Main Page:
US Stocks/Bonds 20/80 Portfolio

For the US Stocks/Bonds 20/80 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% Withdrawal Strategy

2% vs Perpetual/Safe Withdrawal Rates

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