Last Update: 30 November 2024
You decided on a 3.5% 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 3.5% withdrawal strategy, you would have lived on your investiment for 30 years in the 99.06% of cases, and for 50 years in the 45.51% 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Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.435% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 3.5% Withdrawal Strategy
Let's calculate the success rate of a 3.5% 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.
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- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.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.
| 3.5% 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
|
99.06
|
75.66
|
45.51
|
32.62
|
29.66
|
31.98
|
| Fail Rate(%) |
0.00
|
0.00
|
0.94
|
24.34
|
54.49
|
67.38
|
70.34
|
68.02
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
100.00
|
99.94
|
82.06
|
52.19
|
34.86
|
27.39
|
28.27
|
31.19
|
| At least 50% |
97.63
|
74.69
|
51.14
|
39.69
|
28.93
|
25.35
|
27.38
|
29.95
|
| At least 75% |
76.56
|
55.10
|
43.01
|
31.51
|
24.36
|
21.99
|
25.69
|
28.94
|
| At least 100% |
44.79
|
38.81
|
36.22
|
26.24
|
20.19
|
18.53
|
21.92
|
26.58
|
| 3.5% 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
|
98.34
|
70.18
|
34.61
|
11.43
|
8.86
|
11.62
|
| Fail Rate(%) |
0.00
|
0.00
|
1.66
|
29.82
|
65.39
|
88.57
|
91.14
|
88.38
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
100.00
|
100.00
|
79.90
|
48.13
|
17.14
|
6.86
|
7.76
|
10.79
|
| At least 50% |
98.52
|
74.09
|
48.39
|
33.84
|
10.82
|
5.61
|
6.93
|
9.13
|
| At least 75% |
75.02
|
52.86
|
41.74
|
26.77
|
7.49
|
1.66
|
5.26
|
7.88
|
| At least 100% |
39.41
|
32.99
|
33.06
|
22.75
|
2.00
|
0.00
|
0.28
|
5.39
|
| 3.5% 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
|
100.00
|
100.00
|
| At least 75% |
96.67
|
91.41
|
100.00
|
| At least 100% |
62.16
|
75.35
|
94.61
|
3.5% vs Perpetual/Safe Withdrawal Rates
Let's compare a 3.5% 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 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 | 4.712 | ||
|
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 | 3.841 | ||
|
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 | 3.430 | ||
|
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 | 2.452 | 2.928 | ||
|
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 | 11.523 | |
|
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 | 6.528 | ||
|
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 | 2.426 | ||
|
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 |
6.435 | 6.492 | 6.634 | 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 | 5.948 | 6.487 | ||
Related Pages
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
