US Stocks/Bonds 20/80 Portfolio: 5% withdrawal simulation

Last Update: 30 April 2024

You decided on a 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 5% withdrawal strategy, you would have lived on your investiment for 30 years in the 45.71% of cases, and for 50 years in the 11.2% 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Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.435% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 5% Withdrawal Strategy

Let's calculate the success rate of a 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.

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  • Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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 - Apr 2024
Swipe left to see all data
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
91.44
45.71
27.92
11.20
9.37
8.69
9.08
Fail Rate(%)
0.00
8.56
54.29
72.08
88.80
90.63
91.31
90.92
Preserved Capital (infl. adj.) % Success, on % Preserved Capital
At least 25%
100.00
61.77
37.47
20.94
9.19
8.47
8.49
8.40
At least 50%
82.22
45.28
31.53
14.99
8.30
7.67
7.79
7.26
At least 75%
54.45
32.10
20.66
13.23
7.41
6.96
6.99
6.70
At least 100%
31.90
22.49
14.25
12.20
5.56
6.33
6.19
6.47
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Period: May 1924 - Apr 2024
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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
89.70
40.78
20.53
0.00
0.00
0.00
0.00
Fail Rate(%)
0.00
10.30
59.22
79.47
100.00
100.00
100.00
100.00
Preserved Capital (infl. adj.) % Success, on % Preserved Capital
At least 25%
100.00
61.81
35.08
14.42
0.00
0.00
0.00
0.00
At least 50%
81.50
39.54
27.47
10.54
0.00
0.00
0.00
0.00
At least 75%
53.65
27.16
17.00
9.57
0.00
0.00
0.00
0.00
At least 100%
26.46
15.40
10.94
9.02
0.00
0.00
0.00
0.00
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Period: May 1974 - Apr 2024
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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
78.95
82.57
At least 75%
77.96
61.22
59.34
At least 100%
38.88
33.24
38.17
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 April 2024

5% vs Perpetual/Safe Withdrawal Rates

Let's compare a 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 - Apr 2024
Period: May 1924 - Apr 2024
Period: May 1974 - Apr 2024
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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 10.271 11.637
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 5.294 6.633
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 4.008 4.709
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 3.835
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 3.422
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 2.789 3.209
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 2.576 3.097
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 2.461 2.954
Legend:
SWR 100% Success
95% Success
90% Success
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 11.545
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 6.551
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 3.127
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 2.444
Legend:
SWR 100% Success
95% Success
90% Success
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
5.525
Jun 1974
7.794
Jun 1974
9.645
Jan 1977
10.283 10.977 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
6.452 6.512 6.648 7.756
30 Years
Worst Period (from)
3.100
Nov 1993
3.753
Nov 1993
4.406
Nov 1993
5.059
Nov 1993
5.397
May 1974
5.610 5.716 5.864 6.487
Legend:
SWR 100% Success
95% Success
90% Success
PWR 100% Capital Protection
75%
50% Protection
25%
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 April 2024

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