Last Update: 31 October 2024
You decided on a 7.5% withdrawal strategy and implemented the US Stocks/Bonds 40/60 Portfolio: how likely, so far, your investment would have been enough for your retirement?.
With a 7.5% withdrawal strategy, you would have lived on your investiment for 30 years in the 16.21% of cases, and for 50 years in the 2.57% of cases.
Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.851% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 7.5% Withdrawal Strategy
Let's calculate the success rate of a 7.5% Withdrawal Strategy, on the US Stocks/Bonds 40/60 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- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.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.
| 7.5% 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
|
46.17
|
16.21
|
9.66
|
2.57
|
0.44
|
0.00
|
0.00
|
| Fail Rate(%) |
0.00
|
53.83
|
83.79
|
90.34
|
97.43
|
99.56
|
100.00
|
100.00
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
87.20
|
31.67
|
12.84
|
7.53
|
1.12
|
0.27
|
0.00
|
0.00
|
| At least 50% |
64.27
|
19.60
|
10.36
|
5.93
|
0.64
|
0.00
|
0.00
|
0.00
|
| At least 75% |
35.73
|
13.44
|
7.80
|
3.80
|
0.24
|
0.00
|
0.00
|
0.00
|
| At least 100% |
16.73
|
9.58
|
4.84
|
2.34
|
0.16
|
0.00
|
0.00
|
0.00
|
| 7.5% 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
|
43.70
|
10.70
|
6.10
|
0.00
|
0.00
|
0.00
|
0.00
|
| Fail Rate(%) |
0.00
|
56.30
|
89.30
|
93.90
|
100.00
|
100.00
|
100.00
|
100.00
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
88.81
|
27.89
|
8.80
|
4.58
|
0.00
|
0.00
|
0.00
|
0.00
|
| At least 50% |
63.92
|
13.42
|
6.54
|
3.19
|
0.00
|
0.00
|
0.00
|
0.00
|
| At least 75% |
33.12
|
8.32
|
4.04
|
2.77
|
0.00
|
0.00
|
0.00
|
0.00
|
| At least 100% |
13.14
|
5.93
|
2.62
|
1.94
|
0.00
|
0.00
|
0.00
|
0.00
|
| 7.5% Withdrawal Rate |
% Success
|
||
|---|---|---|---|
| 10 Years | 20 Years | 30 Years | |
|
Success Rate (%) At least 0% Preserved Capital |
100.00
|
68.98
|
36.10
|
| Fail Rate(%) |
0.00
|
31.02
|
63.90
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | ||
| At least 25% |
100.00
|
53.74
|
29.88
|
| At least 50% |
80.25
|
28.81
|
22.82
|
| At least 75% |
46.78
|
21.05
|
14.11
|
| At least 100% |
21.83
|
15.79
|
9.13
|
7.5% vs Perpetual/Safe Withdrawal Rates
Let's compare a 7.5% 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 Apr 1908 |
0.000 Mar 1910 |
2.040 Jul 1911 |
5.144 Jul 1911 |
7.824 Dec 1915 |
8.887 | 9.769 | 10.588 | 12.405 | |
|
20 Years Worst Period (from) |
0.000 Jan 1899 |
0.644 Jul 1901 |
2.157 Jul 1901 |
3.670 Jul 1901 |
4.823 Jul 1911 |
5.178 | 5.384 | 5.745 | 7.282 | ||
|
30 Years Worst Period (from) |
1.544 Jul 1890 |
2.379 Jun 1902 |
2.969 Jun 1902 |
3.429 May 1901 |
3.851 Jul 1901 |
4.124 | 4.296 | 4.529 | 5.641 | ||
|
40 Years Worst Period (from) |
1.846 Apr 1940 |
2.316 Apr 1940 |
2.785 Apr 1940 |
3.172 Mar 1937 |
3.423 Jul 1901 |
3.691 | 3.789 | 3.952 | 4.586 | ||
|
50 Years Worst Period (from) |
2.397 Jul 1901 |
2.585 Jul 1901 |
2.770 Feb 1937 |
2.942 Feb 1937 |
3.114 Mar 1937 |
3.368 | 3.475 | 3.629 | 4.090 | ||
|
60 Years Worst Period (from) |
2.597 Mar 1937 |
2.685 Mar 1937 |
2.773 Mar 1937 |
2.862 Mar 1937 |
2.950 Mar 1937 |
3.192 | 3.322 | 3.497 | 3.946 | ||
|
70 Years Worst Period (from) |
2.572 Jul 1911 |
2.678 Jul 1901 |
2.750 Jul 1901 |
2.819 Mar 1937 |
2.873 Mar 1937 |
3.090 | 3.189 | 3.363 | 3.914 | ||
|
80 Years Worst Period (from) |
2.488 Jul 1901 |
2.568 Jul 1901 |
2.648 Jul 1901 |
2.728 Jul 1901 |
2.808 Jul 1901 |
3.000 | 3.088 | 3.246 | 3.740 | ||
|
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 Dec 1936 |
0.199 Oct 1971 |
2.957 Jul 1972 |
5.679 Jun 1972 |
8.111 Jan 1973 |
9.408 | 9.890 | 10.580 | 12.357 | |
|
20 Years Worst Period (from) |
0.000 Oct 1961 |
1.441 Oct 1961 |
2.875 Apr 1962 |
4.026 May 1965 |
4.845 Sep 1968 |
5.162 | 5.462 | 5.882 | 7.155 | ||
|
30 Years Worst Period (from) |
2.116 Feb 1946 |
2.681 Feb 1946 |
3.246 Feb 1946 |
3.622 May 1965 |
3.962 Nov 1965 |
4.164 | 4.334 | 4.594 | 5.684 | ||
|
40 Years Worst Period (from) |
1.846 Apr 1940 |
2.316 Apr 1940 |
2.785 Apr 1940 |
3.172 Mar 1937 |
3.539 Mar 1937 |
3.719 | 3.787 | 3.948 | 4.570 | ||
|
50 Years Worst Period (from) |
2.424 Feb 1937 |
2.597 Feb 1937 |
2.770 Feb 1937 |
2.942 Feb 1937 |
3.114 Mar 1937 |
3.381 | 3.468 | 3.607 | 4.018 | ||
|
60 Years Worst Period (from) |
2.597 Mar 1937 |
2.685 Mar 1937 |
2.773 Mar 1937 |
2.862 Mar 1937 |
2.950 Mar 1937 |
3.196 | 3.310 | 3.505 | 3.888 | ||
|
70 Years Worst Period (from) |
2.655 Mar 1937 |
2.710 Mar 1937 |
2.764 Mar 1937 |
2.819 Mar 1937 |
2.873 Mar 1937 |
3.090 | 3.169 | 3.393 | 3.998 | ||
|
80 Years Worst Period (from) |
2.673 Feb 1937 |
2.710 Feb 1937 |
2.746 Feb 1937 |
2.783 Mar 1937 |
2.819 Mar 1937 |
3.014 | 3.059 | 3.203 | 3.694 | ||
|
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 Mar 1999 |
2.683 Mar 1999 |
5.413 Feb 1999 |
7.895 Sep 2000 |
10.127 Jan 1977 |
10.598 | 10.915 | 11.359 | 12.885 | |
|
20 Years Worst Period (from) |
2.736 Apr 2000 |
3.569 Apr 2000 |
4.402 Apr 2000 |
5.234 Apr 2000 |
6.067 Apr 2000 |
6.313 | 6.578 | 7.028 | 8.319 | ||
|
30 Years Worst Period (from) |
4.324 Nov 1993 |
4.844 Nov 1993 |
5.363 Nov 1993 |
5.667 Jan 1977 |
5.954 Jan 1977 |
6.183 | 6.405 | 6.608 | 7.103 | ||
Related Pages
Portfolio Main Page:
US Stocks/Bonds 40/60 Portfolio
For the US Stocks/Bonds 40/60 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
