Last Update: 30 November 2024
You decided on a 3.5% withdrawal strategy and implemented the US Stocks/Bonds 60/40 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 100% of cases, and for 50 years in the 99.44% of cases.
Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.999% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 60/40 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- Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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The Perpetual Withdrawal Rate (PWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, preserving the original invested capital, adjusted for inflation too.
The Safe Withdrawal Rate (SWR) is the percentage of the initial portfolio balance that can be withdrawn at the beginning of each month with inflation adjustment, without the portfolio running out of money.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
|
100.00
|
100.00
|
99.44
|
98.14
|
95.73
|
93.92
|
| Fail Rate(%) |
0.00
|
0.00
|
0.00
|
0.00
|
0.56
|
1.86
|
4.27
|
6.08
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
100.00
|
100.00
|
100.00
|
99.85
|
98.00
|
96.37
|
94.84
|
93.47
|
| At least 50% |
98.03
|
95.52
|
98.66
|
96.71
|
94.07
|
95.30
|
93.65
|
92.34
|
| At least 75% |
85.36
|
82.90
|
91.67
|
89.99
|
90.71
|
94.15
|
92.16
|
91.78
|
| At least 100% |
72.51
|
71.58
|
79.57
|
84.65
|
86.94
|
92.46
|
90.18
|
90.09
|
| 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
|
100.00
|
100.00
|
100.00
|
100.00
|
100.00
|
99.17
|
| Fail Rate(%) |
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.00
|
0.83
|
| Preserved Capital (infl. adj.) | % Success, on % Preserved Capital | |||||||
| At least 25% |
100.00
|
100.00
|
100.00
|
100.00
|
99.50
|
100.00
|
99.72
|
99.17
|
| At least 50% |
98.89
|
96.67
|
99.64
|
98.61
|
95.84
|
99.58
|
99.45
|
98.76
|
| At least 75% |
85.20
|
85.54
|
95.24
|
93.48
|
92.01
|
97.92
|
99.17
|
98.34
|
| At least 100% |
74.65
|
71.28
|
86.68
|
88.63
|
87.85
|
96.67
|
98.06
|
97.10
|
| 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% |
94.80
|
99.72
|
100.00
|
| At least 100% |
88.98
|
92.52
|
100.00
|
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 May 1908 |
0.000 Jun 1910 |
1.880 Jul 1911 |
5.040 Jul 1911 |
7.811 Jan 1973 |
8.891 | 9.787 | 10.793 | 12.977 | |
|
20 Years Worst Period (from) |
0.000 Jan 1901 |
0.771 Jul 1901 |
2.282 Jul 1901 |
3.792 Jul 1901 |
4.748 Dec 1968 |
5.276 | 5.561 | 6.058 | 7.888 | ||
|
30 Years Worst Period (from) |
1.731 Jun 1902 |
2.395 Jun 1902 |
3.058 Jun 1902 |
3.669 Jul 1901 |
3.999 Dec 1968 |
4.320 | 4.549 | 4.936 | 6.340 | ||
|
40 Years Worst Period (from) |
2.786 Jul 1901 |
2.994 Jul 1901 |
3.201 Jul 1901 |
3.408 Jul 1901 |
3.615 Jul 1901 |
3.928 | 4.092 | 4.399 | 5.292 | ||
|
50 Years Worst Period (from) |
2.805 Jul 1901 |
2.946 Jul 1901 |
3.087 Jul 1901 |
3.228 Jul 1901 |
3.369 Jul 1901 |
3.672 | 3.829 | 4.100 | 4.801 | ||
|
60 Years Worst Period (from) |
3.028 Jul 1901 |
3.084 Jul 1901 |
3.140 Jul 1901 |
3.195 Jul 1901 |
3.251 Jul 1901 |
3.627 | 3.792 | 4.081 | 4.722 | ||
|
70 Years Worst Period (from) |
3.037 Jul 1901 |
3.076 Jul 1901 |
3.115 Jul 1901 |
3.154 Jul 1901 |
3.194 Jul 1901 |
3.537 | 3.709 | 4.021 | 4.786 | ||
|
80 Years Worst Period (from) |
2.973 Jul 1901 |
3.015 Jul 1901 |
3.057 Jul 1901 |
3.098 Jul 1901 |
3.140 Jul 1901 |
3.453 | 3.631 | 3.922 | 4.568 | ||
|
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 1964 |
0.167 Jul 1972 |
2.864 Jul 1972 |
5.515 Jun 1972 |
7.811 Jan 1973 |
9.354 | 9.938 | 10.790 | 12.906 | |
|
20 Years Worst Period (from) |
0.646 Apr 1962 |
1.969 Apr 1962 |
3.246 Aug 1964 |
4.052 Dec 1968 |
4.748 Dec 1968 |
5.224 | 5.585 | 6.233 | 7.867 | ||
|
30 Years Worst Period (from) |
2.793 Feb 1965 |
3.138 Feb 1965 |
3.483 Feb 1965 |
3.783 Nov 1965 |
3.999 Dec 1968 |
4.298 | 4.595 | 5.075 | 6.620 | ||
|
40 Years Worst Period (from) |
2.882 Dec 1968 |
3.088 Dec 1968 |
3.295 Dec 1968 |
3.501 Dec 1968 |
3.707 Dec 1968 |
3.940 | 4.172 | 4.512 | 5.511 | ||
|
50 Years Worst Period (from) |
3.161 Sep 1929 |
3.258 Dec 1968 |
3.346 Dec 1968 |
3.433 Dec 1968 |
3.521 Dec 1968 |
3.725 | 3.843 | 4.116 | 4.822 | ||
|
60 Years Worst Period (from) |
3.364 Mar 1937 |
3.421 Mar 1937 |
3.477 Mar 1937 |
3.533 Mar 1937 |
3.590 Mar 1937 |
3.847 | 3.984 | 4.244 | 4.901 | ||
|
70 Years Worst Period (from) |
3.396 Mar 1937 |
3.429 Mar 1937 |
3.463 Mar 1937 |
3.497 Mar 1937 |
3.531 Mar 1937 |
3.924 | 4.117 | 4.397 | 5.151 | ||
|
80 Years Worst Period (from) |
3.404 Mar 1937 |
3.425 Mar 1937 |
3.446 Mar 1937 |
3.467 Mar 1937 |
3.488 Mar 1937 |
3.753 | 3.936 | 4.178 | 4.821 | ||
|
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 1998 |
1.258 Mar 1999 |
4.362 Mar 1999 |
6.887 Sep 2000 |
9.242 Sep 2000 |
10.380 | 10.890 | 11.390 | 13.680 | |
|
20 Years Worst Period (from) |
2.567 Apr 2000 |
3.334 Apr 2000 |
4.102 Apr 2000 |
4.869 Apr 2000 |
5.637 Apr 2000 |
6.085 | 6.543 | 7.432 | 8.845 | ||
|
30 Years Worst Period (from) |
5.381 Nov 1993 |
5.721 Jan 1977 |
5.969 Jan 1977 |
6.217 Jan 1977 |
6.465 Jan 1977 |
6.715 | 6.998 | 7.177 | 7.726 | ||
Related Pages
Portfolio Main Page:
US Stocks/Bonds 60/40 Portfolio
For the US Stocks/Bonds 60/40 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
