US Stocks/Bonds 80/20 Portfolio: 2.5% withdrawal simulation

Last Update: 30 November 2024

You decided on a 2.5% withdrawal strategy and implemented the US Stocks/Bonds 80/20 Portfolio: how likely, so far, your investment would have been enough for your retirement?.

With a 2.5% 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Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.731% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 2.5% Withdrawal Strategy

Let's calculate the success rate of a 2.5% Withdrawal Strategy, on the US Stocks/Bonds 80/20 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Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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 - Nov 2024

Swipe left to see all data

2.5% Withdrawal Rate	% Success
2.5% 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	100.00
At least 50%	99.42	99.94	100.00	100.00	100.00	100.00	100.00	100.00
At least 75%	89.87	98.07	99.87	100.00	100.00	100.00	100.00	100.00
At least 100%	80.03	88.06	99.66	100.00	100.00	100.00	100.00	100.00

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Period: Dec 1924 - Nov 2024

Swipe left to see all data

2.5% Withdrawal Rate	% Success
2.5% 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	100.00
At least 50%	100.00	100.00	100.00	100.00	100.00	100.00	100.00	100.00
At least 75%	89.18	99.06	100.00	100.00	100.00	100.00	100.00	100.00
At least 100%	79.65	90.53	100.00	100.00	100.00	100.00	100.00	100.00

Legend: Min% of Protected Capital

Min 0%

Min 25%

Min 50%

Min 75%

Min 100%

Period: Dec 1974 - Nov 2024

Swipe left to see all data

2.5% Withdrawal Rate	% Success
2.5% 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%	94.80	100.00	100.00
At least 100%	90.44	99.72	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 80/20 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 November 2024

2.5% vs Perpetual/Safe Withdrawal Rates

Let's compare a 2.5% 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 - Nov 2024

Period: Dec 1924 - Nov 2024

Period: Dec 1974 - Nov 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 Jun 1908	0.000 Jun 1910	1.675 Jul 1911	4.901 Jul 1911	7.252 Sep 1929	8.686	9.408	10.733	13.503
	20 Years Worst Period (from)	0.000 May 1901	0.844 Jul 1901	2.359 Jul 1901	3.578 Sep 1929	4.422 Sep 1929	5.249	5.555	6.127	8.498
	30 Years Worst Period (from)	1.509 Jun 1902	2.277 Jun 1902	3.045 Jun 1902	3.531 Sep 1929	3.731 Sep 1929	4.416	4.634	5.131	6.986
	40 Years Worst Period (from)	2.873 Dec 1968	3.070 Dec 1968	3.267 Dec 1968	3.406 Sep 1929	3.519 Sep 1929	4.053	4.207	4.640	5.930
	50 Years Worst Period (from)	2.901 Sep 1929	3.014 Sep 1929	3.127 Sep 1929	3.240 Sep 1929	3.354 Sep 1929	3.823	4.001	4.356	5.413
	60 Years Worst Period (from)	3.072 Sep 1929	3.115 Sep 1929	3.159 Sep 1929	3.202 Sep 1929	3.245 Sep 1929	3.841	4.034	4.447	5.407
	70 Years Worst Period (from)	3.144 Sep 1929	3.159 Sep 1929	3.174 Sep 1929	3.189 Sep 1929	3.205 Sep 1929	3.771	3.963	4.423	5.567
	80 Years Worst Period (from)	3.118 Sep 1929	3.134 Sep 1929	3.151 Sep 1929	3.168 Sep 1929	3.184 Sep 1929	3.696	3.879	4.307	5.244

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 Jun 1964	0.000 Oct 1964	2.667 Aug 1972	5.283 Jun 1972	7.252 Sep 1929	8.772	9.489	10.638	13.488
	20 Years Worst Period (from)	1.046 Sep 1929	1.890 Sep 1929	2.734 Sep 1929	3.578 Sep 1929	4.422 Sep 1929	5.177	5.477	6.246	8.493
	30 Years Worst Period (from)	2.931 Sep 1929	3.131 Sep 1929	3.331 Sep 1929	3.531 Sep 1929	3.731 Sep 1929	4.334	4.609	5.228	7.447
	40 Years Worst Period (from)	2.873 Dec 1968	3.070 Dec 1968	3.267 Dec 1968	3.406 Sep 1929	3.519 Sep 1929	4.044	4.217	4.665	6.385
	50 Years Worst Period (from)	2.901 Sep 1929	3.014 Sep 1929	3.127 Sep 1929	3.240 Sep 1929	3.354 Sep 1929	3.816	3.983	4.312	5.534
	60 Years Worst Period (from)	3.072 Sep 1929	3.115 Sep 1929	3.159 Sep 1929	3.202 Sep 1929	3.245 Sep 1929	4.048	4.274	4.702	5.855
	70 Years Worst Period (from)	3.144 Sep 1929	3.159 Sep 1929	3.174 Sep 1929	3.189 Sep 1929	3.205 Sep 1929	4.089	4.431	5.182	6.490
	80 Years Worst Period (from)	3.118 Sep 1929	3.134 Sep 1929	3.151 Sep 1929	3.168 Sep 1929	3.184 Sep 1929	3.827	4.212	4.658	5.923

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 Nov 1998	0.000 Mar 1999	3.105 Mar 1999	5.878 Sep 2000	8.357 Sep 2000	9.884	10.701	11.415	14.270
	20 Years Worst Period (from)	2.318 Apr 2000	3.031 Apr 2000	3.744 Apr 2000	4.457 Apr 2000	5.170 Apr 2000	5.798	6.426	7.750	9.359
	30 Years Worst Period (from)	5.740 Sep 1987	6.027 Sep 1987	6.315 Sep 1987	6.603 Sep 1987	6.891 Sep 1987	7.149	7.441	7.712	8.346

Legend:

SWR 100% Success

95% Success

90% Success

Legend:

PWR 100% Capital Protection

75%

50% Protection

25%

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

For the US Stocks/Bonds 80/20 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 2.5% Withdrawal Strategy

2.5% vs Perpetual/Safe Withdrawal Rates

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