US Stocks/Bonds 80/20 Portfolio: 4.5% withdrawal simulation

Last Update: 31 May 2024

You decided on a 4.5% 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 4.5% withdrawal strategy, you would have lived on your investiment for 30 years in the 93.32% of cases, and for 50 years in the 76.17% 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Worst case scenario so far, over a 30-year time horizon, you could have withdrawn 3.731% of your initial capital each year, kept withdrawing all the time (adjusting for inflation), and you wouldn't have run out of money before 30 years.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 4.5% Withdrawal Strategy

Let's calculate the success rate of a 4.5% 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  • Each month, money is withdrawn from the portfolio. The withdrawal rate is calculated based on the initial withdrawn, annualized.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 - May 2024
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4.5%
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
99.94
93.32
82.89
76.17
78.79
77.84
74.15
Fail Rate(%)
0.00
0.06
6.68
17.11
23.83
21.21
22.16
25.85
Preserved Capital (infl. adj.) % Success, on % Preserved Capital
At least 25%
100.00
95.07
86.98
79.52
73.51
77.81
77.54
73.81
At least 50%
91.35
83.08
80.97
75.62
71.34
76.47
77.05
73.47
At least 75%
79.73
72.91
74.36
71.81
68.20
74.96
76.15
72.68
At least 100%
67.42
65.54
65.32
67.03
65.86
73.62
75.45
71.88
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Period: Jun 1924 - May 2024
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4.5%
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
99.90
91.80
83.77
74.88
85.24
89.20
83.40
Fail Rate(%)
0.00
0.10
8.20
16.23
25.12
14.76
10.80
16.60
Preserved Capital (infl. adj.) % Success, on % Preserved Capital
At least 25%
100.00
94.28
88.35
80.58
72.38
85.03
89.20
82.99
At least 50%
90.75
82.93
83.23
77.95
70.55
84.20
88.92
82.57
At least 75%
79.74
73.67
78.95
75.45
68.05
82.74
88.37
82.57
At least 100%
68.36
66.08
73.72
73.23
65.89
82.12
88.37
82.16
Legend: Min% of Protected Capital
Min 0%
Min 25%
Min 50%
Min 75%
Min 100%
Period: Jun 1974 - May 2024
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4.5%
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
99.72
100.00
At least 50%
95.22
94.74
100.00
At least 75%
90.44
90.58
100.00
At least 100%
81.29
86.98
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 May 2024

4.5% vs Perpetual/Safe Withdrawal Rates

Let's compare a 4.5% 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 - May 2024
Period: Jun 1924 - May 2024
Period: Jun 1974 - May 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
Jun 1908
0.000
Jun 1910
1.675
Jul 1911
4.901
Jul 1911
7.252
Sep 1929
8.686 9.408 10.727 13.492
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 6.126 8.506
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 5.126 6.970
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 5.920
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 4.347 5.406
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
3.844 4.057 4.459 5.413
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 5.551
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 4.305 5.225
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
Jun 1964
0.000
Oct 1964
2.667
Aug 1972
5.283
Jun 1972
7.252
Sep 1929
8.772 9.489 10.638 13.491
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 8.563
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
4.076 4.294 4.732 5.899
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 6.541
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
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 11.360 14.272
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 7.768 9.373
30 Years
Worst Period (from)
5.740
Sep 1987
6.027
Sep 1987
6.315
Sep 1987
6.603
Sep 1987
6.828
Jun 1974
7.092 7.400 7.683 8.310
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 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 May 2024

Related Pages

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