Fixed vs variable withdrawals: what a 7% variable rule does to your money
Short answer: Withdrawing 7% of each year’s balance, never below 70% or above 100% of a target budget, lasted 30 years in 75% of US start years since 1871, against 52% for a steady 7%. Over 50 years it lasted 42%, against 31%. Variable rules survive more often because spending falls in bad years, but 7% is still far above the roughly 3.5% to 4% that steady spending supports.
A fixed (steady) rule spends the same inflation-adjusted amount every year. A variable rule spends a percentage of whatever the portfolio is worth that year, so spending falls after a crash and rises after a boom. A floor stops spending falling too far; a cap stops it rising past what you need.
| Rule ($1M, all stocks) | 30 years lasted | 40 years lasted | 50 years lasted |
|---|---|---|---|
| Steady 4% ($40k a year) | 96% | 94% | 90% |
| Steady 7% ($70k a year) | 52% | 39% | 31% |
| Variable 7%, floor 70%, cap 100% of $70k | 75% | 57% | 42% |
Takeaways
- Variable rules trade certainty of spending for survival. In the worst start years, spending sits at the floor (here $49k instead of $70k) for long stretches.
- The floor is what fails. With a 70% floor, a long bad stretch still drains the portfolio; a lower floor or a lower rate survives more often.
- A cash bucket did not help here. Holding two years of spending in cash and drawing on it after down years lowered success in our tests, because the cash earns less than stocks over time.
Compare every rule with your own numbers in the Journey, or fine-tune rate, floor and cap in the Workspace.
Questions
Is a variable withdrawal rate better than the 4% rule?
It lasts more often at the same starting rate because spending falls after bad years, but your income varies. At a 7% rate with a 70% floor it lasted 30 years in 75% of start years, against 96% for a steady 4%.
What is a withdrawal floor?
The least you will spend in a year, as a share of your target budget. A 70% floor on a $70k budget means you never spend less than $49k, even if the percentage of the balance would be lower.