Withdrawal rates › 25 years

Is 3% a safe withdrawal rate for 25 years?

A 3% withdrawal ($30k a year from $1M, raised with inflation) lasted 25 years in 100% of start years since 1871 with a 60/40 portfolio, and 100% with 100% stocks.

It never ran out: the money ran out in 0 of 129 start years from 1871 to 1999.

Even the weakest start, 1966, finished with $450k.

In 81% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $1.9M.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high left success at 100%. Holding two years of spending in cash and drawing on it after down years left it at 100%.

By portfolio and strategy

Success is the share of start years in which the money never ran out. Endings are for the fixed strategy, in today's dollars. 20% cut in bear markets: spending drops 20% while the portfolio is more than 20% below its inflation-adjusted high. 2-year cash bucket: two years of spending held in cash earning 0.5% real, spent after years when stocks fell and refilled after years they rose.

3.25% → · 20 years · 30 years · 40 years · 50 years

Questions

Is 3% a safe withdrawal rate for 25 years?

A 3% withdrawal ($30k a year from $1M, raised with inflation) lasted 25 years in 100% of start years since 1871 with a 60/40 portfolio, and 100% with 100% stocks. By the usual 95% standard it was safe.

What was the worst year to retire at 3%?

None ran out. The weakest start, 1966, ended with $450k.

Does cutting spending in bear markets help?

At 3% over 25 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 100% to 100%.