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Withdrawal rates › 40 years

Is 3% a safe withdrawal rate for 40 years?

A 3% withdrawal ($30k a year from $1M, raised with inflation) lasted 40 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 114 start years from 1871 to 1984.

Even the weakest start, 1966, finished with $601k.

In 96% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $2.4M.

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%.

1871: lasted, $8.8M left18711872: lasted, $8.4M left1873: lasted, $7.8M left1874: lasted, $7.3M left1875: lasted, $6.1M left1876: lasted, $6.1M left1877: lasted, $6.7M left1878: lasted, $4.0M left1879: lasted, $2.7M left1880: lasted, $2.4M left18801881: lasted, $1.5M left1882: lasted, $2.2M left1883: lasted, $2.5M left1884: lasted, $2.4M left1885: lasted, $2.6M left1886: lasted, $2.0M left1887: lasted, $2.0M left1888: lasted, $2.9M left1889: lasted, $3.3M left1890: lasted, $2.6M left18901891: lasted, $3.0M left1892: lasted, $1.7M left1893: lasted, $2.1M left1894: lasted, $2.7M left1895: lasted, $2.2M left1896: lasted, $2.9M left1897: lasted, $3.1M left1898: lasted, $2.1M left1899: lasted, $1.5M left1900: lasted, $2.5M left19001901: lasted, $1.6M left1902: lasted, $1.1M left1903: lasted, $1.4M left1904: lasted, $2.0M left1905: lasted, $1.4M left1906: lasted, $1.1M left1907: lasted, $1.1M left1908: lasted, $1.7M left1909: lasted, $1.1M left1910: lasted, $1.3M left19101911: lasted, $1.3M left1912: lasted, $1.3M left1913: lasted, $1.6M left1914: lasted, $2.0M left1915: lasted, $2.9M left1916: lasted, $2.3M left1917: lasted, $3.0M left1918: lasted, $5.8M left1919: lasted, $7.9M left1920: lasted, $9.2M left19201921: lasted, $11M left1922: lasted, $9.3M left1923: lasted, $7.3M left1924: lasted, $8.1M left1925: lasted, $7.1M left1926: lasted, $6.4M left1927: lasted, $5.2M left1928: lasted, $3.7M left1929: lasted, $2.1M left1930: lasted, $2.2M left19301931: lasted, $2.8M left1932: lasted, $4.6M left1933: lasted, $4.4M left1934: lasted, $2.2M left1935: lasted, $2.1M left1936: lasted, $1.3M left1937: lasted, $862k left1938: lasted, $1.5M left1939: lasted, $1.2M left1940: lasted, $1.1M left19401941: lasted, $1.4M left1942: lasted, $1.9M left1943: lasted, $2.3M left1944: lasted, $2.1M left1945: lasted, $1.9M left1946: lasted, $1.5M left1947: lasted, $3.3M left1948: lasted, $3.8M left1949: lasted, $3.9M left1950: lasted, $3.7M left19501951: lasted, $3.1M left1952: lasted, $3.4M left1953: lasted, $3.2M left1954: lasted, $3.5M left1955: lasted, $2.0M left1956: lasted, $1.7M left1957: lasted, $2.0M left1958: lasted, $3.0M left1959: lasted, $2.2M left1960: lasted, $2.3M left19601961: lasted, $2.0M left1962: lasted, $1.3M left1963: lasted, $1.4M left1964: lasted, $1.1M left1965: lasted, $725k left1966: lasted, $601k left1967: lasted, $1.1M left1968: lasted, $965k left1969: lasted, $811k left1970: lasted, $1.8M left19701971: lasted, $1.8M left1972: lasted, $1.6M left1973: lasted, $1.4M left1974: lasted, $3.1M left1975: lasted, $6.2M left1976: lasted, $4.6M left1977: lasted, $4.7M left1978: lasted, $7.0M left1979: lasted, $7.0M left1980: lasted, $9.2M left19801981: lasted, $10M left1982: lasted, $13M left1983: lasted, $7.8M left1984: lasted, $7.9M left

LastedRan out

Every 40-year retirement since 1871 at 3%, 60/40. Each bar is a start year.
$0$2.0M$4.0M$6.0M$8.0MYear 0Year 10Year 20Year 30Year 40

Good 10%MedianBad 10%

Balance over 40 years at 3%, 60/40, across every start year. Real dollars, $1M start.

By portfolio and strategy

PortfolioFixedBear-market cutCash bucketBad 10% endingMedian ending
100% stocks100%100%100%$1.9M$5.6M
80/20100%100%100%$1.7M$3.9M
60/40100%100%100%$1.2M$2.4M
40/60100%100%100%$640k$1.5M

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 · 25 years · 30 years · 50 years

Questions

Is 3% a safe withdrawal rate for 40 years?

A 3% withdrawal ($30k a year from $1M, raised with inflation) lasted 40 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 $601k.

Does cutting spending in bear markets help?

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

Test your own plan. Your spending, housing, Social Security and health insurance against every year since 1871. Free.

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