A 3.5% withdrawal ($35k a year from $1M, raised with inflation) lasted 20 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 134 start years from 1871 to 2004.
Even the weakest start, 1966, finished with $297k.
In 71% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $1.5M.
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%.
LastedRan out
Every 20-year retirement since 1871 at 3.5%, 60/40. Each bar is a start year.
Good 10%MedianBad 10%
Balance over 20 years at 3.5%, 60/40, across every start year. Real dollars, $1M start.
By portfolio and strategy
Portfolio
Fixed
Bear-market cut
Cash bucket
Bad 10% ending
Median ending
100% stocks
100%
100%
100%
$609k
$2.0M
80/20
100%
100%
100%
$631k
$1.8M
60/40
100%
100%
100%
$569k
$1.5M
40/60
100%
100%
100%
$483k
$1.1M
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.
A 3.5% withdrawal ($35k a year from $1M, raised with inflation) lasted 20 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 3.5%?
None ran out. The weakest start, 1966, ended with $297k.
Does cutting spending in bear markets help?
At 3.5% over 20 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.
