Withdrawal rates › 40 years

Is 3.5% a safe withdrawal rate for 40 years?

A 3.5% withdrawal ($35k a year from $1M, raised with inflation) lasted 40 years in 98.2% of start years since 1871 with a 60/40 portfolio, and 100% with 100% stocks.

It almost always lasted: the money ran out in 2 of 114 start years from 1871 to 1984. Failures clustered in start years 1965–1966.

The worst start was 1966, when the money ran out in year 35. Among the start years that lasted, 1969 came closest, finishing with $150k.

In 76% 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 raised success to 100%. Holding two years of spending in cash and drawing on it after down years left it at 98.2%.

Of the four mixes, 100% stocks lasted most often, 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% · 3.75% → · 20 years · 25 years · 30 years · 50 years

Questions

Is 3.5% a safe withdrawal rate for 40 years?

A 3.5% withdrawal ($35k a year from $1M, raised with inflation) lasted 40 years in 98.2% 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%?

1966: with 60/40 the money ran out in year 35.

Does cutting spending in bear markets help?

At 3.5% over 40 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 98.2% to 100%.