A 4.25% withdrawal ($43k a year from $1M, raised with inflation) lasted 40 years in 77.2% of start years since 1871 with a 60/40 portfolio, and 88.6% with 100% stocks.
It lasted most of the time: the money ran out in 26 of 114 start years from 1871 to 1984. Failures clustered in start years 1899, 1902, 1905–1907, 1909–1913, 1937 and 1959–1973.
The worst start was 1966, when the money ran out in year 23. Among the start years that lasted, 1901 came closest, finishing with $8k.
In 48% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $927k.
Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 98.2%. Holding two years of spending in cash and drawing on it after down years lowered it to 71.9%.
Of the four mixes, 100% stocks lasted most often, at 88.6%.
LastedRan out
Every 40-year retirement since 1871 at 4.25%, 60/40. Each bar is a start year.
Good 10%MedianBad 10%
Balance over 40 years at 4.25%, 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
88.6%
99.1%
79.8%
$0
$3.2M
80/20
85.1%
99.1%
78.9%
$0
$2.0M
60/40
77.2%
98.2%
71.9%
$0
$927k
40/60
57%
89.5%
52.6%
$0
$193k
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 4.25% withdrawal ($43k a year from $1M, raised with inflation) lasted 40 years in 77.2% of start years since 1871 with a 60/40 portfolio, and 88.6% with 100% stocks. By the usual 95% standard it was not safe on its own; a lower rate or flexible spending helped.
What was the worst year to retire at 4.25%?
1966: with 60/40 the money ran out in year 23.
Does cutting spending in bear markets help?
At 4.25% over 40 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 77.2% to 98.2%.
Test your own plan. Your spending, housing, Social Security and health insurance against every year since 1871. Free.
