Withdrawal rates › 30 years

Is 4.5% a safe withdrawal rate for 30 years?

A 4.5% withdrawal ($45k a year from $1M, raised with inflation) lasted 30 years in 86.3% of start years since 1871 with a 60/40 portfolio, and 91.1% with 100% stocks.

It usually lasted: the money ran out in 17 of 124 start years from 1871 to 1994. Failures clustered in start years 1902, 1906–1907, 1909, 1912, 1937 and 1962–1969, among others.

The worst start was 1966, when the money ran out in year 21. Among the start years that lasted, 1899 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 $896k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 98.4%. Holding two years of spending in cash and drawing on it after down years lowered it to 79.8%.

Of the four mixes, 100% stocks lasted most often, at 91.1%.

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.

← 4.25% · 4.75% → · 20 years · 25 years · 40 years · 50 years

Questions

Is 4.5% a safe withdrawal rate for 30 years?

A 4.5% withdrawal ($45k a year from $1M, raised with inflation) lasted 30 years in 86.3% of start years since 1871 with a 60/40 portfolio, and 91.1% 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 4.5%?

1966: with 60/40 the money ran out in year 21.

Does cutting spending in bear markets help?

At 4.5% over 30 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 86.3% to 98.4%.