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Withdrawal rates › 40 years

Is 4.5% a safe withdrawal rate for 40 years?

A 4.5% withdrawal ($45k a year from $1M, raised with inflation) lasted 40 years in 70.2% of start years since 1871 with a 60/40 portfolio, and 79.8% with 100% stocks.

It lasted most of the time: the money ran out in 34 of 114 start years from 1871 to 1984. Failures clustered in start years 1899, 1901–1903, 1905–1907, 1909–1914, 1916 and 1929, among others.

The worst start was 1966, when the money ran out in year 21. Among the start years that lasted, 1940 came closest, finishing with $12k.

In 43% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $655k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 93%. Holding two years of spending in cash and drawing on it after down years lowered it to 61.4%.

Of the four mixes, 100% stocks lasted most often, at 79.8%.

1871: lasted, $6.2M left18711872: lasted, $5.9M left1873: lasted, $5.6M left1874: lasted, $5.3M left1875: lasted, $4.3M left1876: lasted, $4.1M left1877: lasted, $5.0M left1878: lasted, $2.8M left1879: lasted, $1.7M left1880: lasted, $1.4M left18801881: lasted, $658k left1882: lasted, $1.2M left1883: lasted, $1.3M left1884: lasted, $1.2M left1885: lasted, $1.4M left1886: lasted, $632k left1887: lasted, $503k left1888: lasted, $1.1M left1889: lasted, $1.1M left1890: lasted, $589k left18901891: lasted, $1.1M left1892: lasted, $245k left1893: lasted, $602k left1894: lasted, $761k left1895: lasted, $445k left1896: lasted, $678k left1897: lasted, $568k left1898: lasted, $112k left1899: ran out in year 311900: lasted, $359k left19001901: ran out in year 341902: ran out in year 301903: ran out in year 351904: lasted, $208k left1905: ran out in year 321906: ran out in year 261907: ran out in year 291908: lasted, $197k left1909: ran out in year 301910: ran out in year 3319101911: ran out in year 311912: ran out in year 301913: ran out in year 351914: ran out in year 401915: lasted, $469k left1916: ran out in year 351917: lasted, $374k left1918: lasted, $3.3M left1919: lasted, $5.2M left1920: lasted, $6.5M left19201921: lasted, $8.4M left1922: lasted, $6.6M left1923: lasted, $4.8M left1924: lasted, $5.6M left1925: lasted, $4.6M left1926: lasted, $3.8M left1927: lasted, $2.9M left1928: lasted, $1.5M left1929: ran out in year 391930: lasted, $312k left19301931: lasted, $910k left1932: lasted, $2.7M left1933: lasted, $2.5M left1934: lasted, $651k left1935: lasted, $911k left1936: ran out in year 401937: ran out in year 291938: lasted, $356k left1939: lasted, $29k left1940: lasted, $12k left19401941: lasted, $291k left1942: lasted, $947k left1943: lasted, $1.1M left1944: lasted, $896k left1945: lasted, $676k left1946: lasted, $71k left1947: lasted, $1.7M left1948: lasted, $2.3M left1949: lasted, $2.4M left1950: lasted, $2.1M left19501951: lasted, $1.6M left1952: lasted, $1.7M left1953: lasted, $1.5M left1954: lasted, $1.7M left1955: lasted, $352k left1956: ran out in year 361957: ran out in year 391958: lasted, $513k left1959: ran out in year 331960: ran out in year 3319601961: ran out in year 311962: ran out in year 271963: ran out in year 281964: ran out in year 251965: ran out in year 221966: ran out in year 211967: ran out in year 231968: ran out in year 221969: ran out in year 221970: ran out in year 3319701971: ran out in year 301972: ran out in year 261973: ran out in year 231974: lasted, $423k left1975: lasted, $3.3M left1976: lasted, $1.9M left1977: lasted, $2.0M left1978: lasted, $4.0M left1979: lasted, $4.3M left1980: lasted, $6.2M left19801981: lasted, $7.1M left1982: lasted, $10M left1983: lasted, $5.6M left1984: lasted, $5.6M left

LastedRan out

Every 40-year retirement since 1871 at 4.5%, 60/40. Each bar is a start year.
$0$2.0M$4.0M$6.0MYear 0Year 10Year 20Year 30Year 40

Good 10%MedianBad 10%

Balance over 40 years at 4.5%, 60/40, across every start year. Real dollars, $1M start.

By portfolio and strategy

PortfolioFixedBear-market cutCash bucketBad 10% endingMedian ending
100% stocks79.8%96.5%77.2%$0$2.8M
80/2077.2%96.5%71.9%$0$1.7M
60/4070.2%93%61.4%$0$655k
40/6048.2%76.3%43%$0$0

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 · 30 years · 50 years

Questions

Is 4.5% a safe withdrawal rate for 40 years?

A 4.5% withdrawal ($45k a year from $1M, raised with inflation) lasted 40 years in 70.2% of start years since 1871 with a 60/40 portfolio, and 79.8% 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 40 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 70.2% to 93%.

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