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Withdrawal rates › 50 years

Is 4.5% a safe withdrawal rate for 50 years?

A 4.5% withdrawal ($45k a year from $1M, raised with inflation) lasted 50 years in 56.7% of start years since 1871 with a 60/40 portfolio, and 75% with 100% stocks.

It lasted only about half the time or a little more: the money ran out in 45 of 104 start years from 1871 to 1974. Failures clustered in start years 1892, 1898–1914, 1916, 1929–1930, 1936–1941 and 1946, among others.

The worst start was 1966, when the money ran out in year 21. Among the start years that lasted, 1917 came closest, finishing with $44k.

In 38% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $228k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 86.5%. Holding two years of spending in cash and drawing on it after down years lowered it to 46.2%.

Of the four mixes, 100% stocks lasted most often, at 75%.

1871: lasted, $4.0M left18711872: lasted, $4.4M left1873: lasted, $5.1M left1874: lasted, $5.1M left1875: lasted, $4.8M left1876: lasted, $4.4M left1877: lasted, $6.5M left1878: lasted, $5.8M left1879: lasted, $4.5M left1880: lasted, $3.7M left18801881: lasted, $1.4M left1882: lasted, $2.1M left1883: lasted, $2.1M left1884: lasted, $2.5M left1885: lasted, $2.3M left1886: lasted, $811k left1887: lasted, $505k left1888: lasted, $1.3M left1889: lasted, $946k left1890: lasted, $297k left18901891: lasted, $1.3M left1892: ran out in year 481893: lasted, $477k left1894: lasted, $517k left1895: lasted, $160k left1896: lasted, $357k left1897: lasted, $76k left1898: ran out in year 431899: ran out in year 311900: ran out in year 4819001901: ran out in year 341902: ran out in year 301903: ran out in year 351904: ran out in year 461905: ran out in year 321906: ran out in year 261907: ran out in year 291908: ran out in year 461909: 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, $265k left1916: ran out in year 351917: lasted, $44k left1918: lasted, $5.7M left1919: lasted, $7.7M left1920: lasted, $8.3M left19201921: lasted, $11M left1922: lasted, $8.2M left1923: lasted, $6.3M left1924: lasted, $5.5M left1925: lasted, $3.2M left1926: lasted, $2.9M left1927: lasted, $2.4M left1928: lasted, $815k left1929: ran out in year 391930: ran out in year 4819301931: lasted, $370k left1932: lasted, $1.5M left1933: lasted, $1.6M left1934: lasted, $168k left1935: lasted, $763k left1936: ran out in year 401937: ran out in year 291938: ran out in year 491939: ran out in year 411940: ran out in year 4119401941: ran out in year 491942: lasted, $2.1M left1943: lasted, $2.1M left1944: lasted, $1.5M left1945: lasted, $883k left1946: ran out in year 421947: lasted, $2.8M left1948: lasted, $5.5M left1949: lasted, $6.4M left1950: lasted, $4.9M left19501951: lasted, $3.8M left1952: lasted, $3.0M left1953: lasted, $2.2M left1954: lasted, $2.8M left1955: lasted, $175k left1956: ran out in year 361957: ran out in year 391958: lasted, $190k 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, $128k left

LastedRan out

Every 50-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 40Year 50

Good 10%MedianBad 10%

Balance over 50 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% stocks75%94.2%70.2%$0$3.3M
80/2070.2%93.3%64.4%$0$1.9M
60/4056.7%86.5%46.2%$0$228k
40/6029.8%52.9%24%$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 · 40 years

Questions

Is 4.5% a safe withdrawal rate for 50 years?

A 4.5% withdrawal ($45k a year from $1M, raised with inflation) lasted 50 years in 56.7% of start years since 1871 with a 60/40 portfolio, and 75% 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 50 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 56.7% to 86.5%.

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