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Withdrawal rates › 40 years

Is 4.75% a safe withdrawal rate for 40 years?

A 4.75% withdrawal ($48k a year from $1M, raised with inflation) lasted 40 years in 62.3% of start years since 1871 with a 60/40 portfolio, and 77.2% with 100% stocks.

It lasted only about half the time or a little more: the money ran out in 43 of 114 start years from 1871 to 1984. Failures clustered in start years 1898–1914, 1916–1917, 1929, 1936–1937, 1939–1940 and 1946, among others.

The worst start was 1966, when the money ran out in year 19. Among the start years that lasted, 1892 came closest, finishing with $2k.

In 39% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $397k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 87.7%. Holding two years of spending in cash and drawing on it after down years lowered it to 52.6%.

Of the four mixes, 100% stocks lasted most often, at 77.2%.

1871: lasted, $5.8M left18711872: lasted, $5.5M left1873: lasted, $5.2M left1874: lasted, $5.0M left1875: lasted, $4.0M left1876: lasted, $3.8M left1877: lasted, $4.7M left1878: lasted, $2.6M left1879: lasted, $1.5M left1880: lasted, $1.2M left18801881: lasted, $513k left1882: lasted, $1.0M left1883: lasted, $1.1M left1884: lasted, $1.0M left1885: lasted, $1.1M left1886: lasted, $401k left1887: lasted, $256k left1888: lasted, $808k left1889: lasted, $695k left1890: lasted, $250k left18901891: lasted, $838k left1892: lasted, $2k left1893: lasted, $345k left1894: lasted, $436k left1895: lasted, $151k left1896: lasted, $306k left1897: lasted, $149k left1898: ran out in year 361899: ran out in year 281900: ran out in year 4019001901: ran out in year 301902: ran out in year 261903: ran out in year 301904: ran out in year 391905: ran out in year 281906: ran out in year 231907: ran out in year 261908: ran out in year 391909: ran out in year 261910: ran out in year 2919101911: ran out in year 261912: ran out in year 261913: ran out in year 301914: ran out in year 351915: lasted, $58k left1916: ran out in year 301917: ran out in year 391918: lasted, $2.9M left1919: lasted, $4.7M left1920: lasted, $6.0M left19201921: lasted, $7.9M left1922: lasted, $6.2M left1923: lasted, $4.4M left1924: lasted, $5.2M left1925: lasted, $4.1M left1926: lasted, $3.4M left1927: lasted, $2.6M left1928: lasted, $1.1M left1929: ran out in year 321930: lasted, $4k left19301931: lasted, $597k left1932: lasted, $2.4M left1933: lasted, $2.1M left1934: lasted, $392k left1935: lasted, $713k left1936: ran out in year 351937: ran out in year 251938: lasted, $159k left1939: ran out in year 371940: ran out in year 3719401941: lasted, $112k left1942: lasted, $792k left1943: lasted, $947k left1944: lasted, $700k left1945: lasted, $477k left1946: ran out in year 381947: lasted, $1.4M left1948: lasted, $2.1M left1949: lasted, $2.1M left1950: lasted, $1.8M left19501951: lasted, $1.4M left1952: lasted, $1.4M left1953: lasted, $1.2M left1954: lasted, $1.4M left1955: lasted, $82k left1956: ran out in year 321957: ran out in year 341958: lasted, $101k left1959: ran out in year 301960: ran out in year 3019601961: ran out in year 281962: ran out in year 251963: ran out in year 261964: ran out in year 231965: ran out in year 201966: ran out in year 191967: ran out in year 211968: ran out in year 201969: ran out in year 201970: ran out in year 2719701971: ran out in year 251972: ran out in year 231973: ran out in year 211974: ran out in year 401975: lasted, $2.8M left1976: lasted, $1.5M left1977: lasted, $1.5M left1978: lasted, $3.5M left1979: lasted, $3.9M left1980: lasted, $5.8M left19801981: lasted, $6.6M left1982: lasted, $9.6M left1983: lasted, $5.3M left1984: lasted, $5.3M left

LastedRan out

Every 40-year retirement since 1871 at 4.75%, 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 4.75%, 60/40, across every start year. Real dollars, $1M start.

By portfolio and strategy

PortfolioFixedBear-market cutCash bucketBad 10% endingMedian ending
100% stocks77.2%94.7%70.2%$0$2.2M
80/2072.8%93.9%68.4%$0$1.4M
60/4062.3%87.7%52.6%$0$397k
40/6041.2%66.7%35.1%$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.

← 4.5% · 5% → · 20 years · 25 years · 30 years · 50 years

Questions

Is 4.75% a safe withdrawal rate for 40 years?

A 4.75% withdrawal ($48k a year from $1M, raised with inflation) lasted 40 years in 62.3% of start years since 1871 with a 60/40 portfolio, and 77.2% 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 4.75%?

1966: with 60/40 the money ran out in year 19.

Does cutting spending in bear markets help?

At 4.75% over 40 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 62.3% to 87.7%.

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