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Withdrawal rates › 40 years

Is 5.25% a safe withdrawal rate for 40 years?

A 5.25% withdrawal ($53k a year from $1M, raised with inflation) lasted 40 years in 46.5% of start years since 1871 with a 60/40 portfolio, and 68.4% with 100% stocks.

It failed more often than it lasted: the money ran out in 61 of 114 start years from 1871 to 1984. Failures clustered in start years 1886–1887, 1889–1890, 1892–1917, 1929–1931, 1934 and 1936–1941, among others.

The worst start was 1966, when the money ran out in year 17. Among the start years that lasted, 1945 came closest, finishing with $79k.

In 28% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $0.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 70.2%. Holding two years of spending in cash and drawing on it after down years lowered it to 40.4%.

Of the four mixes, 100% stocks lasted most often, at 68.4%.

1871: lasted, $5.0M left18711872: lasted, $4.6M left1873: lasted, $4.4M left1874: lasted, $4.3M left1875: lasted, $3.3M left1876: lasted, $3.1M left1877: lasted, $4.1M left1878: lasted, $2.2M left1879: lasted, $1.2M left1880: lasted, $926k left18801881: lasted, $223k left1882: lasted, $667k left1883: lasted, $735k left1884: lasted, $660k left1885: lasted, $721k left1886: ran out in year 391887: ran out in year 371888: lasted, $218k left1889: ran out in year 401890: ran out in year 3518901891: lasted, $224k left1892: ran out in year 331893: ran out in year 371894: ran out in year 371895: ran out in year 331896: ran out in year 351897: ran out in year 331898: ran out in year 291899: ran out in year 241900: ran out in year 3119001901: ran out in year 251902: ran out in year 231903: ran out in year 251904: ran out in year 291905: ran out in year 231906: ran out in year 201907: ran out in year 211908: ran out in year 291909: ran out in year 211910: ran out in year 2319101911: ran out in year 211912: ran out in year 211913: ran out in year 231914: ran out in year 271915: ran out in year 321916: ran out in year 241917: ran out in year 301918: lasted, $2.1M left1919: lasted, $3.8M left1920: lasted, $5.2M left19201921: lasted, $7.1M left1922: lasted, $5.3M left1923: lasted, $3.6M left1924: lasted, $4.3M left1925: lasted, $3.3M left1926: lasted, $2.5M left1927: lasted, $1.8M left1928: lasted, $353k left1929: ran out in year 261930: ran out in year 3019301931: ran out in year 401932: lasted, $1.7M left1933: lasted, $1.5M left1934: ran out in year 381935: lasted, $318k left1936: ran out in year 271937: ran out in year 211938: ran out in year 361939: ran out in year 291940: ran out in year 2919401941: ran out in year 361942: lasted, $483k left1943: lasted, $570k left1944: lasted, $308k left1945: lasted, $79k left1946: ran out in year 331947: lasted, $822k left1948: lasted, $1.6M left1949: lasted, $1.6M left1950: lasted, $1.3M left19501951: lasted, $883k left1952: lasted, $808k left1953: lasted, $597k left1954: lasted, $784k left1955: ran out in year 341956: ran out in year 281957: ran out in year 291958: ran out in year 331959: ran out in year 261960: ran out in year 2619601961: ran out in year 241962: ran out in year 221963: ran out in year 221964: ran out in year 201965: ran out in year 181966: ran out in year 171967: ran out in year 181968: ran out in year 181969: ran out in year 171970: ran out in year 2219701971: ran out in year 211972: ran out in year 191973: ran out in year 171974: ran out in year 281975: lasted, $1.8M left1976: lasted, $611k left1977: lasted, $605k left1978: lasted, $2.6M left1979: lasted, $3.0M left1980: lasted, $4.8M left19801981: lasted, $5.6M left1982: lasted, $8.6M left1983: lasted, $4.5M left1984: lasted, $4.5M left

LastedRan out

Every 40-year retirement since 1871 at 5.25%, 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 5.25%, 60/40, across every start year. Real dollars, $1M start.

By portfolio and strategy

PortfolioFixedBear-market cutCash bucketBad 10% endingMedian ending
100% stocks68.4%81.6%61.4%$0$1.5M
80/2061.4%77.2%52.6%$0$692k
60/4046.5%70.2%40.4%$0$0
40/6029.8%44.7%27.2%$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.

← 5% · 5.5% → · 20 years · 25 years · 30 years · 50 years

Questions

Is 5.25% a safe withdrawal rate for 40 years?

A 5.25% withdrawal ($53k a year from $1M, raised with inflation) lasted 40 years in 46.5% of start years since 1871 with a 60/40 portfolio, and 68.4% 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 5.25%?

1966: with 60/40 the money ran out in year 17.

Does cutting spending in bear markets help?

At 5.25% over 40 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 46.5% to 70.2%.

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