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Withdrawal rates › 20 years

Is 5.5% a safe withdrawal rate for 20 years?

A 5.5% withdrawal ($55k a year from $1M, raised with inflation) lasted 20 years in 88.1% of start years since 1871 with a 60/40 portfolio, and 87.3% with 100% stocks.

It usually lasted: the money ran out in 16 of 134 start years from 1871 to 2004. Failures clustered in start years 1906–1907, 1909, 1911–1912, 1937 and 1964–1973.

The worst start was 1969, when the money ran out in year 16. Among the start years that lasted, 1910 came closest, finishing with $4k.

In 40% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $758k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 98.5%. Holding two years of spending in cash and drawing on it after down years lowered it to 85.1%.

1871: lasted, $2.2M left18711872: lasted, $2.4M left1873: lasted, $2.3M left1874: lasted, $2.4M left1875: lasted, $2.2M left1876: lasted, $1.9M left1877: lasted, $2.5M left1878: lasted, $2.1M left1879: lasted, $1.7M left1880: lasted, $1.4M left18801881: lasted, $942k left1882: lasted, $1.4M left1883: lasted, $1.3M left1884: lasted, $1.1M left1885: lasted, $1.3M left1886: lasted, $896k left1887: lasted, $758k left1888: lasted, $857k left1889: lasted, $885k left1890: lasted, $707k left18901891: lasted, $990k left1892: lasted, $648k left1893: lasted, $787k left1894: lasted, $749k left1895: lasted, $613k left1896: lasted, $727k left1897: lasted, $609k left1898: lasted, $356k left1899: lasted, $159k left1900: lasted, $308k left19001901: lasted, $138k left1902: lasted, $58k left1903: lasted, $130k left1904: lasted, $236k left1905: lasted, $47k left1906: ran out in year 191907: ran out in year 201908: lasted, $283k left1909: ran out in year 191910: lasted, $4k left19101911: ran out in year 191912: ran out in year 191913: lasted, $20k left1914: lasted, $169k left1915: lasted, $328k left1916: lasted, $34k left1917: lasted, $401k left1918: lasted, $1.5M left1919: lasted, $2.1M left1920: lasted, $2.7M left19201921: lasted, $3.0M left1922: lasted, $1.9M left1923: lasted, $1.5M left1924: lasted, $1.7M left1925: lasted, $1.5M left1926: lasted, $1.5M left1927: lasted, $992k left1928: lasted, $534k left1929: lasted, $159k left1930: lasted, $266k left19301931: lasted, $455k left1932: lasted, $1.0M left1933: lasted, $958k left1934: lasted, $406k left1935: lasted, $755k left1936: lasted, $195k left1937: ran out in year 191938: lasted, $418k left1939: lasted, $247k left1940: lasted, $248k left19401941: lasted, $513k left1942: lasted, $1.3M left1943: lasted, $1.3M left1944: lasted, $1.2M left1945: lasted, $1.1M left1946: lasted, $564k left1947: lasted, $1.5M left1948: lasted, $2.0M left1949: lasted, $2.0M left1950: lasted, $1.5M left19501951: lasted, $1.4M left1952: lasted, $1.3M left1953: lasted, $1.3M left1954: lasted, $1.1M left1955: lasted, $502k left1956: lasted, $363k left1957: lasted, $407k left1958: lasted, $462k left1959: lasted, $232k left1960: lasted, $202k left19601961: lasted, $145k left1962: lasted, $31k left1963: lasted, $42k left1964: ran out in year 191965: ran out in year 181966: ran out in year 171967: ran out in year 181968: ran out in year 171969: ran out in year 161970: ran out in year 2019701971: ran out in year 191972: ran out in year 171973: ran out in year 161974: lasted, $173k left1975: lasted, $943k left1976: lasted, $721k left1977: lasted, $758k left1978: lasted, $1.6M left1979: lasted, $2.2M left1980: lasted, $2.8M left19801981: lasted, $2.9M left1982: lasted, $3.7M left1983: lasted, $2.3M left1984: lasted, $2.5M left1985: lasted, $2.5M left1986: lasted, $1.9M left1987: lasted, $1.3M left1988: lasted, $1.7M left1989: lasted, $1.3M left1990: lasted, $1.2M left19901991: lasted, $1.5M left1992: lasted, $1.1M left1993: lasted, $1.2M left1994: lasted, $1.1M left1995: lasted, $1.6M left1996: lasted, $932k left1997: lasted, $791k left1998: lasted, $492k left1999: lasted, $131k left2000: lasted, $145k left20002001: lasted, $238k left2002: lasted, $524k left2003: lasted, $759k left2004: lasted, $540k left

LastedRan out

Every 20-year retirement since 1871 at 5.5%, 60/40. Each bar is a start year.
$0$1.0M$2.0M$3.0MYear 0Year 5Year 10Year 15Year 20

Good 10%MedianBad 10%

Balance over 20 years at 5.5%, 60/40, across every start year. Real dollars, $1M start.

By portfolio and strategy

PortfolioFixedBear-market cutCash bucketBad 10% endingMedian ending
100% stocks87.3%98.5%82.8%$0$1.3M
80/2086.6%98.5%83.6%$0$1.0M
60/4088.1%98.5%85.1%$0$758k
40/6082.1%98.5%78.4%$0$484k

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.

← 5.25% · 5.75% → · 25 years · 30 years · 40 years · 50 years

Questions

Is 5.5% a safe withdrawal rate for 20 years?

A 5.5% withdrawal ($55k a year from $1M, raised with inflation) lasted 20 years in 88.1% of start years since 1871 with a 60/40 portfolio, and 87.3% 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 5.5%?

1969: with 60/40 the money ran out in year 16.

Does cutting spending in bear markets help?

At 5.5% over 20 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 88.1% to 98.5%.

Test your own plan. Your spending, housing, Social Security and health insurance against every year since 1871. Free.

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