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Withdrawal rates › 30 years

Is 5.5% a safe withdrawal rate for 30 years?

A 5.5% withdrawal ($55k a year from $1M, raised with inflation) lasted 30 years in 62.1% of start years since 1871 with a 60/40 portfolio, and 71.8% with 100% stocks.

It lasted only about half the time or a little more: the money ran out in 47 of 124 start years from 1871 to 1994. Failures clustered in start years 1897–1917, 1929–1930, 1936–1937, 1939–1940, 1946 and 1956–1974.

The worst start was 1969, when the money ran out in year 16. Among the start years that lasted, 1892 came closest, finishing with $6k.

In 38% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $388k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 78.2%. Holding two years of spending in cash and drawing on it after down years lowered it to 55.6%.

Of the four mixes, 100% stocks lasted most often, at 71.8%.

1871: lasted, $3.5M left18711872: lasted, $3.5M left1873: lasted, $3.3M left1874: lasted, $3.1M left1875: lasted, $3.0M left1876: lasted, $2.8M left1877: lasted, $3.6M left1878: lasted, $2.3M left1879: lasted, $1.7M left1880: lasted, $1.5M left18801881: lasted, $701k left1882: lasted, $1.2M left1883: lasted, $1.2M left1884: lasted, $1.1M left1885: lasted, $996k left1886: lasted, $455k left1887: lasted, $310k left1888: lasted, $435k left1889: lasted, $293k left1890: lasted, $132k left18901891: lasted, $281k left1892: lasted, $6k left1893: lasted, $152k left1894: lasted, $135k left1895: lasted, $15k left1896: lasted, $46k left1897: ran out in year 301898: ran out in year 271899: ran out in year 231900: ran out in year 2819001901: ran out in year 241902: ran out in year 221903: ran out in year 231904: ran out in year 271905: ran out in year 211906: ran out in year 191907: ran out in year 201908: ran out in year 261909: ran out in year 191910: ran out in year 2119101911: ran out in year 191912: ran out in year 191913: ran out in year 211914: ran out in year 241915: ran out in year 281916: ran out in year 211917: ran out in year 271918: lasted, $1.1M left1919: lasted, $1.6M left1920: lasted, $2.3M left19201921: lasted, $3.2M left1922: lasted, $2.4M left1923: lasted, $1.8M left1924: lasted, $2.0M left1925: lasted, $1.8M left1926: lasted, $1.6M left1927: lasted, $1.3M left1928: lasted, $375k left1929: ran out in year 241930: ran out in year 2719301931: lasted, $185k left1932: lasted, $1.5M left1933: lasted, $1.3M left1934: lasted, $129k left1935: lasted, $692k left1936: ran out in year 241937: ran out in year 191938: lasted, $60k left1939: ran out in year 251940: ran out in year 2619401941: lasted, $101k left1942: lasted, $1.1M left1943: lasted, $1.2M left1944: lasted, $712k left1945: lasted, $401k left1946: ran out in year 301947: lasted, $857k left1948: lasted, $1.2M left1949: lasted, $1.1M left1950: lasted, $835k left19501951: lasted, $673k left1952: lasted, $493k left1953: lasted, $488k left1954: lasted, $555k left1955: lasted, $29k left1956: ran out in year 271957: ran out in year 271958: ran out in year 301959: ran out in year 251960: ran out in year 2419601961: ran out in year 231962: ran out in year 211963: ran out in year 211964: 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: ran out in year 241975: lasted, $1.3M left1976: lasted, $594k left1977: lasted, $587k left1978: lasted, $1.6M left1979: lasted, $1.6M left1980: lasted, $2.4M left19801981: lasted, $2.7M left1982: lasted, $4.2M left1983: lasted, $2.9M left1984: lasted, $3.0M left1985: lasted, $3.3M left1986: lasted, $2.2M left1987: lasted, $1.3M left1988: lasted, $2.1M left1989: lasted, $1.9M left1990: lasted, $1.7M left19901991: lasted, $2.4M left1992: lasted, $1.5M left1993: lasted, $1.2M left1994: lasted, $1.2M left

LastedRan out

Every 30-year retirement since 1871 at 5.5%, 60/40. Each bar is a start year.
$0$1.0M$2.0M$3.0MYear 0Year 10Year 20Year 30

Good 10%MedianBad 10%

Balance over 30 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% stocks71.8%89.5%68.5%$0$1.6M
80/2071.8%87.1%62.9%$0$893k
60/4062.1%78.2%55.6%$0$388k
40/6049.2%67.7%44.4%$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.

← 5.25% · 5.75% → · 20 years · 25 years · 40 years · 50 years

Questions

Is 5.5% a safe withdrawal rate for 30 years?

A 5.5% withdrawal ($55k a year from $1M, raised with inflation) lasted 30 years in 62.1% of start years since 1871 with a 60/40 portfolio, and 71.8% 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 5.5%?

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

Does cutting spending in bear markets help?

At 5.5% over 30 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 62.1% to 78.2%.

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