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Withdrawal rates › 20 years

Is 5.75% a safe withdrawal rate for 20 years?

A 5.75% withdrawal ($58k a year from $1M, raised with inflation) lasted 20 years in 83.6% of start years since 1871 with a 60/40 portfolio, and 82.8% with 100% stocks.

It lasted most of the time: the money ran out in 22 of 134 start years from 1871 to 2004. Failures clustered in start years 1905–1907, 1909–1913, 1916, 1937 and 1962–1973.

The worst start was 1969, when the money ran out in year 15. Among the start years that lasted, 1902 came closest, finishing with $8k.

In 39% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $672k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 97%. Holding two years of spending in cash and drawing on it after down years lowered it to 78.4%.

1871: lasted, $2.1M left18711872: lasted, $2.3M left1873: lasted, $2.2M left1874: lasted, $2.2M left1875: lasted, $2.0M left1876: lasted, $1.8M left1877: lasted, $2.4M left1878: lasted, $2.0M left1879: lasted, $1.6M left1880: lasted, $1.3M left18801881: lasted, $841k left1882: lasted, $1.3M left1883: lasted, $1.2M left1884: lasted, $1.1M left1885: lasted, $1.2M left1886: lasted, $796k left1887: lasted, $667k left1888: lasted, $780k left1889: lasted, $797k left1890: lasted, $623k left18901891: lasted, $906k left1892: lasted, $565k left1893: lasted, $709k left1894: lasted, $676k left1895: lasted, $546k left1896: lasted, $651k left1897: lasted, $541k left1898: lasted, $307k left1899: lasted, $113k left1900: lasted, $264k left19001901: lasted, $97k left1902: lasted, $8k left1903: lasted, $71k left1904: lasted, $177k left1905: ran out in year 201906: ran out in year 181907: ran out in year 191908: lasted, $181k left1909: ran out in year 181910: ran out in year 1919101911: ran out in year 181912: ran out in year 171913: ran out in year 191914: lasted, $48k left1915: lasted, $219k left1916: ran out in year 191917: lasted, $245k left1918: lasted, $1.4M left1919: lasted, $2.0M left1920: lasted, $2.5M left19201921: lasted, $2.9M left1922: lasted, $1.8M left1923: lasted, $1.4M left1924: lasted, $1.6M left1925: lasted, $1.4M left1926: lasted, $1.4M left1927: lasted, $922k left1928: lasted, $473k left1929: lasted, $97k left1930: lasted, $198k left19301931: lasted, $381k left1932: lasted, $939k left1933: lasted, $879k left1934: lasted, $328k left1935: lasted, $659k left1936: lasted, $88k left1937: ran out in year 181938: lasted, $322k left1939: lasted, $136k left1940: lasted, $138k left19401941: lasted, $400k left1942: lasted, $1.2M left1943: lasted, $1.2M left1944: lasted, $1.0M left1945: lasted, $933k left1946: lasted, $443k left1947: lasted, $1.3M left1948: lasted, $1.9M left1949: lasted, $1.9M left1950: lasted, $1.4M left19501951: lasted, $1.3M left1952: lasted, $1.3M left1953: lasted, $1.2M left1954: lasted, $1.0M left1955: lasted, $454k left1956: lasted, $308k left1957: lasted, $350k left1958: lasted, $413k left1959: lasted, $184k left1960: lasted, $156k left19601961: lasted, $98k left1962: ran out in year 201963: ran out in year 201964: ran out in year 191965: ran out in year 171966: ran out in year 161967: ran out in year 171968: ran out in year 161969: ran out in year 151970: ran out in year 1919701971: ran out in year 181972: ran out in year 161973: ran out in year 151974: lasted, $54k left1975: lasted, $834k left1976: lasted, $590k left1977: lasted, $618k left1978: lasted, $1.5M left1979: lasted, $2.0M left1980: lasted, $2.7M left19801981: lasted, $2.8M left1982: lasted, $3.6M left1983: lasted, $2.2M left1984: lasted, $2.4M left1985: lasted, $2.3M left1986: lasted, $1.8M left1987: lasted, $1.2M left1988: lasted, $1.6M left1989: lasted, $1.2M left1990: lasted, $1.1M left19901991: lasted, $1.4M left1992: lasted, $1.0M left1993: lasted, $1.1M left1994: lasted, $1.0M left1995: lasted, $1.5M left1996: lasted, $851k left1997: lasted, $706k left1998: lasted, $401k left1999: lasted, $47k left2000: lasted, $49k left20002001: lasted, $134k left2002: lasted, $419k left2003: lasted, $676k left2004: lasted, $454k left

LastedRan out

Every 20-year retirement since 1871 at 5.75%, 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 5.75%, 60/40, across every start year. Real dollars, $1M start.

By portfolio and strategy

PortfolioFixedBear-market cutCash bucketBad 10% endingMedian ending
100% stocks82.8%95.5%82.1%$0$1.1M
80/2082.8%97%81.3%$0$943k
60/4083.6%97%78.4%$0$672k
40/6077.6%96.3%74.6%$0$407k

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% · 6% → · 25 years · 30 years · 40 years · 50 years

Questions

Is 5.75% a safe withdrawal rate for 20 years?

A 5.75% withdrawal ($58k a year from $1M, raised with inflation) lasted 20 years in 83.6% of start years since 1871 with a 60/40 portfolio, and 82.8% 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 5.75%?

1969: with 60/40 the money ran out in year 15.

Does cutting spending in bear markets help?

At 5.75% over 20 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 83.6% to 97%.

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

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