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Withdrawal rates › 25 years

Is 5.75% a safe withdrawal rate for 25 years?

A 5.75% withdrawal ($58k a year from $1M, raised with inflation) lasted 25 years in 68.2% of start years since 1871 with a 60/40 portfolio, and 74.4% with 100% stocks.

It lasted only about half the time or a little more: the money ran out in 41 of 129 start years from 1871 to 1999. Failures clustered in start years 1899, 1901–1917, 1929–1930, 1936–1937, 1939–1940 and 1959–1974, among others.

The worst start was 1969, when the money ran out in year 15. Among the start years that lasted, 1898 came closest, finishing with $9k.

In 36% of start years the portfolio ended above the $1M it started with, after inflation. The median ending balance was $557k.

Cutting spending by 20% whenever the portfolio sat more than 20% below its real high raised success to 86.8%. Holding two years of spending in cash and drawing on it after down years lowered it to 63.6%.

Of the four mixes, 100% stocks lasted most often, at 74.4%.

1871: lasted, $2.5M left18711872: lasted, $2.4M left1873: lasted, $2.7M left1874: lasted, $3.1M left1875: lasted, $2.3M left1876: lasted, $2.2M left1877: lasted, $3.2M left1878: lasted, $2.3M left1879: lasted, $1.3M left1880: lasted, $1.4M left18801881: lasted, $768k left1882: lasted, $1.2M left1883: lasted, $1.0M left1884: lasted, $1.1M left1885: lasted, $1.1M left1886: lasted, $550k left1887: lasted, $460k left1888: lasted, $709k left1889: lasted, $555k left1890: lasted, $365k left18901891: lasted, $704k left1892: lasted, $279k left1893: lasted, $334k left1894: lasted, $295k left1895: lasted, $185k left1896: lasted, $170k left1897: lasted, $125k left1898: lasted, $9k left1899: ran out in year 221900: lasted, $28k left19001901: ran out in year 221902: ran out in year 211903: ran out in year 221904: ran out in year 241905: ran out in year 201906: ran out in year 181907: ran out in year 191908: ran out in year 241909: 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: ran out in year 211915: ran out in year 251916: ran out in year 191917: ran out in year 241918: lasted, $1.1M left1919: lasted, $1.7M left1920: lasted, $2.3M left19201921: lasted, $3.5M left1922: lasted, $2.0M left1923: lasted, $1.3M left1924: lasted, $1.4M left1925: lasted, $1.2M left1926: lasted, $1.0M left1927: lasted, $860k left1928: lasted, $361k left1929: ran out in year 221930: ran out in year 2419301931: lasted, $251k left1932: lasted, $1.2M left1933: lasted, $964k left1934: lasted, $193k left1935: lasted, $571k left1936: ran out in year 221937: ran out in year 181938: lasted, $128k left1939: ran out in year 231940: ran out in year 2319401941: lasted, $213k left1942: lasted, $1.1M left1943: lasted, $1.2M left1944: lasted, $919k left1945: lasted, $616k left1946: lasted, $138k left1947: lasted, $1.1M left1948: lasted, $1.8M left1949: lasted, $1.5M left1950: lasted, $941k left19501951: lasted, $906k left1952: lasted, $829k left1953: lasted, $635k left1954: lasted, $654k left1955: lasted, $214k left1956: lasted, $12k left1957: lasted, $28k left1958: lasted, $136k left1959: ran out in year 241960: ran out in year 2319601961: ran out in year 221962: 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: ran out in year 211975: lasted, $1.3M left1976: lasted, $628k left1977: lasted, $557k left1978: lasted, $1.3M left1979: lasted, $1.8M left1980: lasted, $2.4M left19801981: lasted, $2.5M left1982: lasted, $3.9M left1983: lasted, $2.5M left1984: lasted, $2.0M left1985: lasted, $2.2M left1986: lasted, $1.7M left1987: lasted, $991k left1988: lasted, $1.5M left1989: lasted, $1.6M left1990: lasted, $1.4M left19901991: lasted, $1.6M left1992: lasted, $1.1M left1993: lasted, $1.2M left1994: lasted, $1.0M left1995: lasted, $1.6M left1996: lasted, $953k left1997: lasted, $687k left1998: lasted, $157k left1999: ran out in year 21

LastedRan out

Every 25-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 20Year 25

Good 10%MedianBad 10%

Balance over 25 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% stocks74.4%90.7%72.1%$0$1.3M
80/2072.9%91.5%66.7%$0$838k
60/4068.2%86.8%63.6%$0$557k
40/6058.1%77.5%52.7%$0$200k

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% → · 20 years · 30 years · 40 years · 50 years

Questions

Is 5.75% a safe withdrawal rate for 25 years?

A 5.75% withdrawal ($58k a year from $1M, raised with inflation) lasted 25 years in 68.2% of start years since 1871 with a 60/40 portfolio, and 74.4% 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 5.75%?

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

Does cutting spending in bear markets help?

At 5.75% over 25 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 68.2% to 86.8%.

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