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Withdrawal rates › 40 years

Is 5.75% a safe withdrawal rate for 40 years?

A 5.75% withdrawal ($58k a year from $1M, raised with inflation) lasted 40 years in 38.6% of start years since 1871 with a 60/40 portfolio, and 57.9% with 100% stocks.

It failed more often than it lasted: the money ran out in 70 of 114 start years from 1871 to 1984. Failures clustered in start years 1881, 1886–1917, 1928–1931, 1934–1941, 1944–1946 and 1955–1974, among others.

The worst start was 1969, when the money ran out in year 15. Among the start years that lasted, 1953 came closest, finishing with $21k.

In 25% 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 50.9%. Holding two years of spending in cash and drawing on it after down years lowered it to 32.5%.

Of the four mixes, 100% stocks lasted most often, at 57.9%.

1871: lasted, $4.1M left18711872: lasted, $3.8M left1873: lasted, $3.7M left1874: lasted, $3.6M left1875: lasted, $2.7M left1876: lasted, $2.5M left1877: lasted, $3.5M left1878: lasted, $1.8M left1879: lasted, $796k left1880: lasted, $604k left18801881: ran out in year 391882: lasted, $322k left1883: lasted, $343k left1884: lasted, $278k left1885: lasted, $292k left1886: ran out in year 351887: ran out in year 331888: ran out in year 361889: ran out in year 341890: ran out in year 3118901891: ran out in year 351892: ran out in year 291893: ran out in year 311894: ran out in year 311895: ran out in year 291896: ran out in year 291897: ran out in year 281898: ran out in year 261899: ran out in year 221900: ran out in year 2619001901: 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, $1.3M left1919: lasted, $2.8M left1920: lasted, $4.3M left19201921: lasted, $6.2M left1922: lasted, $4.4M left1923: lasted, $2.8M left1924: lasted, $3.5M left1925: lasted, $2.4M left1926: lasted, $1.7M left1927: lasted, $1.0M left1928: ran out in year 341929: ran out in year 221930: ran out in year 2419301931: ran out in year 301932: lasted, $1.1M left1933: lasted, $838k left1934: ran out in year 291935: ran out in year 391936: ran out in year 221937: ran out in year 181938: ran out in year 281939: ran out in year 231940: ran out in year 2319401941: ran out in year 291942: lasted, $174k left1943: lasted, $193k left1944: ran out in year 391945: ran out in year 361946: ran out in year 281947: lasted, $263k left1948: lasted, $1.1M left1949: lasted, $1.1M left1950: lasted, $744k left19501951: lasted, $384k left1952: lasted, $231k left1953: lasted, $21k left1954: lasted, $187k left1955: ran out in year 291956: ran out in year 261957: ran out in year 261958: ran out in year 281959: 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, $886k left1976: ran out in year 361977: ran out in year 361978: lasted, $1.6M left1979: lasted, $2.1M left1980: lasted, $3.8M left19801981: lasted, $4.6M left1982: lasted, $7.7M left1983: lasted, $3.8M left1984: lasted, $3.8M left

LastedRan out

Every 40-year retirement since 1871 at 5.75%, 60/40. Each bar is a start year.
$0$1.0M$2.0M$3.0M$4.0MYear 0Year 10Year 20Year 30Year 40

Good 10%MedianBad 10%

Balance over 40 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% stocks57.9%72.8%52.6%$0$798k
80/2046.5%67.5%41.2%$0$0
60/4038.6%50.9%32.5%$0$0
40/6025.4%32.5%20.2%$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% · 6% → · 20 years · 25 years · 30 years · 50 years

Questions

Is 5.75% a safe withdrawal rate for 40 years?

A 5.75% withdrawal ($58k a year from $1M, raised with inflation) lasted 40 years in 38.6% of start years since 1871 with a 60/40 portfolio, and 57.9% 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 40 years with 60/40, a 20% cut whenever the portfolio was 20% below its high took success from 38.6% to 50.9%.

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