So if you had $1 million saved for retirement on 31st December 1999, invested it in the SNP 500 and withdrew 4% in the first year and adjusted for inflation each year after that. you would have ZERO dollars left before 2026. By 2010 your balance would be $438,076 with an inflation adjusted withdrawal of $52295. By 2020 your balance would have improved but not caught up with inflation at $329,874. With an inflation adjusted withdrawal of $62061. Even with the crazy bull markets of the last 6 years the withdrawal rate as of 2025 is up to $96550 and the money would of ran out this summer. Was the 4% rule calculated for 30 years in a worst case scenario? I hear people talking about 7% or 8% being the new norm? How frightened would you of been come 2010 with over have your money gone 😳
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8 Comments
Kar Yung Tom@karyungtom · 12d
In the original 1994 paper, Bengen was doing something like 50% stocks / 50% bonds. 4% was calculated the SAFEMAX number that allowed this portfolio to survive ~95%+ of the time. It was just a study done on a specific time period in the US. Learning about dynamic withdrawal strategies is the way to go!
ETF Go@etf.go · 12d
I show a different result for 4% level over that time period. But regardless - it’s an exercise people should do if they are considering higher withdrawal rates because as you said 7% - 8% doesn’t fair to well (as it would have been depleted during the GFC). 👍
Scott S@scottsinvesting · 12d
One of the more informative and important posts I've seen in a while Michael... Recency bias has some expecting ridiculous returns going forward. There's a lot of folks who are going to experience a very rude awakening at some point IMHO. In the meantime, I hope a lot of folks see your post and appreciate what you shared.
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