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What Withdrawal Rate Is Sustainable?
Test withdrawal rates from 3% to 6% against a hypothetical sequence of market returns. Find the balance between income and longevity.
Withdrawal Rate Simulator
How This Simulator Works
The Model
This simulator tests different withdrawal rates against an illustrative sequence of market returns using a rolling-period analysis. Rather than using average returns (which hide volatility), it replays a representative sequence of hypothetical good and bad years to test whether a given withdrawal rate would sustain across different market environments.
Key Calculations
- Initial withdrawal: Portfolio Value × Withdrawal Rate (e.g., $1M × 4% = $40,000/year)
- Annual adjustment: Each year, the withdrawal amount increases by the inflation rate to maintain purchasing power
- Portfolio update: Each year, Balance = Previous Balance × (1 + Market Return) − Inflation-Adjusted Withdrawal
- Success rate: Percentage of all rolling periods where the portfolio lasted the full retirement length
- Median end balance: The middle outcome across all simulated periods, showing a typical result
Assumptions
- Returns are a hypothetical, nominal 60/40 stock/bond sequence over 50 annual periods, averaging about 6.2% a year (about 5.6% compounded) with about 11% volatility and a worst year of −20%. It is not actual market history
- The sequence has no long multi-year declines like 1929–32, 1973–74, or 2000–02, so real-world outcomes can be worse
- Withdrawals increase each year by the specified inflation rate
- No taxes, advisory fees, or transaction costs are deducted
- The portfolio is rebalanced annually (implicit in using a blended return)
- A period “fails” if the portfolio balance reaches zero before the retirement length ends
Interpreting Your Results
- Green bars (≥90%) indicate withdrawal rates that lasted in most periods of this illustrative sequence
- Amber bars (70-89%) indicate rates that survived most periods but carry meaningful risk
- Red bars (<70%) indicate rates that ran out in many periods of this illustrative sequence
- The detailed table shows annual/monthly income, success rate, and the typical ending portfolio balance
- A higher success rate in this illustration suggests more room for unexpected expenses or a longer-than-expected life, but it is not a probability or forecast
Tips for Using This Tool
- The “4% rule” is a common starting point, but your ideal rate depends on your full financial picture
- Try extending the retirement length to 35-40 years to stress-test against longer lifespans
- Higher inflation rates significantly reduce purchasing power, try 3-4% to see the impact
- Because the sequence is hypothetical and relatively mild, treat high success rates here with caution
- In practice, retirees can adjust spending in bad years, which this rigid model ignores; harsher markets than this sequence would reduce sustainability
Illustrative Success Rate by Withdrawal Rate
Based on rolling 30-year periods using a diversified portfolio
Detailed Comparison
| Rate | Annual Income | Monthly Income | Success | Median End Balance |
|---|---|---|---|---|
| 3% | $30,000 | $2,500 | 100% | $2,001,137 |
| 3.5% | $35,000 | $2,917 | 100% | $1,475,893 |
| 4% | $40,000 | $3,333 | 100% | $1,077,800 |
| 4.5% | $45,000 | $3,750 | 100% | $619,321 |
| 5% | $50,000 | $4,167 | 57% | $126,911 |
| 5.5% | $55,000 | $4,583 | 19% | $0 |
| 6% | $60,000 | $5,000 | 5% | $0 |
The 4% rule as a starting point. At a 4% withdrawal rate, a $1,000,000 portfolio provides $40,000/year ($3,333/month) in initial retirement income, increasing with inflation each year. But your ideal rate depends on your specific situation, tax strategy, Social Security timing, and spending flexibility all play a role.
This simulator uses simplified, hypothetical return sequences for a diversified portfolio and is for illustrative purposes only. It does not account for taxes, fees, sequence-of-returns risk in full detail, or individual circumstances. Actual results will vary. Past performance does not guarantee future results. Consult a qualified financial advisor before making withdrawal decisions.
All computation happens in your browser. No data leaves your device.
This simulator is provided for educational and informational purposes only. It uses a simplified, hypothetical return sequence, not actual market history, and does not account for taxes, fees, or individual circumstances. Actual withdrawal sustainability depends on many factors including asset allocation, tax situation, Social Security benefits, and spending flexibility. Past performance does not guarantee future results. Please consult with a qualified financial advisor before making retirement withdrawal decisions. All computation happens entirely in your browser and no data is transmitted or stored.
Brought to you by Rubric Advisors
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