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### Does money invested 50% in a US stock index fund and 50% in a US bond index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

Submitted by: BBlack 104**Yes. While the bulk of the studies in this list for which we identified answers agrees with this conclusion, some studies came to different conclusions. We encourage you to consider each of the studies for yourself to understand why they differ. Note that some studies in this list give us reason to question their conclusions. This may be because they were criticized in an article, produced by a financially interested or ideologically motivated source, or were published in sources that are not peer-reviewed, are low ranked or not ranked at all, which may indicate limited editorial oversight. Carefully review the individual study summaries below for more information.**

This short answer was generated by aggregating the answers that each of
the 11 studies below
gave to the question (as indicated by State of K members) and adjusting for source quality and other factors.
If key studies are missing or the answers attributed to individual studies are incorrect, the above answer could be wrong.
For medical questions, don't rely on the information here. Consult a medical professional.

6

YES ANSWERS

5

NO ANSWERS

0

NO DATA ON ANSWER

Chart summary of 11 studies examining this question

*Showing up to 10 at a time*All answers are assigned by State of K users. The label

**Couldn't Identify**means that State of K was not able to determine whether a study answers the question "yes" or "no". This could be due to several factors. One possibility is that a study found some evidence to indicate that the answer to the question is "yes" and some evidence to indicate that the answer is "no". This often happens when a study uses two or more proxies to study the same phenomenon (i.e. firearm sales figures and self-reported firearm ownership rates as proxies for the prevalence of firearms) and the proxies yield different results when looking for correlations with another phenomenon (i.e. firearm-related deaths). Alternatively, the label may be applied if the phenomenon under study (i.e. whether breast milk improves cognitive function) is true for one group, but not another (i.e. true for girls, but not for boys). Yet another possibility is that a study found there was insufficient evidence to reach a conclusion regarding the question. Finally, the full text or abstract of a study may not have been written clearly or was inaccessible. This would make it difficult to determine how a study answered a question.

All labels of

**Literature Reviews**and source quality are assigned by State of K. For academic journals, the label "Q[NUMBER]" is an indication of the quality of the publication. The "NUMBER" refer to the best quartile in which the journal appeared among all the subjects in which the journal was ranked by Scimago Institutions Rankings. For example, if a journal was ranked in the third quartile (Q3) in infectious diseases, but in the second quartile in Ebola studies (Q2), you would see "Q2". The best quartile is "Q1". Publications other than academic journals may be labeled as "Highly Regarded Sources". Government sources receive this label as do NGOs ranked by the TTCSP Global Go To Think Tank Index Reports. The information contained in a source that is labeled "highly regarded" or "Q1" is not necessarily more accurate than information contained in a source without that label, but these are rough guides to source quality.

QUESTIONS TO CONSIDER

Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

Did quantitative easing reduce US mortgage rates?

Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

Add question

18 studies

Submitted by: KKrista 77

Did quantitative easing reduce US mortgage rates?

3 studies

Submitted by: BBlack 104

Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

18 studies

Submitted by: KKrista 77

Add question

SUMMARIES OF STUDIES

Total studies in list: 11

Sorted by publication year

1

###### Safe Withdrawal Rates: A Guide for Early Retirees

"When talking about withdrawal rates in retirement it's hard to ignore the 4% rule. The origin of this rule goes back to the work of Bengen (1994, 1996, 1997, 2001) and Cooley, Hubbard and Walz (1998, 2011), more commonly known as the Trinity Study. The Trinity Study showed that withdrawing 4% of the portfolio value at the beginning of retirement and subsequently adjusting the withdrawals for inflation, will likely sustain a 30-year retirement in a portfolio comprised of 50-100% stocks and 0-50% bonds. This result is relevant to the average retiree with a horizon of only 30 years and not the typical early retiree with a much longer horizon, though. We perform extensive simulations and case studies targeted at early retirees and show that the longer horizon and today's expensive equity valuations will likely necessitate a lower initial withdrawal rate."

AUTHOR

Ern EarlyRetirementNow

PUBLISHED

2017 in SSRN Electronic Journal

UNRANKED SOURCE

Yes

Yes

2

###### Maximum Withdrawal Rates: An Empirical and Global Perspective

"Standard analysis of retirement strategies involves evaluating their failure rate. One of the shortcomings of this approach is that a strategy may have a low failure rate and at the same time leave large unintended bequests. Maximum withdrawal rates, by definition, exhaust a portfolio by the end of the retirement period, thus leaving no bequest; they can be used both to assess the likelihood of sustaining any chosen level of inflation-adjusted withdrawals, and more generally to evaluate retirement strategies. This article provides a comprehensive historical perspective on maximum withdrawal rates considering 11 asset allocations, 21 countries, and 115 years."

AUTHOR

Javier Estrada

PUBLISHED

2017 in SSRN Electronic Journal

UNRANKED SOURCE

Yes

Yes

3

###### Asset Valuations and Safe Portfolio Withdrawal Rates

"Bond yields today are well below and stock market valuations are well above their historical average. There are no historical periods in the United States where comparable low bond yields and high equity valuations have occurred simultaneously. Both current bond yields and stock values have been shown to predict near-term returns. Portfolio returns in the first decade of retirement have an outsize impact on retirement income strategies. Traditional Monte Carlo simulation approaches generally do not incorporate market valuations into their analysis. In order to simulate how retirees will fare in a low return environment for both stocks and bonds, we incorporate the predictive ability of current valuations to simulate its impact on retirement portfolios. We estimate bond returns through an autoregressive model that uses an initial bond yield value where yields drift in the future. We use the cyclically adjusted price-to-earnings (CAPE) ratio as an estimate of market valuation to predict short-run stock performance. Our simulations indicate that the safety of a given withdrawal strategy is significantly affected by the initial bond yield and CAPE value at retirement, and that the relative impact varies based on the portfolio equity allocation. Using valuation measures current as of April 15, 2013, which is a bond yield of 2.0% and a CAPE of 22, we find the probability of success for a 40% equity allocation with a 4% initial withdrawal rate over a 30 year period is approximately 48%. This success rate is materially lower than past studies and has sobering implications on the likelihood of success for retirees today, as well as how much those near retirement may need to save to ensure a successful retirement."

AUTHORS

Wade Pfau

Michael S. Finke

David Blanchett

Michael S. Finke

David Blanchett

PUBLISHED

2013 in SSRN Electronic Journal

UNRANKED SOURCE

No

No

4

###### The 4 Percent Rule is Not Safe in a Low-Yield World

"The safety of a 4% initial withdrawal strategy depends on asset return assumptions. Using historical averages to guide simulations for failure rates for retirees spending an inflation-adjusted 4% of retirement date assets over 30 years results in an estimated failure rate of about 6%. This modest projected failure rate rises sharply if real returns decline. As of January 2013, intermediate-term real interest rates are about 4% less than their historical average. Calibrating bond returns to the January 2013 real yields offered on 5-year TIPS, while maintaining the historical equity premium, causes the projected failure rate for retirement account withdrawals to jump to 57%. The 4% rule cannot be treated as a safe initial withdrawal rate in today’s low interest rate environment. Some planners may wish to assume that today’s low interest rates are an aberration and that higher real interest rates will return in the medium-term horizon. Although there is little evidence to support this assumption, we estimate how a reversion to historical real yields will impact failure rates. Because of sequence of returns risk, portfolio withdrawals can cause the events in early retirement to have a disproportionate effect on the sustainability of an income strategy. We simulate failure rates if today's bond rates return to their historical average after either 5 or 10 years and find that failure rates are much higher (18% and 32%, respectively for a 50% stock allocation) than many retirees may be willing to accept. The success of the 4% rule in the U.S. may be an historical anomaly, and clients may wish to consider their retirement income strategies more broadly than relying solely on systematic withdrawals from a volatile portfolio."

AUTHORS

David Blanchett

Wade Pfau

Michael S. Finke

Wade Pfau

Michael S. Finke

PUBLISHED

2013 in SSRN Electronic Journal

UNRANKED SOURCE

No

No

5

###### Sustainable Withdrawal Rates During Retirement and the Risks of Financial Ruin

"This paper describes the application of two different techniques for measuring sustainable withdrawal rates during retirement and the associated risks in running out of funds in the retirement savings pool. The first is a bootstrap simulation approach using recent Australian equity and bond market data. The second is a simulation-free analytical approach proposed in Milevsky and Robinson (2005). To illustrate, we compute and compare the probabilities of financial ruin for a retiree with a thirty year retirement horizon for some commonly recommended periodic withdrawal rates."

AUTHOR

Lakshman Alles

PUBLISHED

2012 in SSRN Electronic Journal

UNRANKED SOURCE

Yes

Yes

6

###### Portfolio Success Rates: Where to Draw the Line

"Portfolio success rate analysis provides the information needed to plan withdrawals from a retirement portfolio. Because financial markets and other matters of life change unexpectedly, those plans are likely to change.This updated analysis reports portfolio success rates net of monthly withdrawals through a range of payout periods. The data we rely on are total returns to large-company common stocks and high-grade corporate bonds as well as Consumer Price Index values and inflation rates from January 1926 through December 2009.We conclude that if 75 percent success is where to draw the line on portfolio success rates, a client can plan to withdraw a fixed amount of 7 percent of the initial value of portfolios composed of at least 50 percent large-company common stocks.The sample data suggest that clients who plan to make annual inflation adjustments to withdrawals should plan lower initial withdrawal rates in the 4 percent to 5 percent range, again from portfolios of 50 percent or more large-company common stocks, in order to accommodate future increases in withdrawals.Changes in withdrawal rates or amounts can be made in response to unexpected changes in financial market conditions using the basic tables we provide."

AUTHORS

Daniel T. Waltz

Carl M. Hubbard

Philip L. Cooley

Carl M. Hubbard

Philip L. Cooley

PUBLISHED

2011 in Journal of Financial Planning

UNRANKED SOURCE

Yes

Yes

7

###### Spending Flexibility and Safe Withdrawal Rates

"Shortfall risk retirement income analyses offer little insight into how much risk is optimal, and how risk tolerance affects retirement income decisions. This study models retirement income risk in a manner consistent with risk tolerance in portfolio selection in order to estimate optimal asset allocations and withdrawal rates for retirees with different risk attitudes. We find that the 4 percent retirement withdrawal rate strategy may only be appropriate for risk averse clients with moderate guaranteed income sources. The ability to accept greater shortfall probabilities means that risk tolerant investors will prefer a higher withdrawal rate and a riskier retirement portfolio. A risk tolerant client may prefer a withdrawal rate of between 5 and 7 percent with a guaranteed income of $20,000. The optimal retirement portfolio allocation to stock increases by between 10 and 30 percentage points and the optimal withdrawal rate increases by between 1 and 2 percentage points for clients with a guaranteed income of $60,000 instead of $20,000."

AUTHORS

Duncan Williams

Wade Pfau

Michael S. Finke

Wade Pfau

Michael S. Finke

PUBLISHED

2011 in SSRN Electronic Journal

UNRANKED SOURCE

No

No

8

###### Revisiting Retirement Withdrawal Plans and Their Historical Rates of Return

"This paper examines the historical record of the so-called 4% rule, the popular guideline for sustainable real annual withdrawals in a self funded retirement. Our findings indicate that a withdrawal plan following this rule (“4R”) carries an historical risk of failure for a long retirement that is much higher than generally acknowledged. For example, we find that 15% of the historical 35-year retirements failed when funded with equal parts of stocks and bonds. The “real” withdrawal plans that generated no historical failures were all less than 4%, sometimes far less, when retirements exceeded 25 years. The historical failure rates that we find for a 5R plan are higher than a 4R plan by a factor of at least three for all retirement periods. The historical failures are not random. Rather they occur in clusters of years in which the majority of new retirement withdrawal plans fail. A key driver of these failures was a rapid, significant and lasting increase in the rate of inflation - this event increased withdrawals and contributed to a declining real rate of return that was ultimately unable to support the withdrawal plan. Although TIPS bonds and inflation-adjusted annuities are both too new for historical analysis, we note they may offer an opportunity to curtail income plan failures in the future. This is because they (1) offer a known real rate of return and (2) adjust for inflation close to the time at which inflation impacts withdrawals. Our review of the prior literature and a detailed description of the methodology used in the study appear at the end of the paper, after the Summary and Conclusions section."

AUTHORS

Felix Schirripa

Christopher O'Flinn

Christopher O'Flinn

PUBLISHED

2010 in SSRN Electronic Journal

UNRANKED SOURCE

No

No

9

###### Guidelines for Withdrawal Rates and Portfolio Safety During Retirement

"The existing literature for retirement portfolio withdrawal rates suggests that a real withdrawal rate of 4 percent of the initial portfolio is safe." This paper demonstrates that a blanket "4 percent withdrawal" rule may be an oversimplification of a complex set of circumstances. • Risk tolerance, asset allocation, withdrawal size, and expected returns all affect the process of withdrawing from a retirement portfolio. To advance previous research, this paper uses 21 stock/bond allocations and 71 withdrawal rates, for 1,491 possible combinations. For each of these combinations, 10,000 bootstrap iterations are run for 30-year periods. • Results show that withdrawal rates as high as 5.5 to 6 percent can be achieved, but only at a 25 to 30 percent chance of running out of money and with stock allocations of 75 to 100 percent. A 4.4 percent withdrawal rate with a 50/50 bond/stock allocation has a 10 percent chance of running out of money. To visually illustrate the results for clients, the paper develops easy-to-understand withdrawal contours, runout contours, and balance-remaining contours that clearly reveal the relationship between asset allocation, withdrawal rates, the chance of running out of money, and estate building. First, given a tolerance for the chance of running out of money, the largest amount that can be withdrawn can be determined. Second, the contours can be used to provide the client's optimal asset allocation for a fixed withdrawal rate and a given tolerance for running out of money. Third, the withdrawal amount at various levels of tolerance for running out of money can be determined while holding the asset mix constant."

AUTHORS

Sandeep Singh

Jeffrey C. Strieter

John J. Spitzer

Jeffrey C. Strieter

John J. Spitzer

PUBLISHED

2007 in Journal of Financial Planning

UNRANKED SOURCE

No

No

10

###### Retirement Spending: Choosing a Sustainable Withdrawal Rate

"To help in the selection of a withdrawal rate, the following sections provide information on the historical success of various withdrawal rates from portfolios of stocks and bonds. If a withdrawal rate proves too high based on historical year-to-year returns, then it seems likely that the rate will not be sustainable during future periods. Conversely, historically sustainable withdrawal rates are more likely to have a high probability of success in the future."

AUTHORS

Daniel T. Waltz

Carl M. Hubbard

Philip Cooley

Carl M. Hubbard

Philip Cooley

PUBLISHED

1998 in American Association of Individual Investors

UNRANKED SOURCE

Yes

Yes

11

###### Determining Withdrawal Rates Using Historical Data

"At the onset of retirement, investment advisors make crucial recommendations toclients concerning asset allocation, as wellas dollar amounts they can safely withdraw annually, so clients will not outlivetheir money. This article utilizes historical investment data as a rational basis forthese recommendations. It employs graphical interpretations of the data to determinethe maximum safe withdrawal rate (as apercentage of initial portfolio value), andestablishes a range of stock and bond assetallocations that is optimal for virtually allretirement portfolios. Finally, it providesguidance on "mid-retirement" changes ofasset allocation and withdrawal rate."

AUTHOR

William P. Bengen

PUBLISHED

1994 in Journal of Financial Planning

UNRANKED SOURCE

Yes

Yes

Page 1 of 1.

ADDITIONAL STUDIES TO CONSIDER ADDING TO LIST

State of K periodically recommends additional studies to add to this list, both newly published and newly discovered.
There are none for now, but check back another time.

QUESTIONS TO CONSIDER

Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

Did quantitative easing reduce US mortgage rates?

Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

Add question

18 studies

Submitted by: KKrista 77

Did quantitative easing reduce US mortgage rates?

3 studies

Submitted by: BBlack 104

Does money invested in a US stock index fund have at least a 95% chance of lasting for 30 years at an annual withdrawal rate of 4% (excluding taxes and fees, and with withdrawals adjusted for inflation each year)?

18 studies

Submitted by: KKrista 77

Add question