Extended Portfolio Safety Tables: Minimum Balances
These tables give you insight into the safety of your own portfolio. They show how retirement portfolios perform both when they succeed and when they fail. You will be able to spot dangers early enough to respond.
In all cases, the withdrawal rate was far enough above the Safe Withdrawal Rate to have both successes and failures.
These data extend back to 1871. The earlier data behave differently from those of recent years in a variety of ways. For example, in the late 19th century, you could withdraw 6% (plus inflation) safely every year for 30 years from a portfolio consisting entirely of commercial paper.
Every generation encounters at least one major investment surprise. It has a profound influence. This generation went through the bubble. We need to keep potential surprises in mind in our early retirement planning. Compare and contrast these results to those of 1921-1980. This can give us an important insight as to what we should expect.
The amounts shown are the minimum balances within the first five years and within the first ten years.
HSWR80
Withdrawal Rate = 5%
Real dollar balances
1921-1980
Survived Min Yr 5 Min Yr 10
Under 50K 1 3
50Ks 3 5
60Ks 5 6
70Ks 7 7
80Ks 19 17
90Ks 21 22
100K 31 27
Total 87 87
Failed Min Yr 5 Min Yr 10
Under 50K 2 14
50Ks 5 2
60Ks 2 3
70Ks 6 1
80Ks 5 2
90Ks 2 1
100K 1 0
Total 23 23
Observations:
1) It is hard to tell anything definite from the first five years. Generally speaking, it is a good sign if your portfolio stays above 80%. It is bad news if it falls below 60%.
2) It is a very good sign if your portfolio is able to stay above 80% for the first ten years.
3) It is very bad news if your portfolio dips below 50% in the first ten years. It is almost certain to fail.
HSWR50
Withdrawal Rate = 5%
Real dollar balances
1921-1980
Survived Min Yr 5 Min Yr 10
Under 50K 1 3
50Ks 2 3
60Ks 1 2
70Ks 8 8
80Ks 11 12
90Ks 22 23
100K 32 26
Total 77 77
Failed Min Yr 5 Min Yr 10
Under 50K 0 16
50Ks 3 3
60Ks 7 4
70Ks 7 4
80Ks 9 5
90Ks 6 1
100K 1 0
Total 33 33
Observations:
1) It is hard to tell anything definite from the first five years. Generally speaking, it is a good sign if your portfolio stays above 70%. It is very bad news if it falls below 70%.
2) It is a very good sign if your portfolio is able to stay above 90% for the first ten years.
3) It is very bad news if your portfolio dips below 50% in the first ten years. It is almost certain to fail.
SwAT2 (Constrained TIPS Switching)
Withdrawal Rate = 6%
Real dollar balances
1921-1980
Survived Min Yr 5 Min Yr 10
Under 50K 0 0
50Ks 1 2
60Ks 1 4
70Ks 6 6
80Ks 16 18
90Ks 11 8
100K 15 12
Total 50 50
Failed Min Yr 5 Min Yr 10
Under 50K 1 11
50Ks 0 11
60Ks 6 13
70Ks 13 18
80Ks 27 5
90Ks 12 2
100K 1 0
Total 60 60
Observations:
1) It is hard to tell anything definite from the first five years. Generally speaking, it is a good sign if your portfolio stays above 80%. It is bad news if it falls below 70%.
2) It is a very good sign if your portfolio is able to stay above 80% for the first ten years.
3) It is very bad news if your portfolio dips below 60% in the first ten years. It is almost certain to fail.
SwOptT2 (Optimized TIPS Switching)
Withdrawal Rate = 6%
Real dollar balances
1921-1980
Survived Min Yr 5 Min Yr 10
Under 50K 0 1
50Ks 2 4
60Ks 2 1
70Ks 9 9
80Ks 11 12
90Ks 11 14
100K 12 6
Total 47 47
Failed Min Yr 5 Min Yr 10
Under 50K 0 6
50Ks 0 6
60Ks 2 25
70Ks 10 15
80Ks 36 7
90Ks 12 4
100K 3 0
Total 63 63
Observations:
1) It is hard to tell anything definite from the first five years. Generally speaking, it is a good sign if your portfolio stays above 90%. It is bad news if it falls below 70%.
2) It is a very good sign if your portfolio is able to stay above 90% for the first ten years.
3) It is very bad news if your portfolio dips below 70% in the first ten years. It is almost certain to fail.
HSWR80T2
Withdrawal Rate = 5%
Real dollar balances
1921-1980
Survived Min Yr 5 Min Yr 10
Under 50K 1 4
50Ks 1 4
60Ks 8 7
70Ks 7 6
80Ks 21 22
90Ks 22 24
100K 29 22
Total 89 89
Failed Min Yr 5 Min Yr 10
Under 50K 1 12
50Ks 5 2
60Ks 2 3
70Ks 6 1
80Ks 4 2
90Ks 2 1
100K 1 0
Total 21 21
Observations:
1) It is hard to tell anything definite from the first five years. Generally speaking, it is a good sign if your portfolio stays above 80%. It is bad news if it falls below 60%.
2) It is a very good sign if your portfolio is able to stay above 80% for the first ten years.
3) It is very bad news if your portfolio dips below 60% in the first ten years. It is almost certain to fail.
HSWR50T2
Withdrawal Rate = 5%
Real dollar balances
1921-1980
Survived Min Yr 5 Min Yr 10
Under 50K 0 0
50Ks 0 4
60Ks 3 6
70Ks 9 9
80Ks 22 28
90Ks 31 24
100K 19 13
Total 84 84
Failed Min Yr 5 Min Yr 10
Under 50K 0 6
50Ks 0 6
60Ks 5 5
70Ks 7 3
80Ks 8 5
90Ks 5 1
100K 1 0
Total 26 26
Observations:
1) It is hard to tell anything definite from the first five years. Generally speaking, it is a good sign if your portfolio stays above 90%. It is bad news if it falls below 70%.
2) It is a good sign if your portfolio is able to stay above 80% for the first ten years.
3) It is very bad news if your portfolio dips below 60% in the first ten years. It is almost certain to fail.
Have fun.
John Walter Russell
July 17, 2005