Where conservative planning ends and calculated risk begins
A 5% withdrawal rate — $50,000/year from a $1,000,000 portfolio, adjusted for inflation — crosses the threshold where failure becomes a real possibility. The historical data makes the tradeoff explicit.
Key findings
Tested across every 30-year window in the dataset using a 60/40 stock-bond portfolio:
- Success rate: 85%
- Median final balance: $4.2 million
- Worst outcome: $320,000
When it works, 5% works spectacularly. The median retiree ended with four times their starting balance. The problem is the 15% of periods where it didn't.
Where the failures cluster
The failures aren't random. They concentrate in the 1960s and early 1970s — eras where high starting valuations collided with prolonged stagflation. Retirees who began withdrawing 5% in these periods saw their portfolios drain before the 30-year mark.
What this means for retirees
An 85% success rate means roughly one in seven retirees would have run out of money. Whether that's acceptable depends on one thing: your ability to cut spending if markets turn against you early. If you can reduce withdrawals during a downturn, 5% becomes much more viable. If your expenses are fixed, the 15% failure rate is a serious risk.
