Safe Withdrawal Rate Simulator
How often would your withdrawal plan have survived across every historical starting year?
What “safe withdrawal rate” actually means
Safe withdrawal rate is the annual amount you can withdraw from a retirement portfolio, adjusted for inflation each year, without running out during retirement. Typically expressed as a percentage of the initial portfolio — $1.5M at 4% means $60,000 in year one, adjusted for inflation thereafter.
“What rate is safe?” depends on what you mean by safe. 100% historical success? 95%? 85%? What retirement length? What portfolio mix? This simulator lets you adjust each variable and see the historical outcome distribution. There is no single right answer — only trade-offs.
The origin of the 4% rule
William Bengen published research in 1994 showing a 4% initial withdrawal rate, adjusted for inflation, would have successfully funded every historical 30-year retirement since 1926 with a 50/50 stock/bond portfolio. The Trinity Study (1998) extended this across various allocations, showing 96–100% success at 4% with 50–75% equities over 30 years.
This became “the 4% rule” — perhaps the most cited heuristic in retirement planning. Useful but frequently misunderstood. It was the ceiling that survived the worst historical case (1966 retirement), not a recommended target.
Why the 4% rule is not as safe as it sounds
Three caveats lost in popular summaries. First, 4% was the maximum that always worked, not a recommendation. Second, it was calibrated to 30-year retirements — for 40–50 year horizons (early retirees), research supports 3.0–3.5%. Third, historical data is finite and US-centric. Whether similar returns continue is unknown.
Sequence of returns risk — the thing most people miss
The 4% rule does not fail because markets average low returns. It fails because of when those returns happen. Two retirees with identical 30-year average returns can have dramatically different outcomes depending on whether bad years come early or late.
A retiree who experiences a major downturn in years 1–5 withdraws from a shrinking portfolio. The portfolio takes a double hit: market drops AND cash leaves. By the time markets recover, the balance is too small for good returns to rescue it. This is why static calculators (like Coast FIRE and Fat FIRE) that assume constant returns underestimate real risk. This simulator captures it by running each historical sequence as it actually occurred.
What the simulation chart shows
The trajectory chart displays all historical retirement simulations overlaid. Each line represents the portfolio path for one possible starting year. Lines that hit zero represent failures. The spread between best and worst outcomes is enormous — someone retiring in 1982 ended with many multiples of their starting portfolio, while someone retiring in 1966 often depleted theirs.
The median path shows the typical outcome, but “typical” is irrelevant if you retire in the wrong year. Safe withdrawal rate planning emphasizes surviving worst-case sequences, not optimizing for the average.
Starting year matters enormously
Historically disastrous starting years: 1929 (Great Depression), 1966 (stagflation and 1973–74 crash), 1973 (oil crisis), 2000 (dot-com plus 2008). Historically excellent starting years: 1982 (multi-decade bull), 2009 (post-crisis bottom). You do not choose when you retire in the market cycle. The only variable you control is whether your withdrawal rate is low enough to survive the worst starting years.
How this relates to other FIRE calculators
Coast FIRE, Barista FIRE, and Fat FIRE all use fixed assumed returns (typically 6–7%) and fixed withdrawal rates (typically 3.5–4%). Reasonable for quick analysis but they hide sequence risk. This simulator adds the stress-testing layer: given your FIRE number and withdrawal plan, how often would it have actually worked across every historical market environment?
What this simulator does not model
Non-US market history (international returns often worse). Tax drag on withdrawals (reduces effective rate 0.5–1%). Social Security and pensions (reduce required withdrawal). Future returns potentially differing from historical. Behavioral factors (ability to cut spending in bear markets). Consider a fee-only financial planner for personalized analysis at actual retirement decision points.
Frequently asked questions
What’s the difference between 4% and 4.5% success rates?
At 4% withdrawal on a 60/40 portfolio over 30 years, historical success is roughly 95–96%. At 4.5%, it drops to around 85–90%. That 10-point gap means the difference between 1-in-20 chance of running out and 1-in-8. Whether that matters depends on your risk tolerance and whether you have backup income (Social Security, pensions, part-time work).
Why does starting year matter so much?
Sequence-of-returns risk. If markets crash in your first 5 years of retirement, you withdraw from a shrinking portfolio. By the time markets recover, the portfolio is too small for good returns to rescue it. The worst historical starting years (1929, 1966, 1973, 2000) all featured multi-year downturns early in retirement. Starting year is the variable you cannot control.
Should I use 3%, 3.5%, or 4% for planning?
4% is the historical ceiling for 30-year retirements. For 40–50 year retirements (early retirees), 3–3.5% is more appropriate. 3% has near-zero historical failure rate at any time horizon. The tradeoff: 3% on $1.5M is $45,000/year; 4% is $60,000. That’s $15,000/year in lifestyle for the same portfolio.
How does this account for Social Security?
It doesn’t directly. If you expect Social Security or a pension, reduce your withdrawal amount by that income. For example, if you need $60,000/year and expect $20,000 from Social Security starting at 67, model $60,000 withdrawals for the early years and $40,000 after 67. The simulator uses a flat withdrawal — adjust manually for income transitions.
Is historical data still valid for future planning?
It’s the best data we have, but it’s not a guarantee. The US had an exceptional investing century. International data often shows lower safe withdrawal rates (3–3.5%). Some researchers argue current valuations imply lower future returns. Using historical backtesting with a margin of safety (lower withdrawal rate than the historical maximum) is the most common approach.
What’s Guyton-Klinger and should I use it?
Guyton-Klinger is a variable withdrawal strategy: reduce withdrawals 10% if your portfolio drops significantly, increase 10% if it grows significantly. Research suggests this supports 5–5.5% initial rates — higher than fixed 4% — because you’re cutting back during downturns. The tradeoff is income variability. Good for people with flexible budgets; risky for those with fixed obligations.
How do I handle the risk of retiring into a bad sequence?
Three practical approaches: (1) a 1–2 year cash buffer so you don’t sell equities during downturns, (2) willingness to reduce spending 10–20% temporarily if markets drop significantly in early retirement, (3) use a withdrawal rate that historically survived every sequence (roughly 3–3.25% for 30-year periods). None eliminates risk entirely; all reduce it substantially.