Extended Portfolio Safety Tables: By Year
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 of commercial paper alone.
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.
HSWR80
Withdrawal Rate = 5%
Real dollar balances
1871-1980
Survived Year 5 Year 10 Year 11 Year 12
Under 50K 1 2 1 2
50Ks 3 2 4 4
60Ks 2 5 5 3
70Ks 6 3 1 3
80Ks 5 3 2 0
90Ks 10 9 9 7
100K 60 63 65 68
Total 87 87 87 87
Failed Year 5 Year 10 Year 11 Year 12
Under 50K 2 13 16 18
50Ks 2 1 2 2
60Ks 5 5 1 1
70Ks 4 1 2 2
80Ks 5 2 2 0
90Ks 3 0 0 0
100K 2 1 0 0
Total 23 23 23 23
Observations:
1) We can spot most of the survivors right away. They have grown beyond the initial investment, many as early as year five.
2) The majority of outcomes are obvious by years 10, 11 and 12. A large fraction of the failures have balances below 50%. A very large fraction of the successes have retained 90% of their initial balances. Many have grown even more.
3) By year 12, all of the failures had fallen below 80% of the initial balance.
4) A few of the portfolios that have done poorly in the first 10, 11 and 12 years are able to recover.
HSWR50
Withdrawal Rate = 5%
Real dollar balances
1871-1980
Survived Year 5 Year 10 Year 11 Year 12
Under 50K 1 1 1 2
50Ks 1 3 4 2
60Ks 2 2 1 3
70Ks 5 4 3 4
80Ks 6 7 7 7
90Ks 10 10 11 7
100K 52 50 50 52
Total 77 77 77 77
Failed Year 5 Year 10 Year 11 Year 12
Under 50K 0 15 19 21
50Ks 3 3 2 4
60Ks 6 4 3 3
70Ks 5 4 4 2
80Ks 8 6 5 3
90Ks 6 1 0 0
100K 5 0 0 0
Total 33 33 33 33
Observations:
1) We can spot most of the survivors right away. They have grown beyond the initial investment, many as early as year five.
2) The majority of outcomes are obvious by years 10, 11 and 12. A large fraction of the failures have balances below 50%. A large fraction of the successes have retained 90% of their initial balances. Many have grown even more.
3) Even in year 12, there were some failures that had retained 80% of the initial balance.
4) The region between 50% and 90% remains ambiguous, even in years 10, 11 and 12.
SwAT2 (Constrained TIPS Switching)
Withdrawal Rate = 6%
Real dollar balances
1871-1980
Survived Year 5 Year 10 Year 11 Year 12
Under 50K 0 0 0 0
50Ks 1 0 0 0
60Ks 1 3 4 4
70Ks 3 3 4 3
80Ks 7 3 1 3
90Ks 10 5 1 2
100K 28 36 40 38
Total 50 50 50 50
Failed Year 5 Year 10 Year 11 Year 12
Under 50K 1 9 14 21
50Ks 0 12 10 11
60Ks 5 12 17 16
70Ks 11 19 14 10
80Ks 24 5 5 2
90Ks 16 3 0 0
100K 3 0 0 0
Total 60 60 60 60
Observations:
1) We can spot most of the survivors right away. They have grown beyond the initial investment, many as early as year five. It is bad news if the balance falls below 80%. The outcome is unclear at intermediate percentages.
2) The majority of successful outcomes are obvious by years 10, 11 and 12. A large fraction of the failures have balances below 80%. A large fraction of the successes have retained 90% of their initial balances. Many have grown even more.
SwOptT2 (Optimized TIPS Switching)
Withdrawal Rate = 6%
Real dollar balances
1871-1980
Survived Year 5 Year 10 Year 11 Year 12
Under 50K 0 0 0 0
50Ks 1 2 0 0
60Ks 3 0 2 2
70Ks 3 4 4 3
80Ks 8 2 2 8
90Ks 5 14 13 9
100K 27 25 26 25
Total 47 47 47 47
Failed Year 5 Year 10 Year 11 Year 12
Under 50K 0 5 7 11
50Ks 0 5 15 20
60Ks 2 27 23 19
70Ks 8 14 10 6
80Ks 36 8 7 7
90Ks 12 4 1 0
100K 5 0 0 0
Total 63 63 63 63
Observations:
1) We can spot most of the survivors right away. They have grown beyond the initial investment, many as early as year five. It is bad news if the balance falls below 70%. The outcome is unclear at intermediate percentages.
2) The majority of successful outcomes are obvious by years 10, 11 and 12. A large fraction of the failures have balances below 80%. A large fraction of the successes have retained 90% of their initial balances. Many have grown even more.
3) The majority of failures are not at all obvious by years 10, 11 and 12. Our warning is far from satisfactory. We recognize the failures only because they are not obviously successful.
4) The region between 60% and 90% remains ambiguous, even in years 10, 11 and 12.
HSWR80T2
Withdrawal Rate = 5%
Real dollar balances
1871-1980
Survived Year 5 Year 10 Year 11 Year 12
Under 50K 1 2 3 3
50Ks 0 2 1 2
60Ks 7 3 5 3
70Ks 3 5 3 3
80Ks 9 8 5 3
90Ks 14 8 11 13
100K 55 61 61 62
Total 89 89 89 89
Failed Year 5 Year 10 Year 11 Year 12
Under 50K 0 11 14 16
50Ks 4 2 2 2
60Ks 3 4 1 2
70Ks 4 1 3 1
80Ks 6 2 1 0
90Ks 2 1 0 0
100K 2 0 0 0
Total 21 21 21 21
Observations:
1) We can spot most of the survivors right away. They have grown beyond the initial investment, many as early as year five. It is bad news if the balance falls below 60%. The outcome is unclear at intermediate percentages.
2) The majority of successful outcomes are obvious by years 10, 11 and 12. A large fraction of the successes have retained 90% of their initial balances. Many have grown even more.
3) A large fraction of the failures have balances below 60% in years 10, 11 and 12.
HSWR50T2
Withdrawal Rate = 5%
Real dollar balances
1871-1980
Survived Year 5 Year 10 Year 11 Year 12
Under 50K 0 0 0 1
50Ks 0 3 3 2
60Ks 2 3 6 5
70Ks 8 7 6 9
80Ks 11 17 13 13
90Ks 21 10 14 10
100K 42 44 42 44
Total 84 84 84 84
Failed Year 5 Year 10 Year 11 Year 12
Under 50K 0 6 9 15
50Ks 0 6 6 4
60Ks 4 6 3 3
70Ks 6 3 5 3
80Ks 8 4 3 1
90Ks 5 1 0 0
100K 3 0 0 0
Total 26 26 26 26
Observations:
1) We can spot most of the survivors right away. They have grown beyond the initial investment, many as early as year five. It is very bad news if the balance falls below 60%. The outcome is unclear at intermediate percentages.
2) The majority of successful outcomes are obvious by years 10, 11 and 12. A large fraction of the successes have retained 80% of their initial balances. Many have grown even more.
3) A large fraction of the failures have balances below 60% in years 11 and 12.
4) The region between 60% and 90% remains ambiguous, even in years 10, 11 and 12.
Have fun.
John Walter Russell
July 17, 2005