Having accumulated a Portfolio, you retire and start withdrawing. There are a jillion question to ask: What percentage should I withdraw each year? Is there a Safe Withdrawal Rate? (SWR) What is the influence of inflation? Shall I use actual historical returns and Monte Carlo or assume some "future" distribution of returns or ...? Are there studies on the subject? What are the historical precedents? What if I ... >So? So an early study was the Trinity Study which examined various portfolio allocations (stock + bonds) to see which would have survived N years with a particular withdrawal rate. For example, with a portfolio of 75% stocks + 25% bonds your portfolio would have lasted 30 years (with a 98% probability) had you withdrawn 5% each year. >What stocks? What bonds? What period of time? Good questions. I think the stock component was the S&P500 and for bonds, high grade corporate bonds were used ... and it covered the period 1926 to 1995. However, that's not so important since there have been a jillion such studies since Trinity. See the table? The usual assumption is that you withdraw x% of your initial portfolio, then increase that each year according to the Consumer Price Index. That means that, once you've started withdrawing, your withdrawals are predetermined for the next umpteen years. They ignore current market machinations. It ignores the fact that your portfolio has grown from $500K to $10M. You withdraw the prescribed amount, based upon that initial $500K. It ignores the fact that your portfolio has collapsed from $500K to $100K. You withdraw the prescribed amount, based upon that $500K. >Huh? If my portfolio collapsed I wouldn't keep withdrawing ... Yes ... so there have been a jillion subsequent studies on SWRs.

Allocation 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 100% Stocks 15 Years 100 100 98 98 93 91 88 77 63 55 20 Years 100 98 96 94 92 84 73 61 47 43 25 Years 100 98 96 91 87 78 70 50 43 35 30 Years 100 98 95 90 85 78 68 54 49 34 75% Stocks + 25% Bonds 15 Years 100 100 100 100 96 95 91 79 63 46 20 Years 100 100 100 96 94 88 71 51 41 33 25 Years 100 100 98 96 91 78 57 46 33 26 30 Years 100 100 98 95 88 73 54 46 37 24 50% Stocks + 50% Bonds 15 Years 100 100 100 100 100 98 91 71 50 36 20 Years 100 100 100 100 96 88 61 41 25 10 25 Years 100 100 100 98 96 70 43 22 7 0 30 Years 100 100 100 98 90 51 37 15 0 0 25% Stocks + 75% Bonds 15 Years 100 100 100 100 100 100 91 50 21 14 20 Years 100 100 100 100 100 71 24 12 4 2 25 Years 100 100 100 100 78 22 9 0 0 0 30 Years 100 100 100 100 32 5 0 0 0 0 100% Bonds 15 Years 100 100 100 100 100 79 43 38 14 7 20 Years 100 100 100 96 47 35 16 6 0 0 25 Years 100 100 98 52 26 7 2 0 0 0 30 Years 100 100 51 27 0 0 0 0 0 0

One thing to remember is that the order in which returns occur will greatly influence the evolution of your portfolio:

See:

• Sensible Withdrawals
• Sam retires ... then what?
• VERY safe withdrawals
• Withdrawal strategies
• more on SWRs
• Withdrawals and your age
• JWR essay

to continue