What this simulator does
It answers one question: if you start retirement with a portfolio and withdraw the same amount every year in today’s money, how often would the money have lasted to the end? It checks this in two ways, which you can switch with the method selector.
- Historical. Replays your plan starting in every year from 1928 to the last one that completes your chosen horizon. With 30 years that is 69 real periods, including 1929, the 1970s inflation and 2008.
- Monte Carlo. Generates 5,000 possible retirements by drawing complete historical years at random (stocks, bonds and inflation from the same year, so they keep moving together). This explores combinations that did not happen in that order.
How it is calculated
Each year the spending is withdrawn at the start, and the rest earns the return of a portfolio rebalanced to your stock/bond mix, minus fees. We then deduct that year’s inflation, so everything stays in today’s money and spending keeps its purchasing power. If the portfolio cannot cover a year’s spending, that scenario counts as a failure.
What the results show
With €1,000,000, €40,000 of annual spending (4%), a 60/40 portfolio, 30 years and no fees, the money would have lasted in 94% of historical periods and in about 91% of Monte Carlo scenarios. The plan failed for retirements starting in 1965, 1966, 1968 and 1969; the worst was 1966, when the money ran out in year 26. The highest rate that never failed in that case was 3.7%. Try raising fees to 1% and watch the probability drop: costs matter as much as the withdrawal rate.
Advanced options
- State pension. Enter the yearly pension you expect, in today’s money, and how many years until it starts. From that year on, only the part of your spending the pension does not cover is withdrawn from the portfolio.
- Guardrails spending rule. From the second year, if your withdrawal rate is more than 20% above the initial one (because the portfolio fell), spending is cut by 10%; if it is more than 20% below, spending rises by 10%. Spending never falls below the minimum you choose: if the portfolio cannot pay even that, the scenario counts as a failure. It is a simplified version of the Guyton-Klinger rule.
- Cash buffer. That many years of the initial spending are held in 3-month Treasury bills. After a year in which the portfolio lost value, spending comes from the buffer; in other years it comes from the portfolio and the buffer is refilled. Your stock/bond mix applies to the rest.
With €1,000,000, €45,000 of spending (4.5%), a 60/40 portfolio and 40 years, fixed spending lasted in 68% of historical periods. With guardrails and a floor of 80% of spending, it lasted in 90%. A 3-year cash buffer, by contrast, lowered it to 56%: money sitting in cash earned less than it saved by not selling after bad years.
Limits you should know
- US data in dollars. It is the longest reliable public series, but a European investor faces different inflation, currency and taxes. US markets were among the best of the 20th century, so results may be optimistic for other countries.
- No taxes. Spending is before taxes on fund sales.
- Simplified rules. The pension is a fixed amount in today’s money and the guardrails always follow the same rule. Real-life adjustments are less mechanical.
- The past does not guarantee the future. This is an educational tool, not investment advice.
Formulas, assumptions and the data source are detailed in our methodology. If your retirement may last 40 or 50 years, see our study of safe withdrawal rates for long retirements. To work out how much you need, use the 4% rule calculator.