GRIPS Research Center

Discussion Paper: 10-12
Revised version“An International Perspective on Safe Withdrawal Rates from Retirement Savings:
The Demise of the 4 Percent Rule?”1
byWade D. Pfau
Associate Professor
National Graduate Institute for Policy Studies (GRIPS)
7-22-1 Roppongi, Minato-ku, Tokyo 106-8677 Japan
Email: wpfau@grips.ac.jp
phone: 81-3-6439-6225

Abstract
Numerous studies about sustainable withdrawal rates from retirement savings have been
published, but they are overwhelmingly based on the same underlying data for US asset returns
since 1926. From an international perspective, the United States enjoyed a particularly favorable
climate for asset returns in the twentieth century, and to the extent that the US may experiencemean reversion in the current century, "safe" withdrawal rates may be overstated in many studies.
This paper explores the issue of sustainable withdrawal rates using 109 years of financial market
data for 17 developed market countries in an attempt to provide a broader perspective about safe
withdrawal rates, as financial planners and their clients must consider whether they will be
comfortable basing decisions using the impressive and perhaps anomalous numbers found in thepast US data. From an international perspective, a 4 percent real withdrawal rate is surprisingly
risky. Even with some overly optimistic assumptions, it would have only provided "safety" in 4of the 17 countries. A fixed asset allocation split evenly between stocks and bonds would havefailed at some point in all 17 countries.

JEL Codes: G11, G15, G17, C15
Brief Biography:
Wade Pfau, an Associate Professor at the National Graduate Institute for Policy Studies in Tokyo,
Japan, holds a Ph.D. in Economics from Princeton University. His hometown is Des Moines,
Iowa.
Acknowledgements: The author is grateful for financial support from the Japan Society for the
Promotion of Science Grants-in-Aid for Young Scientists (B) #20730179, as well as for excellent
research assistance from Carmina Mancenon and for the detailed comments of an anonymous
reviewer for this journal.

1This paper is forthcoming at Journal of Financial Planning.
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1. Introduction
For retirement savings that are not annuitized, an important and difficult question for
retirees regards finding a safe withdrawal rate that will provide as much retirement income as
possible without exhausting their savings. The starting point for advice on this issue in themodern era is Bengen (1994), who famously motivated the 4 percent withdrawal rule using
historical simulations. He later coined the term "SAFEMAX" to describe the highest withdrawal
rate, as a percentage of the account balance at retirement, that could be adjusted for inflation ineach subsequent year and would allow for at least 30 years of withdrawals during all of therolling historical periods in his dataset. Several years later, Cooley, Hubbard, and Walz (1998)
use a Monte Carlo simulation based on the same data to determine that a 4 percent withdrawal
rate with an underlying portfolio of 50 percent stocks and 50 percent bonds provides a 95 percent
chance for success. While Scott, Sharpe, and Watson (2009) argue against the 4 percent
withdrawal rule as being an expensive and inefficient means for achieving retirement spending
goals, they first note how widely it has been adopted by the popular press and financial planners
as an appropriate general rule of thumb for retirees.
Numerous studies on sustainable withdrawal rates with various tweaks and modifications
followed this early research. For instance, Google Scholar indicates that 55 studies have cited theoriginal Bengen (1994) article, and the author counts well over 30 articles on this topic in thepages of this journal. As the 4 percent rule became established as a baseline, a fair number ofthese studies were motivated by the search for ways to further increase the safe withdrawal rate.
Bengen (2006a) considers some of the subsequent research advances, such as diversifying into
more financial assets, requiring sustainable withdrawals for longer or shorter periods of time,changing withdrawal patterns to favor larger withdrawals either in early or late retirement,
making dynamic adjustments to the withdrawal rate in response to market conditions, andrebalancing the underlying portfolio at different time intervals. By including small company
stocks in addition to the S&P 500 index, he finds that the safe withdrawal rate can be increased
from 4.15 percent to 4.58 percent, and more generally he writes that the accumulated impacts ofthese modifications leave him comfortable recommending withdrawal rates much closer to 5
percent than to 4 percent. Bengen (2006b) provides a specific example of this revised
recommendation, as a retiree who includes small-capitalization stocks, accepts a 6 percent chancefor failure, and rebalances the portfolio once every four years can enjoy a 5.1 percent real
withdrawal rate.

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It is widely acknowledged and understood that the applicability of these withdrawal ratestudies depend on the future behaving with the same patterns as the past. But a potential problem
with the findings of so many of the existing studies is that they are based on the same Ibbotson
Associates' Stocks, Bonds, Bills, and Inflation (SBBI) monthly data on total returns for US
financial markets since 1926, a time interval for which there are less than three nonoverlapping
30-year periods. Either this data is used directly for historical simulations or bootstrapping
approaches, or it is used to calculate parameters for Monte Carlo simulations. The problem is thatthe time period covered by this data may have been a particularly fortuitous one for the UnitedStates. If one thinks of the world as a Monte Carlo simulation, then the single path observed in
the twentieth-century United States may not represent its true underlying distribution of returns,
and future returns are likely to be lower.
This point is made forcefully in Dimson, Marsh, and Staunton (2004). They argue thatlooking only to past US data for future predictions will lead to "success bias" and sampling error.
As the title of their article suggests, it is "irrational optimism." In the first case, they note thatthough the US enjoyed remarkable growth and success in the twentieth century, with its stock
market capitalization growing from about 22 percent of world's total in 1900 to 54 percent in
2003, such relative success would have been difficult to predict in 1900 and cannot be
extrapolated into the future. As for sampling error, the US data does not reach over a long enoughtime interval to be confident about its characteristics, as there are too few nonoverlapping periods.
Examining asset returns for a larger selection of countries should provide a better idea about therange of possibilities for the future. Their hope was to eliminate the widespread belief that thestock market will always provide a positive real return over a 20-year period, as while this wastrue in the United States, it was also true only in 3 of the remaining 15 countries they investigate(Norway has since been added to their dataset, increasing the total countries now available to 17).
For their study with data from 1900 to 2002, the real compounded returns to the US stock market
was 6.3 percent, compared to 5.4 percent for their index of developed-country stock markets.
The argument in Dimson, Marsh, and Staunton (2004) was not based on any underlying
factors in the US. But an established literature also argues that the US should expect lower stock
returns in the future due to underlying fundamental factors. Data available from Robert Shiller's
homepage (http://www.econ.yale.edu/~shiller/data.htm) indicate that the dividend yield in June2010 was 2.03 percent, compared to an average value since 1900 of 4.3 percent, and thecyclically adjusted price-earnings ratio in June 2010 was 19.79, compared to an average since
1900 of 16.27. Low dividend yields and a high price-multiple on earnings should both lead to
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lower future stock returns on average. For this reason, Bogle (2009) is very skeptical about basing
stock return expectations on their historical performance.
One study in this literature acknowledging that past market conditions may not suitably
represent what will happen in the future is Blanchett and Blanchett (2008). Basing an average
forecast for future stock returns on a variety of sources, they find that the future real return for a
60/40 portfolio of stocks and bonds could be between 1 and 2 percentage points less thanhistorical averages. They use Monte Carlo simulations to consider how varying the returns andstandard deviations of an investment portfolio will impact the sustainable real withdrawal rate for
30-year periods, which essentially allows the reader to choose their assumptions for these two
portfolio parameters and see how the probability of success changes for various withdrawal rates.
Our approach for obtaining a better idea about the implications of lower asset returns onsustainable withdrawal rates is to replicate the methodology of Bengen (2006a) using 109 yearsof financial market data for 17 developed market countries. The author uses this multi-country
data not because of a belief that the United States is directly comparable to the other countries, or
because of a bearish outlook for the US, but rather as a way to consider sustainable withdrawal
rates under different historical circumstances, acknowledging that asset returns in the US may
simply be unable to continue the blazing path that past investors could enjoy. Though an
acceptable interpretation of the results is also that they provide guidance to prospective retirees in
17 different countries, the intention is to apply them more as 17 potential scenarios for what aprospective retiree in the US may face in the future. Though not all readers may accept the notionthat the experiences of other countries are relevant to the United States, these findings do suggestthat advisers and retirees should more critically consider the safety of the 4 percent withdrawal
rule. Altogether, this paper argues that conclusions reached by studies using the SBBI data may
be providing overly optimistic estimates of future sustainable withdrawal rates.

2. Methodology and Data
This paper primarily uses the Dimson, Marsh, and Staunton (DMS) dataset commerciallyavailable from Ibbotson Associates and Morningstar. For each of 17 developed market countries,
annual data is available for stocks, bonds, bills, and inflation for the 109 years between 1900 and2008. Results with this data are compared to those based on the Stock, Bonds, Bills, and Inflation(SBBI) data that is commercially available from Ibbotson Associates for the United States on amonthly basis since 1926. While the SBBI data includes two series for stocks (large and small
capitalization stocks) and three series for bonds (intermediate-term government bonds (ITGB),
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long-term government bonds (LTGB), and long-term corporate bonds (LTCB)), the DMS data
provides one series for each asset. Detailed definitions and sources for the DMS data are provided
in Dimson, Marsh, and Staunton (2002). With this data, the paper uses a historical simulations
approach, considering the perspective of individuals retiring in each year of the historical period.
Because the assumed retirement duration is 30 years and the data ends with 2008, retirements
take place between 1900 and 1979. There are 80 retirement dates for each of 17 countries, or
1,360 retirement episodes.
For each country and in each retirement year, the paper optimizes across the threedomestic financial assets, finding the fixed asset allocation that provides the highest sustainable
withdrawal rate over the next 30 years. There are 5,151 possible asset allocations, which consistof all possible combinations of each asset in one percentage point increments. Other important
assumptions include:
1. SAFEMAX: Bengen (2006a) describes SAFEMAX as the highest withdrawal rate that would
have provided a sustained real retirement income without being exhausted for the required
number of years during every year of the historical period. In other words, it is the maximum
sustainable withdrawal rate from the worst-case retirement year. This paper uses Bengen's
SAFEMAX concept.
2. Perfect Foresight Assumption: Much of the analysis provides a best-case scenario forincreasing the SAFEMAX by assuming in each year for each country that the new retiree has
perfect foresight to choose the fixed asset allocation that maximizes the withdrawal rate for thesubsequent 30 years. Obviously the assumption is not realistic and artificially inflates the
SAFEMAX, but even so, the traditional 4 percent withdrawal rule will still perform surprisingly
poorly. This assumption avoids accusations that a poor-performing asset allocation was chosen todiscredit the 4 percent rule. To provide some idea about this assumption, we will also include abrief discussion for how the results change for a specific portfolio mixed evenly between stocks
and bonds.
3. Portfolio Administrative fees: This assumption is rather vexing, but to be consistent with moststudies (Ameriks, Veres, and Warshawsky (2001) and Pye (2001) are two notable exceptions), we
assume that mutual fund companies and financial planners do not deduct any fees from theportfolio. We do this in order to make clear that the lower SAFEMAXs we find are due to factors
other than such fees. To provide some idea about the potential impact of administrative fees, notethat Bengen (2006a) finds a SAFEMAX of 4.15 percent for a portfolio with 50 percent largecompany stocks and 50 percent intermediate-term government bonds. If we include average
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annual administrative fees of 1.6 percent for stock mutual funds and 1.2 percent for bond mutual
funds(these

are

close

to

the

averages

foundby Morningstar

in

2008

- see

http://news.morningstar.com/PDFs/Appendix_0409.pdf), which we deduct at the end of each year
before rebalancing, the SAFEMAX for this portfolio is reduced by 0.66 percentage points to 3.49
percent. Looking to the future, index funds and ETFs do provide very low administrative fees,
making it more reasonable to ignore them, but retirees who invest in costly mutual funds or who
pay fees to financial planners must realize the strong impact it will have on their sustainable
withdrawal rate.
4. Portfolio rebalancing and taxes: Like much of the literature, we assume that the investment
portfolio will be rebalanced at the end of each year to maintain the targeted asset allocation, andwe do not attempt to collect taxes. This assumption is appropriate for withdrawals from a RothIRA, but must be considered as a pre-tax withdrawal rate for taxable accounts.
5. Withdrawal amounts and pattern of activities during the year: We assume the annual accountwithdrawal is set as a percentage of the accumulated portfolio at the retirement date. In eachsubsequent year, the withdrawal amount is adjusted by the previous year's inflation. Withdrawals
are made at the start of each year. The remaining account balance, divided among the three assets,then grows or shrinks by that year's asset returns, and at the end of the year the portfolio isrebalanced to the target asset allocation. If the withdrawal drops the account balance to zero atany point before the 30th year, the withdrawal rate was too high and the portfolio failed to besustainable.

3. Results
Tables 1 and 2 provide summary statistics for the 17 countries in the DMS dataset for theyears 1900 to 2008, and for the US SBBI data for the years 1926 to 2009. These statistics areprovided for the real returns after removing the effects of inflation. Before proceeding further,
these tables already serve to illustrate how the United States enjoyed relatively favorable asset
returns from an international perspective. For stocks, only 3 countries enjoyed a higher
compounded real return than the United States' 6.01 in the DMS data and 6.6 in the SBBI data.
Surprisingly, given the high values, the US could also enjoy relatively low volatility for stock
returns, as only 4 countries experienced standard deviations below the 20.43 percent of the UnitedStates. Australia boasts the distinction of being the only country with both a higher return (thehighest of all) and lower volatility than the US, while Canada enjoyed the lowest stock volatility

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Revised versionof any country. Another benefit for the United States was the low correlation between stocks andbonds, which will reduce the overall risk of portfolios that include these assets.
// Table 1 About Here //Table 2 provides the details of a similar success story for fixed income assets andinflation in the United States. First, for bonds, only 3 countries enjoyed higher compoundedannual real bond returns than the United States. Of these, only Sweden experienced higher stockand bond returns than the US. Equally important, only two countries enjoyed less volatility for
their bond returns. Switzerland is the one country with both higher returns and lower risks for its
bonds. As for the SBBI data, all three bond series showed higher compounded returns than the
US bonds in the DMS data, while two of the bond series also experienced less volatility. As forthe real returns on bills, there were 6 countries with higher compounded real returns, but thestandard deviation for bills in the United States was the lowest of any country. As well, only two
countries experienced lower compounded average inflation than the 2.98 percent value in the US.
// Table 2 About Here //These two tables showed that conditions were quite favorable, relatively speaking, for theUnited States. The country consistently enjoyed among the highest returns and lowest volatilities
for stocks, bonds, bills, and inflation. As a consequence, simulations using US data should
provide for relatively high sustainable withdrawal rates from retirement savings.
// Figure 1 About Here //Figure 1 provides a historical perspective on the maximum withdrawal rate that would
have sustained inflation-adjusted withdrawals for a retirement duration of 30 years using DMS
data for the United States. It demonstrates the perfect foresight assumption visually, as the
optimal fixed asset allocation for each retiree fluctuates from year to year. For instance, a newretiree in 1905 would have done best with an allocation of 95/1/4 for stocks/bonds/bills, while thenext retiree one year later would find that 53/0/47 provides the highest sustainable withdrawal
rate. The stock allocation fell to a low of 24 percent for the 1929 retiree, but in fact, 43 of the 80
retirees would choose stock allocations of 95 percent or more to maximize their withdrawal rates.
With this perfect foresight assumption, the SAFEMAX is 4.02 percent, which occurred in 1969.
The asset allocation for the SAFEMAX is 57/6/37 for stocks/bonds/bills.
// Table 3 About Here //Table 3 summarizes the information about sustainable withdrawal rates provided in
Figure 1 for each of the 17 countries. The SAFEMAX exceeds 4 percent in only 4 of the 17
countries: Canada, Sweden, Denmark, and the United States. The US is ranked fourth, with the7

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previously mentioned 4.02 percent SAFEMAX occurring in 1969. For the US, the remainingcolumns can be understood as follows. The 10th percentile column value of 4.7 percent meansthat for the 80 retirement years in the US, 4.7 percent would have worked 90 percent of the time,and a slightly larger withdrawal rate would have resulted in failures 10 percent of the time (8 ofthe 80 retirement years). The next columns reveal more about the situation for a retiree using a 4
percent withdrawal rate and a 5 percent withdrawal rate. In the US, the 4 percent withdrawal rate
failed in zero percent of cases and always provided 30 years of withdrawals, while a 5 percent
withdrawal rate would have led to failure in 22.5 percent of cases. In the worst-case scenario, theretiree’s account would have been depleted after only 20 years with a 5 percent withdrawal rate.
As for the other countries in Table 3, the most unfortunate retiree of all was a Japaneseperson retiring in 1940, whose SAFEMAX was a miserably low 0.47 percent. Six countries
experienced SAFEMAX values below 3 percent.

With the 10th percentile column, retirees

accepting a 10 percent chance for failure could enjoy a withdrawal rate above 4 percent in 9
countries, but 5 countries still found these withdrawal rates to be under 3 percent even with theallowed chance for failure. For the columns showing what happens specifically when a 4 percent
withdrawal rate is used, 9 countries experienced failures in 5 percent or less of cases, but then alarge jump occurs so that the best to be hoped for was failure in 25 percent of cases. In Italy,
failures occurred in 62.5 percent of cases, and in Japan, withdrawals were sustainable for only 3
years in the worst-case scenario. Meanwhile, with a 5 percent withdrawal rate, Canada was the
only country where failures occurred in less than 10 percent of cases.
// Figure 2 About Here //Figure 2 provides a different perspective by showing the maximum sustainable
withdrawal rates across the distribution of stock allocations for each country. This figure
maintains an aspect of the perfect foresight assumption, as for each stock allocation the
breakdown between bonds and bills that provides the highest withdrawal rate is chosen. The
distribution for the United States is shown with a thick red line. Occasionally, because of the way
the figure is constructed, a country's maximum is slightly less than its SAFEMAX in Table 3. The
reason is that for each stock allocation, the maximum sustainable withdrawal rate is found foreach retirement year. The plotted point is the minimum of these maximum sustainable withdrawal
rates across the 80 retirement years. The plotted maximum will be smaller than the SAFEMAX incases where the particular asset allocation that produced the SAFEMAX actually resulted in alower sustainable withdrawal rate in some other retirement year (but was not the other year's
SAFEMAX).
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That being said, Figure 2 provides two very interesting results. First, for stock allocations
between 30 and 90 percent, the United States enjoyed higher sustainable withdrawal rates than
any country except for Canada. For the US, the maximum occurs at 57 to 60 percent stocks, but
unlike many of the countries that show a much more pointed hump, the maximum is only slightly
less for stock allocations between about 30 and 80 percent. Maximums for Sweden and Denmark
come close to the US only for a few specific asset allocations. The second interesting result fromthis figure relates to the stock allocations associated with each country's maximum. Switzerland,with 19 percent stocks, is the only country where the maximum occurs exclusively with a stock
allocation under 48 percent. Meanwhile, 9 of the 17 countries experience maximum withdrawal
rates with stock allocations between 48 and 75 percent, and 7 countries have stock allocations thatare exclusively 80 percent or higher. These include 100 percent stock allocations in South Africa,
France, and Japan. SAFEMAX does not obtain its safety from conservative asset allocations, andthe findings from this figure suggest that from an international perspective, stock allocations of atleast 50 percent during retirement should be given careful consideration.
Finally, to provide insight about the role of the perfect foresight assumption, consider aspecific asset allocation of 50/50 for stocks and bonds, a common choice for withdrawal ratestudies. A table for this allocation is not shown, but a 4 percent withdrawal rate is not safe whenusing the SAFEMAX criterion for any country in the DMS data. Indeed, the original Bengen(2006a) result is the only case with a SAFEMAX above 4 percent. For the DMS data, Canada's
SAFEMAX of 3.94 is the highest, followed by the US and Denmark with 3.66. Even with awillingness to accept a 10 percent chance of failure, a withdrawal rate of over 4 percent waspossible only in 4 countries.

4. Conclusions
With the SAFEMAX criterion, and from an international perspective, the 4 percent real
withdrawal rule has simply not been safe. With the perfect foresight assumption, only 4 of 17
countries had a SAFEMAX above 4 percent, while a 50/50 allocation for stocks and bonds led tozero successes for the 17 countries in the DMS data. Granted, researchers have demonstrated that
including more financial assets, using dynamic rules to adjust withdrawals to market conditions,and changing rebalancing strategies can all serve to increase safe withdrawal rates, and thesemodifications have not been incorporated here. As well, some of the worst outcomes wereconnected with World Wars I and II, and we can hope that such devastating wars will never
happen again. On the other hand, the paper does already provide two important advantages to
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increase the SAFEMAXs, namely the perfect foresight assumption and the lack of administrativeand planner fees.
These findings may be rather frightening. After all, who but the wealthiest could possibly
save enough to live comfortably from the global SAFEMAX withdrawal rate of 0.47 percent?
The results assume that historical patterns in each country will prevail in the future, though fromthe perspective of a US retiree, the issue is whether the future US will experience the same asset
return patterns as the past US, or whether Americans should expect some kind of mean reversion
that could lower asset returns to levels more in line with what many other countries haveexperienced. It may be tempting to hope that asset returns in the twenty-first century UnitedStates will continue to be as spectacular as in the last century, but Bogle (2009) cautions hisreaders, "Please, please please: Don't count on it" (page 60).

References
Ameriks, John, Robert Veres, and Mark J. Warshawsky. 2001. “Making Retirement Income Lasta Lifetime." Journal of Financial Planning 14, 12 (December) 60-76.
Bengen, William P. 1994. “Determining Withdrawal Rates Using Historical Data.” Journal of
Financial Planning 7, 4 (October): 171-180.
Bengen, William P. 2006a. Conserving Client Portfolios During Retirement. Denver: FPA Press.
Bengen, William P. 2006b. "Baking a Withdrawal Plan 'Layer Cake' for Your Retirement
Clients." Journal of Financial Planning 19, 8 (August): 44-51.
Blanchett, David M., and Brian C. Blanchett. 2008. "Data Dependence and Sustainable Real
Withdrawal Rates." Journal of Financial Planning 21, 9 (September): 70-85.
Bogle, John C. 2009. Enough: True Measures of Money, Business, and Life. Hoboken, New
Jersey: John Wiley and Sons.
Cooley, Philip L., Carl M. Hubbard, and Daniel T. Walz. 1998. “Retirement Savings: Choosing a
Withdrawal Rate That Is Sustainable.” American Association of Individual Investors
Journal 20, 2 (February): 16-21.
Dimson, Elroy, Paul Marsh, and Mike Staunton. 2004. "Irrational Optimism." Financial Analysts
Journal 60, 1 (January/February): 15-25.
Dimson, Elroy, Paul Marsh, and Mike Staunton. 2002. Triumph of the Optimists: 101 Years of
Global Investment Returns. Princeton: Princeton University Press.
Pye, Gordon B. 2001. "Adjusting Withdrawal Rates for Taxes and Expenses." Journal of
Financial Planning 14, 4 (April): 126-136.
Scott, Jason S., William F. Sharpe, and John G. Watson. 2009. "The 4% Rule At What Price?"
Journal of Investment Management 7, 3 (Third Quarter).

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Table 1
Summary Statistics for Real Equity Returns

Australia
SwedenSouth Africa
United States
CanadaUnited Kingdom
The Netherlands
Denmark
Switzerland
Japan
NorwayIrelandSpain
FranceGermany
Italy
Belgium
US SBBI S&P 500
US SBBI Small-Cap

Geometric
Mean
7.26
7.23
7.07
6.01
5.87
5.09
4.65
4.62
4.1
3.79
3.77
3.54
3.53
3.17
2.8
1.89
1.86

Arithmetic
Mean
8.89
9.59
9.32
8.05
7.25
6.98
6.79
6.44
5.96
8.54
6.76
6.2
5.77
5.72
7.94
6
4.18

Standard
Deviation
18.14
22.93
22.72
20.43
17.03
20.06
21.75
20.71
19.92
30.05
27.31
23.17
22.17
23.33
32.5
29.21
22.46

6.60
8.59

8.64
13.16

20.51
32.14

Correlation
BetweenStocks and
Bonds
0.28
0.18
0.44
0.17
0.16
0.53
0.08
0.48
0.37
0.38
0.19
0.5
0.35
0.38
0.44
0.4
0.4

Note: Red coloring indicates value is higher than the US DMS value for means, andlower for standard deviations and correlations.
Source: Own calculations from Dimson, Marsh, and Staunton (1900 - 2008) data
and SBBI (1926 - 2009) data.

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Table 2
Summary Statistics for Real Bonds and Bills, and for Inflation
Real Bonds

Real Bills

Inflation

Geometric
Mean

Arithmetic
MeanStandard
Deviation

Geometric
MeanStandard
Deviation

Geometric
MeanStandard
Deviation

Denmark
Switzerland
SwedenUnited States
CanadaSouth Africa
NorwayAustralia
United Kingdom
The Netherlands
Spain
Ireland
Belgium
FranceJapan
Germany
Italy

3.04
2.59
2.51
2.12
2.1
1.77
1.69
1.52
1.39
1.37
1.36
1.08
-0.14
-0.2
-1.19
-1.62
-1.73

3.66
2.88
3.23
2.59
2.62
2.3
2.43
2.36
2.26
1.79
2.04
2.09
0.6
0.73
1.55
0.73
-0.43

11.72
7.88
12.48
10.03
10.41
10.44
12.29
13.26
13.75
9.46
11.82
14.76
12.09
13.12
20.28
15.49
14.17

2.29
0.8
1.95
0.97
1.64
1.02
1.18
0.67
1.05
0.72
0.36
0.67
-0.33
-2.85
-1.98
-0.32
-3.69

6.07
5.05
6.85
4.68
4.92
6.3
7.25
5.47
6.33
5
5.92
6.69
8.12
9.65
14.05
10.15
11.64

3.93
2.34
3.6
2.98
3.07
4.92
3.77
3.88
3.95
2.95
5.9
4.37
5.39
7.32
7.17
4.87
8.58

6.17
5.29
7.33
4.88
4.65
7.58
7.4
5.3
6.64
4.8
6.95
6.98
9.04
12.38
42.08
15.21
35.29

US SBBI ITGB
US SBBI LTGB
US SBBI LTCB

2.25
2.34
2.76

2.48
2.87
3.18

6.87
10.69
9.51

0.63

3.92

3.01

4.20

Note: Red coloring indicates value is higher than the US DMS value for means (except inflation), andlower for standard deviations. For Germany, inflation statistics are calculated after excluding two yearsof hyperinflation in 1921 and 1922. For the SBBI data, ITBG represents intermediate-term government
bonds, LTGB represents long-term government bonds, and LTCB represents long-term corporate bonds.
Source: Own calculations from Dimson, Marsh, and Staunton (1900 - 2008) data and SBBI (1926 2009) data.

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Figure 1

Note: Assumptions include perfect foresight, a 30-year retirement duration, no administrative fees,
annual inflation adjustments for withdrawals, and annual rebalancing.
Source: Own calculations from Dimson, Marsh, and Staunton (1900 - 2008) data.
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Table 3
Sustainable Withdrawal Rates with Perfect Foresight Assumption
For Retirees, 1900 - 1979

CanadaSwedenDenmark
United States
South Africa
United Kingdom
Australia
Switzerland
The Netherlands
Ireland
NorwaySpain
Italy
Belgium
FranceGermanyJapan

Withdrawal Rate =4%

Withdrawal Rate =5%

SAFEMAXSAFEMAXYear

10th
Percentile# Years in
Worst
Case

% Failures
Within 30
Years# Years in
Worst
Case

% Failures
Within 30
Years

4.42
4.23
4.08
4.02
3.84
3.77
3.68
3.59
3.36
3.28
3.13
2.56
1.56
1.46
1.25
1.14
0.47

1969
1914
1937
1969
1937
1900
1970
1962
1941
1911
1915
1957
1944
1911
1943
1914
1940

5.04
4.92
4.6
4.7
4.88
4.17
4.91
4.08
4.14
3.41
3.46
3.07
2.61
1.78
2.62
1.52
0.54

30
30
30
30
27
26
25
26
22
21
20
19
6
11
7
9
3

0.0%
0.0%
0.0%
0.0%
1.3%
3.8%
2.5%
5.0%
2.5%
25.0%
32.5%
36.3%
62.5%
40.0%
42.5%
25.0%
37.5%

23
20
20
20
17
17
18
18
17
15
13
15
5
9
7
8
3

8.8%
11.3%
28.8%
22.5%
11.3%
27.5%
10.0%
40.0%
37.5%
45.0%
61.3%
68.8%
76.3%
68.8%
71.3%
41.3%
40.0%

Note: Assumptions include perfect foresight, a 30-year retirement duration, no administrative fees, annual
inflation adjustments for withdrawals, and annual rebalancing.
Source: Own calculations from Dimson, Marsh, and Staunton (1900 - 2008) data.

14

GRIPS Research Center

Discussion Paper: 10-12
Revised version

Figure 2

Note: Assumptions include perfect foresight for each stock allocation, a 30-year retirement
duration, no administrative fees, annual inflation adjustments for withdrawals, and annual
rebalancing.
Source: Own calculations from Dimson, Marsh, and Staunton (1900 - 2008) data.
15