Today I wanted to do another yearly update post. This time I’ll refresh the worst times to retire in history with data from 2013 which adds another year in the retirement story of the 5 ‘unluckiest’ retirees in history. See here for last year’s update.
As I said in last year’s update:
The worst time to retire since 1929 turns out not to be the Great Depression, as most people would believe. In fact, the worst time to retire in history was 1966, followed by 1965, then by the Great Depression year of 1929. The SWR (safe withdrawal rate) of 4.39% for a 70% stock 30% bond portfolio is solely determined by the retirement results of the 1966 retiree. Of course, we care about the present not the past. How are the year 2000 and the year 2008 retiree doing compared to those who retired during these worst of times? The table below (click for a larger image) shows the year by year progress for 5 retirees; the 1929 retiree, the 1965 retiree, the 1966 retiree, the 2000 retiree, and the year 2008 retiree. It uses a starting portfolio value of $1M, with a 70% stock 30% bond portfolio, which yielded a max SWR of 4.39%.
Here is the updated table with 2013 data.
After 14 years, the year 2000 retiree is doing pretty well compared to history. It may not seem that way. The year 2000 retiree’s portfolio is down to $787K and the $61K yearly withdrawal is now 7.7% of the portfolio. CWR is defined here. But that is way better than the 1929, 1965, or 1966 retiree, all of whose portfolios survived a 30 year retirement. The year 2008 retiree is doing even better. After 6 years, despite the financial crisis, portfolio value is back to where it started and so is the current withdrawal rate. This is a much better situation than any of the other 4 example retirees.
In short, both our ‘unlucky’ modern retirees, 2000 and 2008, are doing just fine. With respect to history they are in a better position than the three worst retirement periods in history (1929, 1965, 1966). The 4% SWR rule looks to be just fine for yet another year.
P.S. I only discuss the worst retirement periods in history and the worst current periods, 2000 and 2008. This means that any other starting year in retirement has better results than that shown here. For example, the 2001 retiree would be better off than the 2000 retiree.
4 Comments
Jeff Mattson · May 13, 2014 at 11:13 am
Wonderful positive support! I haven’t wavered yet, but sometimes I begin to question myself, especially when those around me continually question my choices and refer to how the 2 recent crashes indicate times are a changing. In hindsight, it is obvious I should have (and could have) done what you show, but I was like a lost puppy.
J Scott Wharton · May 14, 2014 at 8:08 am
Thanks for the update, If only your middle name was Nostradamus and you could have a prediction for a 2014 retiree! Like your mind.
libertatemamo · May 14, 2014 at 10:05 am
As the always insightful Yogi Bera once said…it’s tough to make predictions especially about the future.
When you retire matters a lot more than you think | Investing For A Living · October 13, 2014 at 10:29 am
[…] In fact it looks like the 1999 or the 2000 retiree are proceeding to a successful retirement (see here for the latest data). But it was dicey those first 10 years. And what about those who are […]
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