Updated Trinity Study for 2022 – More Withdrawal Rates!

By Baptiste Wicht | Updated: | Financial Independence

(Disclosure: Some of the links below may be affiliate links)

Would you like to know precisely which withdrawal rate is safe and will sustain your lifestyle for a very long time?

You will find the answer in this article with updated results from the Trinity Study! This study researched different withdrawal rates for retirement. Although the original research was not about early retirement, it is often referred to in the Financial Independence and Retire Early (FIRE) movement!

However, there are two caveats to the original study. First, they are only covering the period until 1995. And then, they are not covering more than thirty years of retirement. Thirty years is not enough for some people wanting to retire early.

Therefore, I reproduce the original study’s results with recent data, all the way to 2021! And I extended the data back to 1871. This makes for much more data than the original study.

I have also considered periods as long as 50 years. It means many more withdrawal simulations than the original study.

In this article, you will find how I did it and all the results I have gathered from this data!

The Trinity Study

I have already talked at great length about the Trinity Study. It is an excellent research paper done by three professors from Trinity University.

Their research paper’s goal was to see which withdrawal rates people should use to sustain a particular lifestyle for up to 30 years. It is important to note that the original research was not about early retirement but official retirement.

They tested the success rates of withdrawal rates from 3% to 12%. Also, they tested portfolios with between 0% and 100% stocks by jumps of 25%.

The authors also took inflation into account in the results. Indeed, it is interesting to compare the results with and without inflation. Finally, they also provided the terminal values of the portfolio.

I wrote a detailed article about the Trinity Study if you want more information.

The 4% Rule (of Thumb)

The Trinity Study is the source of the 4% Rule. This rule states that if you only withdraw 4% of your initial portfolio every year, you can sustain your lifestyle for a very long period. And your withdrawal is adjusted for inflation every year.

Some people believe that the original study shows that this will sustain forever. But this is not what the original research was about. They only tested simulations for up to 30 years.

It is better to call it The 4% Rule of Thumb. Because if you plan to retire very early, you will probably need a lower withdrawal rate. Moreover, your withdrawal rate will depend on your portfolio and asset allocation to stocks and bonds.

Why did I do it again?

If the study is excellent, why did I want to redo it? I have several reasons for that.

First, I wanted to see how this was working with recent stock market returns. The original study was only covering years up to 1995. I wanted to have more recent data. I wanted to ensure the results were holding with more recent stock market behavior. So this simulation will cover returns until the end of 2021!

Secondly, the original study only covered up to thirty years of retirement. I wanted to ensure that the portfolio could sustain withdrawals for extended periods. For people retiring early, I think that 50 years is not unreasonable.

Finally, I have to admit that I like to write code. So it was cool to write code related to this blog. And being a big geek, now I can run many simulations with the data I want. Overall, it was a lot of fun preparing the data for this article.

Ultimately, I want to extend the Trinity Study to the European markets. It will be challenging to obtain the data. But I will try to find it for as many years as possible.

How I redid the Trinity Study

My simulation uses monthly withdrawals. Most people in retirement will withdraw money monthly. It is also possible to withdraw money at the end of the year instead. But I believe that it is not common.

I have calculated all the returns monthly. Doing that makes the results much more accurate than doing it yearly. And the monthly withdrawal is updated with inflation every month as well. Every possible starting month in the available data is tested.

For this simulation, I have not done any rebalancing. For more information, I have compared different rebalancing methodologies for retirement.

Withdrawals are based on the current allocation. For instance, if your base allocation to stocks is 60%, but your current allocation is 80%, 80% of the withdrawal will be taken from stocks. I may use different withdrawal techniques in the future.

Based on this simulation, I collected the same results as the original study: success rates without inflation, success rates with inflation, and terminal values.

Success Rates of the Trinity Study

I start the simulation with the entire data from 1871 to 2021.

In this simulation, success is when your portfolio does not run out of money before the end of the simulation. For instance, if we simulate for 20 years and end up with one dollar after 20 years, it is a success. This is a failure if the portfolio runs out of money before that (could be in the first year or the nineteenth year).

So, the success rate is the percentage of the months that end up with success. Obviously, the higher the success rate, the better the results are.

Let’s see what success rates we have when we ignore inflation. Let’s start with 20 years since I do not think anybody will care about a ten-year-long simulation. I will begin at a 3% withdrawal rate and go up to 12%, increasing by 1% at a time.

Updated Trinity Results - 20 years - 1871 - 2021 - No Inflation
Updated Trinity Results – 20 years – 1871 – 2021 – No Inflation

We can see what we already expect:

  • Increasing the withdrawal rate decreases the chances of success
  • Any withdrawal rate higher than 8% does not make sense in the long term, even without inflation.
  • A small allocation of bonds can help with lower withdrawal rates
  • Generally, a 100% stocks portfolio will perform better than the other portfolios.

Let’s see what happens when we push the simulation to 30 years.

Updated Trinity Results - 30 years - 1871 - 2021 - No inflation
Updated Trinity Results – 30 years – 1871 – 2021 – No inflation

We can see that increasing the number of years decrease the likelihood of success. It is logical since you are more likely to run out of money.

With 30 years of retirement without inflation, a 6% withdrawal rate with a significant allocation to stocks still makes a lot of sense!

Taking Inflation into Account for retirement

But, let’s get serious. It is much better to take inflation into account in our simulation! Let’s see again with 20 years to compare the results:

Updated Trinity Results - 20 years - 1871 - 2021 - U.S. Inflation
Updated Trinity Results – 20 years – 1871 – 2021 – U.S. Inflation

As we can see, inflation causes a significant hit to our chances of success! Before inflation, an 8% withdrawal rate made some sense. Now 6% is the limit. And even 6% has a barely over 75% chance of success!

Let’s see what happens with 30 years.

Updated Trinity Results - 30 years - 1871 - 2021 - U.S. Inflation
Updated Trinity Results – 30 years – 1871 – 2021 – U.S. Inflation

We can now see that anything higher than a 6% withdrawal rate is hazardous, with a less than 75% chance to succeed even with 100% stocks.

More withdrawal rates

Since we see that reasonable withdrawal rates are in the range of 3% to 6%, let’s try more withdrawal rates. I have simulated increments of 0.1% of withdrawal rates.

Updated Trinity Results - 30 years - 1871 - 2021 - Inflation - More Rates
Updated Trinity Results – 30 years – 1871 – 2021 – Inflation – More Rates

With a large stock allocation, withdrawal rates between 3% and 4% are very safe. Some people would even dare use withdrawal rates of about 4.5%. But even a portfolio with 100% stocks has only an 85% chance of success after 30 years with 4.5%.

Longer retirement time

One of the caveats of the original study is that they stopped at 30 years. Let’s run the same simulation again but with 40 years this time.

Updated Trinity Results - 40 years - 1871 - 2021 - Inflation
Updated Trinity Results – 40 years – 1871 – 2021 – Inflation

After 40 years, we are starting to see lower success rates, even for most people’s 4% withdrawal rate. Unless you have 100% of stocks, your success rate will be less than 90%.

Let’s see what happens with more than 50 years.

Updated Trinity Results - 50 years - 1871 - 2021 - Inflation
Updated Trinity Results – 50 years – 1871 – 2021 – Inflation

As expected, we see lower success rates. But it is still not bad at all with reasonable withdrawal rates. A 100% allocation to stocks and a 3.5% withdrawal rate still have more than a 98% success rate.

It shows that the study’s original conclusion can still hold for a much more extended period than 30 years. It is excellent news!

Updated Terminal Values

Another interesting thing from the study was that they also compared the terminal values of the different withdrawal rates and portfolios.

So let’s see the terminal values of a 1000$ portfolio after 30 years. I did the simulation for a portfolio of 100% Stocks. For the sake of display, I have reduced the number of withdrawal rates.

Terminal Value of a 1000$ portfolio - 30 Years - 1871 - 2021
Terminal Value of a 1000$ portfolio – 30 Years – 1871 – 2021

I did not show the minimum values. Indeed, they are always zero. If the chance of failure exceeds zero, the minimum value will be zero.

However, the average and median values are quite remarkable. We will focus on the median since it is generally more representative than the average.

For a withdrawal rate of 3.5%, which is my current target, the median terminal value after 30 years is about 6700 dollars! Not only did your portfolio sustain your lifestyle, but it also increased six-fold! Let me repeat this. After 30 years of doing nothing but withdrawing money, you have six times more money than when you started!

The maximum values do not mean a lot. But it is crazy to see that after 30 years, you could have about 30 times more money than when you started! And this is with a 3.5% withdrawal rate!

Let’s see what happens when we extend to 40 years.

Terminal Value of a 1000$ portfolio - 40 Years - 1871 - 2021
Terminal Value of a 1000$ portfolio – 40 Years – 1871 – 2021

We can see that the results are comparable. However, all the values are significantly higher. The numbers are all about twice higher. On average, your retirement money will double during the ten additional years. So, even though you are not contributing any more money and living from it, your portfolio will double in 10 years. How cool does that sound?

The success rate is not everything

There is something important with these measurements: the success rate does not tell the entire story. For instance, for you, which of these two scenarios is better:

  1. 98% to last 50 years, but a chance of running out after ten years
  2. 96% to last 50 years, but a chance of running out after 48 years

For me, the second scenario is better. You do not want to have a chance of failing after only ten years if you are planning for 50 years. But if it fails after 48 years, you have many years to make some adaptations.

So, another quite important metric is the worst duration of a scenario. This means after how many months can you see the first failure can happen.

For reference, here are the success rates of each portfolio for 50 years and different withdrawal rates:

Success Rate for a simulation of 50 years - 1871 - 2021
Success Rate for a simulation of 50 years – 1871 – 2021

And now, here are the worst durations for each of these portfolios:

Worst Duration for a simulation of 50 years - 1871 - 2021
Worst Duration for a simulation of 50 years – 1871 – 2021

If we only look at the first graph, the conclusion is that having a higher allocation to stocks is always better. But if we look at the second graph, 100% stocks is the worst one!

So what does this mean: you need a balance in your portfolio. Bonds will significantly reduce the chances of your portfolio going to zero too early. This does not mean that you should optimize for the highest worst duration either. Because if your highest duration is 40 years, but you have only a 50% chance of reaching 50 years, this is gambling, not planning.

So balance is essential. While stocks will increase your success, stocks are more subject to sequences of return risks.

How did I do it?

You can find my code and my data on Github. Everything is available to share as much as possible!

I wrote the entire program in C++. I used this programming language because it is my favorite! And it is blazing fast! I have not especially optimized my code, and it takes less than a second to generate thousands of simulations.

If you are not a coder, I also have an online FIRE calculator that can do most of the calculations presented here.

My U.S. data s based on the data made available by Big ERN in its Safe Withdrawal Rate series. It is a good dataset that has been tested several times already. Big ERN made all this available for free. I am very thankful for his work! I have completed its data with the missing years using the same methodology.

If you want to use the graphs in this article, I would ask that you cite this article as the source of the image!

Future of the series

It was fascinating to reproduce these results. And it was very insightful as well. I have learned many things from the results. It is great to see the confirmation that the original conclusions hold for more than 50 years.

And it also shows that my current withdrawal rate (3.5%) is a safe bet. I may switch to 3.75% in the future. I will have to run more simulations.

Talking of simulations, I have run a few more simulations with the same idea:

  1. Trinity Study Results with Swiss Stocks
  2. Withdrawal rates and low-yield bonds
  3. When should you rebalance your portfolio?
  4. Does the Trinity Study work in recent years?
  5. How often should you withdraw money?

Since I plan to make a few more articles like these with more simulation, I would like to get your point of view on this article! Please let me know what you think in the comments below! What should I improve?.

What do you think of these results? Would you like me to run more simulations like this? Do you have ideas on what kind of simulations I should run next?

Conclusions

With all these results, we can have several important conclusions.

First, the paper’s original conclusions still hold even with much more data taken into account. And it still stands accurate up to 2021! It is excellent since it shows that the 4% rule of thumb still works!

If you increase the simulation time to more than 30 years, a 4% withdrawal rate is no longer safe. With 50 years of retirement, you have a 90% chance of success with a 4% withdrawal rate at most. A withdrawal rate of around 3.5% would be safer for most people.

If you want real chances of success, you will need more than 50% of your portfolio allocated to stocks. The stocks are what allow us to fight inflation and cover the withdrawal rate year after year.

If you choose a reasonable withdrawal rate, you will likely end up with much more money than when you started! For instance, a 3.5% withdrawal rate over 30 years with 100% stocks would leave you about six times more money than when you started!

For information about the original study, read my detailed article about the Trinity Study.

If you want to start investing to become Financially Independent, you will be interested in my guide on how to get started in the stock market.

Baptiste Wicht is the author behind thepoorswiss.com. In 2017, he realized that he was falling into the trap of lifestyle inflation. He decided to cut on his expenses and increase his income. This blog is relating his story and findings. In 2019, he is saving more than 50% of his income. He made it a goal to reach Financial Independence. You can send Mr. The Poor Swiss a message here.

158 thoughts on “Updated Trinity Study for 2022 – More Withdrawal Rates!”

  1. Very nice article, as all the article you write especially for us that live in Switzerland. You made a great work here.
    I would like to understand is if the stock/bond rate is related to the starting date of the retirement? Can I have a 100% stock in my portfolio untill the retirement to have the better yield and switch to 90/10 in the retirement date to have the best duration?

    Many thanks!

    1. Thanks Marco :)

      Yes, that’s only starting at retirement. You could have a 100% stocks portfolio for all the accumulation phase (before retirement) and then switch to 90/10 (or anything really) at retirement. And then obviously, you will have the average performance of the 90/10 for your retirement.

  2. thanks for your work. what benchmarks are you using for stocks and bonds? would vti and a total bond fund do?

  3. Hi

    Really impressive work, many thanks for sharing. Complete admiration.
    I am a fan of the permanent portfolio with gold and cash in addition to bonds and stocks as it absorbs volatility and reduces the sequence return risk. It would be very nice if you could include this in your calculation, especially since 1970 that gold was left to free trade.

    Many thanks again! Have suscribed to your blog

    1. Hi Dani,

      Thanks for your kind words :)

      I am thinking of adding cash returns to the calculator and my data. That way, I will be able to do other simulations. It’s a good idea to try to simulate the permanent portfolio if I can.
      Thanks for the suggestion.

  4. Very nice!
    For testing the durations, to me it would be interesting to see the results for stocks/cash allocations instead of stocks/bonds.
    Possibly this could be more realistic for the next decades.

    1. Hi Mannigfalter

      That’s an interesting thought! It may be indeed more interesting in the next decade. But in the past, it would not have been as good.
      I will try to add this to my tool and see what goes out.

  5. Hi!

    Fantastic work. And I am always happy when something someone likes a lot doing also creates value for others. This is definitely the case for me, and I believe you enjoy it too, so it’s a success story :)

    Now I do have a question. Let’s forget for a moment about inflation. In this case, if you have a constant withdrawal, and the value of the portfolio is (let’s say in average) increasing, the withdrawals are, in fact, increasing in absolute value as well. To maintain a way of life without considering inflation, this means that you are actually withdrawing every month a bit more than what you actually need. In other words, you would start with x% withdrawal, but as the portfolio value increases with time, your x% should decrease to account for the fact that in absolute value, you still need the same number (again, not considering inflation).
    Am I wrong here? (I may very well be; many of these things are new to me). Is this what you did the calculations?

    Thanks!!!

    1. Hi Nicolas,

      Thanks for your kind words :)

      Actually, it’s not correct. The withdrawals are based on the initial. portfolio, not on the current portfolio. If the portfolio increases or decreases, your withdrawal does not change. In fact, if you ignore inflation, the withdrawals will never change. The withdrawal rate is applied to the initial value, not the current one.
      Since the withdrawals are based on the initial value, the effective withdrawal rate (this one is applied on the current value) will go down as your net worth increases (or go up if your net worth decreases).

      Does that make sense?

      1. Hi Baptiste,

        thank you again for your interesting post(s)!

        Having understood that the withdrawal rate refer to the initial portfolio at “retirement”, you don’t adust it according to the inflation, right?
        But wouldn’t the withdrawals lose too much purchasing power already after 10 years?
        e.g. if retiring 5k/month now could work, I’m sure in 10 years it wouldn’t be enough.

        Thank you anyway for the simulations!

        1. Hi FF,

          The withdrawals are adjusted for inflation, every month. They start at 4% of the initial portfolio and then are being adjusted month after month. So, after a few years, they could be 4.1% of the initial portfolio.
          So, all my simulations account for inflation. Otherwise, they would as you point out correclty not be very valuable :)

  6. Hi Swiss,
    Thank you for this post, I’ve referenced it many times as I think it brings up an interesting point on worst duration vs success rate that I had not considered before reading this.
    I would be very interested to see a post where you take a closer look at more portfolio increments between 60-100% stocks (say 61,62,63,64 etc) on a 50 year timeline. Trying to find the maximum withdrawal rate that sustains a 600 month worst duration would help find the “best” long term allocation?
    Would like to know your thoughts on this as well.
    Thanks,
    Aspiring Early Retiree

    1. Hi crow,

      Thanks, I am glad you like it :)

      To be honest, I don’t think it would do much a difference. Generally speaking, higher stocks give you better success rate but higher bonds better worst duration. Have an “optimal” 93/7 (entire guess) would probably not change much compared to either 90/10 or 100/0.

      If you want, you can play aroud with the calculator to see :)

  7. Thank you for this article! It’s extremely helpful, especially extending the horizon past 30 years!

    According to the book Quit Like a Millionaire, “ In those rare 5 percent of cases where portfolios fail, they fail because of the first five years.” I would be very interested to see a model withdrawing 3% for the first 5 years, then increasing to 4% (of the initial portfolio amount).

    Thanks!

    1. Hi Lauren,

      Thanks :)

      It’s correct that the first years are very important because if a bear market hits during the first few years of your retirement, this is what is going to hit you hard.
      I have never tried using a reduced withdrawal rate in the first N years. It would help for sure, but I don’t know how much. I will try to think about that.

      Another thing you could do is delay your withdrawal with a cash buffer. But this will take more time to accumulate.

  8. Hey Mr. The Poor Swiss. Interesting as always! Question – I am Swiss and have my brokerage account here, where I invest on ETFs and stocks. I plan to retire abroad. As a Swiss national, I imagine I can keep that brokerage account open, right? Switzerland might not be the best option though, as dividends pay a really high tax, and also my destination country will want me to pay tax on capital gains. Otherwise any recommendation on a tax efficient country where to open a brokerage account even if I am not living there (if at all legally possible)?

    Thanks!
    Poorer Swiss

    1. Hi,

      If you retire abroad, you should be able to keep your account, but it depends on the broker. Some Swiss brokers will not allow you to keep the account if you leave Switzerland. Many of them require that you are a resident. So, you should make sure you are using a broker that is good for multiple countries.
      I have no idea bout the tax system of other countries :) The Swiss tax system is complicated enough for me and I don’t plan to leave Switzerland, so I am not researching any other country.

    1. Hi,

      Thanks, that’s an interesting article, although a bit light.
      Keep in mind that they are doing forecasting for the next 10 year. In my case, I am only using historical data, not any forecast. So since their forecast is much more negative than historically, the results will be less optimistic as well.

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