No. 03Paper2011
Portfolio Success Rates: Where to Draw the Line (Trinity Study Update 2011)
Philip L. Cooley, Carl M. Hubbard, Daniel T. Walz
Post-2008 crisis update confirms robustness of 4% rule. But warns that current conditions may require more conservative rates for ultra-long retirements (40-60 years).
Abstract
Update to the original Trinity Study (1998) using data through 2009, including the 2008 financial crisis. Confirms that 4% inflation-adjusted withdrawal rate remains sustainable for 30 years with 75% stocks / 25% bonds (95%+ success). However, authors warn that current economic conditions (low bond yields, high stock valuations) may reduce future safe withdrawal rates. They recommend considering 3-3.5% for 40+ year retirements. Paper finds that 75% allocation to stocks maximizes success rates for 4% withdrawals, while 100% stocks increases volatility without much improving success. Terminal values show that most successful portfolios end with MORE money than initial, allowing legacies.
Key Ideas
- 14% rule survived 2008 crisis—still 95%+ successful for 30 years
- 275% stocks / 25% bonds is sweet spot: maximizes success without excessive volatility
- 3For 40+ year retirements, consider 3-3.5% due to greater longevity and current conditions
- 4Current valuations (2011+) suggest lower forward returns—more conservatism
- 5High terminal values: successful portfolios end with 2-4x initial capital in median
Even after the 2008 financial crisis, 4% withdrawal rates from stock-dominated portfolios continue to produce high success rates for 30-year periods.
95%+
Success rate for 4% withdrawal with 75/25 stocks/bonds over 30 years (post-2008 data)