Break-Even Withdrawal Analysis
Calculate the maximum sustainable withdrawal rate for each historical period.
Understanding Break-Even Rates
What Is Break-Even: The break-even rate is the highest withdrawal rate that would deplete your portfolio exactly at the end of your retirement period - not sooner, not later.
Why This Matters: This analysis reveals the true "margin of safety" built into your chosen withdrawal rate. If the break-even rate for a period is 6.5% and your target is 4%, you have a 2.5% safety buffer.
Real-World Value: Adjust the target withdrawal rate to explore different scenarios. See how historical break-even rates compare to your planned withdrawal strategy.
Historical Context
The 1929-1958 period (Great Depression start) typically shows the lowest break-even rates due to poor early returns and sequence of returns risk.
Periods starting with strong bull markets (like 1982-2011) often allow withdrawal rates of 10%+ due to early portfolio growth.
Most historical periods support withdrawal rates between 5-8%, making conservative withdrawal strategies (3-4%) quite safe for most scenarios.
Understanding Break-Even
Break-Even Rate: The maximum withdrawal rate that depletes the portfolio to exactly $0 at retirement end.
Safety Margin: How much cushion the 4% rule provides above the worst-case scenario.
Key Insight: The 4% rule is designed to work in ALL historical periods, including the worst market conditions.