If you want to take a starting balance of $ 250,000 , you just divide the results by four , or divide by two if you ’ re starting with $ 500,000 . the third 3.92 % … and so on . When the client reaches 96 , the RMD withdrawal would be 8.4 %. The average required withdrawal over the first 25 years was 6.60 %. Only the stipulated distribution was withdrawn — no more and no less .

We analyzed this retirement withdrawal scenario over 26 rolling 25-year periods . The first period lasted from 1973 to 1997 . The second went from 1974 to 1998 . The last period was 1998 to 2022 . When we took all these quarter-century periods together , the average ending portfolio balance for this portfolio was $ 3,065,896 and the average annual RMD withdrawal was $ 201,917 . If you want to take a starting balance of $ 250,000 instead , you just divide the results by four , or divide by two if you ’ re starting with $ 500,000 . The total amount of money withdrawn over each 25-year period averaged just over $ 5 million ( again , taking 25 withdrawals over 26 rolling 25-year periods ).

It almost sounds like a fairy tale : that a 72-year-old retiree could start with $ 1 million , take out $ 5 million over 25 years , and finish with $ 3 million . Recall , this is a 100 % equity portfolio , and that may be atypical for most retirees . Also consider that to achieve these results the retiree has to both annually rebalance and stay in the portfolio . They can ’ t bail out during rocky periods . ( That is also atypical !)

The next asset allocation portfolio holds 80 % equities and 20 % fixed income , and is likely more representative of an actual retirement portfolio . As expected , the client ’ s performance metrics decline slightly during the accumulation years ( in pre-retirement ) and during the retirement years . The 50-year average annualized return is 9.83 %, but the positive annual returns now happen 84 %

TABLE 1

50-Year Portfolio Performance

From January 1 , 1973 through December 31 , 2022 .

ACCUMULATION STATISTICS ( Pre-Retirement Portfolio Results )

DECUMULATION STATISTICS ( Retirement Portfolio Results )

VARIOUS PORTFOLIOS ( Showing Allocation Percentages ) |
50-Year Lump Sum Return * |
50-Year Standard Deviation Returns |
% Time Positive Annual Returns |
Avg Annual Withdrawal 25-Yr Period ( Base : RMD Age 72-97 ) |
Total Amount Withdrawn 25-Yr Periods ( Average ) |
Retirement Portfolio Average Ending Balance ** |

100 % Equity ( Hot Salsa )

40 % S & P 500 • 20 % Russell 2000 • 20 % MSCI EAFE 20 % DJ US REIT

10.48 16.68 80 % 201,917 5,047,924 3,065,896

80 % Equity / 20 % Fixed Income

35 % S & P 500 • 15 % Russell 2000 • 15 % MSCI EAFE 15 % DJ US REIT • 15 % Agg Bond • 5 % Cash

9.83 13.66 84 % 176,769 4,419,233 2,550,020

60 % Equity / 40 % Fixed Income

30 % S & P 500 • 10 % Russell 2000 • 10 % MSCI EAFE 10 % DJ US REIT • 25 % Agg Bond • 15 % Cash

8.96 10.68 84 % 150,184 3,754,599 2,017,904

40 % Equity / 60 % Fixed Income

20 % S & P 500 • 10 % Russell 2000 • 5 % MSCI EAFE 5 % DJ US REIT • 40 % Agg Bond • 20 % Cash

8.13 8.20 88 % 129,810 3,245,243 1,626,794

20 % Equity / 80 % Fixed Income

10 % S & P 500 • 5 % Russell 2000 • 2.5 % MSCI EAFE 2.5 % DJ US REIT • 60 % Agg Bond • 20 % Cash

7.22 6.35 92 % 112,971 2,824,269 1,316,921

100 % Fixed Income ( Mild Salsa ) |
||||||||

70 % Agg Bond • 30 % Cash |
6.01 |
5.45 |
92 % |
93,655 |
2,341,373 |
979,092 |

* Assuming lump sum investment and annual rebalancing . Analysis completed using customized spreadsheet developed by the author . ** The retirement portfolio had a starting balance of $ 1,000,000 with annual end-of-year withdrawal based on RMD schedule starting at age 72 . Ending portfolio balance is the average over 26 rolling 25-year periods . First 25-year period was 1973-1997 , second period was 1974-1998 , and so on .

42 | FINANCIAL ADVISOR MAGAZINE | MARCH 2023 WWW . FA-MAG . COM