Unexpectedly Intriguing!
06 December 2019
Retired Couple - Source: Unsplash - Max Harlynking: https://unsplash.com/photos/DGP-759-Ukk

Have you been saving for retirement and are now ready to retire? What would happen if you withdrew a fixed percentage of the value of your retirement investment once a year for the rest of your life, if that investment was in the S&P 500? Would that provide enough money to pay for the things you might want to buy with it after you no longer have an income from a job? Or might market volatility force you to reconsider your options?

These are difficult questions to answer, because the future is very much an undiscovered country, where chaos controls both the timing and magnitude for when and how much market volatility might erupt.

But if we assume the unfixed future might be like the past, we can test how well a strategy to only withdraw a fixed rate of money from such an investment would have fared using the S&P 500's rich history of data during its most turbulent episodes.

And that's what we've done with our latest tool, where you can see how well you could count on your investment in the S&P 500 would have fared for up to 40 year long periods if you had chosen to retire in any month between January 1871 and 40 years before the present* while fully reinvesting your dividends along the way. If you're accessing this article on a site that republishes our RSS news feed, please click through to working version of the tool at our site.

S&P 500 Investment Data
Description Value
Initial Investment Value (Before Any Withdrawals)
Annual Withdrawal Percentage
Start Month for Withdrawals
Number of Years of Withdrawals

S&P 500 Withdrawal Estimates
Calculated Results Values
Month of Final Withdrawal
   Investment Value Before Withdrawal
   Withdrawal Amount
   Amount Remaining In Investment
Withdrawal Highlights
Average Annual Withdrawal Amount
Total Amount Withdrawn Over All Years
Largest Annual Withdrawal
Smallest Annual Withdrawal

For our tool's default settings, we've chosen September 1929 as the time of the first withdrawal, because this month immediately precedes what happened with the U.S. stock market at the onset of the Great Depression. If your S&P 500 cash out strategy can survive the sustained series of disruptive events that followed this month and provide sufficient funds to support your needs, you can reasonably expect to weather any lesser event.

For good measure, you might also want to consider how your retirement might fare if a market crash occurred well after you've retired. You might choose a date that includes the years of the Great Depression or you could choose the more recent disruptive event of the Great Recession of 2008-2009 by selecting a starting year in the range of the late 1960s through the late 1970s. The maximum length of time the tool will consider for your S&P 500 withdrawal strategy is 40 years.

The tool's results indicate the value of your investment in the S&P 500 before and after your annual withdrawal, along with our estimates of the total amount you would have withdrawn over the number of years you've selected, the average amount of your annual withdrawals, and also the highest and lowest values of your annual withdrawals along with the years in which they would have occurred. Meanwhile, the tool does not consider things like taxes, commissions, or fees, which would most likely be taken out of any money you withdraw if they apply.

* Like our S&P 500 At Your Fingertips and Investing Through Time tools, we plan to periodically update this tool, with the first update in the first quarter of 2020 after the S&P 500's data for 2019 is finalized, and then once a year afterward, which will allow us to roll in new 40-year long periods.


The tool above really doesn't say anthing about what a "safe withdrawal rate" for you may be. For that kind of insight, do check out the following resources on the topic, which you might find useful.

Hubbard, Carl; Cooley, Philip L.; and Walz, Daniel T. Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable. Journal of the American Association of Individual Investors. [Online Article]. February 1998.

Pfau, Wade. The Trinity Study and Portfolio Success Rates (Updated to 2018). Forbes. [Online Article]. 16 January 2018.

RBC Wealth Management. Sustainable withdrawal rates in retirement. [PDF Document]. 25 March 2019.

Where our tool is concerned, so long as you select an annual withdrawal percentage rate of less than 25.0%, your investment will effectively last forever because there will always be some fraction remaining in your investment from which you can withdraw some percentage of it in future years, even though the withdrawal amounts may become vanishingly small, which can be considered the investment math version of one of Zeno's paradoxes.

In practice, you may find it extraordinarily difficult to resist raising the percentage of your investment that you cash out in years where market volatility might crash the amount you would withdraw if you otherwise maintained a fixed percentage rate of withdrawal, where you would intervene to reset that withdrawal rate because you've come to value having cash today more than whatever potential investment value you might have tomorrow. If you need cash to cover your living expenses in retirement or in times of severe economic distress, where your ability to earn income is very limited, it's very understandable.

Our tool can accommodate that kind of decision making. Just update it with the value of your investment at the starting month where you would need to adjust your withdrawal rate, and see what happens next. Then adjust it again at later dates as you might need.

Image credit: unsplash-logoMax Harlynking

Celebrating Political Calculations' Anniversary

Our anniversary posts typically represent the biggest ideas and celebration of the original work we develop here each year. Here are our landmark posts from previous years:

  • A Year's Worth of Tools (2005) - we celebrated our first anniversary by listing all the tools we created in our first year. There were just 48 back then. Today, there are nearly 300....
  • The S&P 500 At Your Fingertips (2006) - the most popular tool we've ever created, allowing users to calculate the rate of return for investments in the S&P 500, both with and without the effects of inflation, and with and without the reinvestment of dividends, between any two months since January 1871.
  • The Sun, In the Center (2007) - we identify the primary driver of stock prices and describe a whole new way to visualize where they're going (especially in periods of order!)
  • Acceleration, Amplification and Shifting Time (2008) - we apply elements of chaos theory to describe and predict how stock prices will change, even in periods of disorder.
  • The Trigger Point for Taxes (2009) - we work out both when, and by how much, U.S. politicians are likely to change the top U.S. income tax rate. Sadly, events in recent years have proven us right.
  • The Zero Deficit Line (2010) - a whole new way to find out how much federal government spending Americans can really afford and how much Americans cannot really afford!
  • Can Increasing the Minimum Wage Boost GDP? (2011) - using data for teens and young adults spanning 1994 and 2010, not only do we demonstrate that increasing the minimum wage fails to increase GDP, we demonstrate that it reduces employment and increases income inequality as well!
  • The Discovery of the Unseen (2012) - we go where so-called experts on income inequality fear to tread and reveal that U.S. household income inequality has increased over time mostly because more Americans live alone!

We marked our 2013 anniversary in three parts, since we were telling a story too big to be told in a single blog post! Here they are:

  • The Major Trends in U.S. Income Inequality Since 1947 (2013, Part 1) - we revisit the U.S. Census Bureau's income inequality data for American individuals, families and households to see what it really tells us.
  • The Widows Peak (2013, Part 2) - we identify when the dramatic increase in the number of Americans living alone really occurred and identify which Americans found themselves in that situation.
  • The Men Who Weren't There (2013, Part 3) - our final anniversary post installment explores the lasting impact of the men who died in the service of their country in World War 2 and the hole in society that they left behind, which was felt decades later as the dramatic increase in income inequality for U.S. families and households.

Resuming our list of anniversary posts....

Labels: , , , ,

About Political Calculations

Welcome to the blogosphere's toolchest! Here, unlike other blogs dedicated to analyzing current events, we create easy-to-use, simple tools to do the math related to them so you can get in on the action too! If you would like to learn more about these tools, or if you would like to contribute ideas to develop for this blog, please e-mail us at:

ironman at politicalcalculations.com

Thanks in advance!

Recent Posts

Stock Charts and News

Most Popular Posts
Quick Index

Site Data

This site is primarily powered by:

This page is powered by Blogger. Isn't yours?

CSS Validation

Valid CSS!

RSS Site Feed

AddThis Feed Button


The tools on this site are built using JavaScript. If you would like to learn more, one of the best free resources on the web is available at W3Schools.com.

Other Cool Resources

Blog Roll

Market Links

Useful Election Data
Charities We Support
Shopping Guides
Recommended Reading
Recently Shopped

Seeking Alpha Certified

Legal Disclaimer

Materials on this website are published by Political Calculations to provide visitors with free information and insights regarding the incentives created by the laws and policies described. However, this website is not designed for the purpose of providing legal, medical or financial advice to individuals. Visitors should not rely upon information on this website as a substitute for personal legal, medical or financial advice. While we make every effort to provide accurate website information, laws can change and inaccuracies happen despite our best efforts. If you have an individual problem, you should seek advice from a licensed professional in your state, i.e., by a competent authority with specialized knowledge who can apply it to the particular circumstances of your case.