In the 1990’s, a key retirement planning study was published by three Professors from Trinity University, often referred to as The Trinity Study.
The Trinity Trio essentially asked the question, “Had we retired at any time in recent history, how much could we spend annually for 30 years without running out of funds?”
The original Trinity Study looked at rolling 30-year periods between 1926 and the end of 1995, and was later expanded to include data through 2009, a span of 84 years that covers a wide range of economic environments including 2 World Wars, the Great Depression, the oil embargo and high inflation period of the 1970’s, and the Boom period of the 1980’s
Their conclusions:
With a portfolio of at least 50% stock and a little flexibility, plan to spend 4% of the initial portfolio value, adjusted for inflation each year, and have a high degree of confidence the portfolio will survive at least 30 years, and often much longer. This is commonly referred to as the 4% Rule or the Safe Withdrawal Rate (SWR).
Read more: https://www.gocurrycracker.com/what-is-your-retirement-number-the-4-rule/
The article refers the annual withdrawal after the initial year should be adjusted for inflation. Here’s an example of what that means: For example, let’s say your portfolio at retirement totals $1 million. You would withdraw $40,000 in your first year of retirement. If the cost of living rises 2% that year, you would give yourself a 2% raise the following year, withdrawing $40,800, and so on for the next 30 years.
Additional article with tables showing different scenarios of 4%-5% withdrawal rates over different time period of history. https://www.kiplinger.com/article/retirement/T037-C032-S014-is-4-withdrawal-rate-still-a-good-retirement-rule.html
