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The safe withdrawal rate: evidence from a broad sample of developed markets

Published online by Cambridge University Press:  17 February 2025

Aizhan Anarkulova ,
Scott Cederburg ,
Michael S. O’Doherty  and
Richard Sias
Aizhan Anarkulova
Affiliation:
Goizueta Business School, Emory University, Atlanta, GA 30322, USA
Scott Cederburg
Affiliation:
Eller College of Management, University of Arizona, Tucson, AZ 85721, USA
Michael S. O’Doherty*
Affiliation:
Trulaske College of Business, University of Missouri, Columbia, MO 65211, USA
Richard Sias
Affiliation:
Eller College of Management, University of Arizona, Tucson, AZ 85721, USA
*
Corresponding author: Michael S O’Doherty; Email: [email protected]
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Abstract

We use a comprehensive new dataset of asset-class returns in 38 developed countries to examine a popular class of retirement spending rules that prescribe annual withdrawals as a constant percentage of the retirement account balance. A 65-year-old couple willing to bear a 5 percent chance of financial ruin can withdraw just 2.31 percent per year, a rate materially lower than conventional advice (e.g., the 4% rule). Our estimates of failure rates under conventional withdrawal policies have important implications for individuals (e.g., savings rates, retirement timing, and retirement consumption), public policy (e.g., participation rates in means-tested programs), and society (e.g., elderly poverty rates).

Keywords

easy data biasfinancial ruinretirementsafe withdrawal ratesurvivor biasC15D31G10G11G12G15G17G51N20
Type
Article
Information
Journal of Pension Economics & Finance , First View , pp. 1 - 37
Copyright
© The Author(s), 2025. Published by Cambridge University Press.

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