Okay, download this spreadsheet
https://www.dropbox.com/s/cbzvg74iyeyfwt6/SPX-monthly-1950-2013-and-IUL-test.xls
It was built for a different purpose but will perhaps tell you what you want to know. It's not Firecalc, but it will tell you some things that Firecalc doesn't. It has data for S&P500 from 1950 to present.
For your exploration, ignore the 10mSMA and IUL sections, only look at the B&H section.
You have not mentioned what is probably the most important thing. The *
average* return does not matter. What matters is the *
worst* return. An average return of 8.5% doesn't help you if you hit a string of -5% years and run out of money before a string of 15% years brings the average back up.
The worst 50 year return for S&P had CAGR of 8.5% and began 4/1/59.
The worst 30 year return for S&P had CAGR of 8.9% and began 11/1/55.
I plugged 4/1/59 into the start & withdraw dates, $100,000 to the initial value, withdraw of $333/mo (4% of $100K), 3% for withdrawal inflation rate, weightings 5 & 5.
Go down to cell R789 and put in 53, for a end date of Mar 2012.
Final value: $1,646,157. Total withdrawn: -$505,388.
The lowest value: $97,995. So you're fine.
Pick a start date just before a bad bear market, like 5/1/69
Final value: $1,163,648.
The lowest value: $82,744. So you're fine. Although it may have been nail-biting time.
Unlike firecalc, it doesn't show you every portfolio start date, it only shows what the portfolio did for one starting date.
However, the "rolling N yr" sheet shows the best/worst/avg/med for every N year period (actually N * 12 month period) you care to examine.
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Virtually certain? If 4% is the 30 year SWR, the indefinite duration SWR is closer to 3% based on every academic paper I've seen. That's a significant difference...
Yes, and moreover those papers have data going back to the 1800's or earlier. I'm not sure how applicable the 1850 investment market statistics are to a 2013 portfolio. But, whatever, the data I have for S&P since 1950 indicates that "virtually certain" is arguably right.
The rolling N-yr returns the above spreadsheet shows for a 60/40 are:
Code:
[FONT=Courier New]Yrs --> 1 5 10 15 20 25 30[/FONT]
[FONT=Courier New]Avg 9.2% 9.1% 9.2% 9.5% 9.6% 9.8% 9.9%[/FONT]
[FONT=Courier New]Med 10.3% 9.1% 8.9% 9.2% 9.3% 9.6% 9.8%[/FONT]
[FONT=Courier New]Min -27.1% -2.2% 0.0% 4.6% 6.3% 7.2% 8.1%[/FONT]
[FONT=Courier New]Max 39.3% 21.9% 15.6% 15.3% 14.6% 14.0% 12.3%[/FONT]
The average return varies hardly at all. The one we care about for portfolio survival, Min, is monotonically increasing.
The most dangerous stage for a retirement portfolio is the early years. There's been a couple of recent papers that talked about this. Just doing naive math in your head:
If you grow at 6.3% and withdraw at 4%, that's a new 2.3% growth. You just have to get past the early years, so that you have enough years that the average is above 4%. The killer is when you've just started out and get hit with 3 years of -8% loss while withdrawing 4%. (And, yeah, that happened. May'00 to May'03.)