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Andrew Hallam

Retirees: Increase The Odds That You Won’t Run Out Of Money

You’ve saved hard for your retirement. Now it’s time to start living on your proceeds. But you want to make sure you don’t run out of money. So, here’s the good news.

If you’ve built a globally diversified portfolio of low-cost ETFs, you should be able to withdraw an inflation-adjusted 4 percent per year. When doing so, your money should last at least 30 years. But what if the stock market threw some unexpected twists? Would you run out of money?

Anything is possible. So let’s imagine several horrible scenarios that all take place during one person’s retirement.

1. Imagine the U.S. stock market not making money for more than 10 years.

2. Imagine the International stock market not making money for more than 10 years.

3. Imagine global stocks crashing 51 percent, halfway through your retirement.

It might be tough to imagine this three-way punch. But this all happened between January 1989 and February 28, 2019. The American S&P 500 index went 10 years and 11 months without making a penny (January 2000 to November 30, 2010).

The S&P 500 Didn’t Make A Profit

January 2000 – November 30, 2010 (10 years, 11 months)




 The International stock market index went almost 11 years, barely eking out a profit. It averaged 0.27 percent per year from January 2008 to December 2018.


International Stocks Languished: January 2008 to December 2018




Now imagine a retiree who had to live through these slumps. They had a globally diversified portfolio representing 60 percent in a global stock index and 40 percent in a bond index. If they retired in 1989 with $500,000, and if they withdrew an inflation-adjusted 4 percent per year, you might wonder if they would have anything left today.

During the first year of their retirement, they would have withdrawn $20,929 (that’s 4% of $500,000, plus an adjustment for inflation). The following year, they would have withdrawn $22,207. Each year, the retiree would have continued to make inflation-adjusted withdrawals.

At that rate, you might say, “There’s no way that money would last 30 years.” After all, it included two lost decades. U.S. stocks went nowhere from 2000-2010; international stocks languished from 2008-2018. What’s worse, global stocks fell 51 percent between January 2008 and March 2009.

Now here’s the shocking part. According to, after 30 years of retirement, the investor would have withdrawn more than $900,000 from their initial $500,000 portfolio. And by February 28, 2019, their portfolio would have been worth almost $1.7 million. That’s right. Their withdrawals would have exceeded the amount that they retired with. And by February 28, 2019, they would have almost $1.7 million left, despite those withdrawals.

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However, this wouldn’t have worked if the retiree misbehaved. In other words, they would have needed to ignore stock market forecasts. They would have needed to keep a cool head when their portfolio dropped in value. There’s a lesson for this among retirees today. Maintain a diversified portfolio of low-cost ETFs. Rebalance it once a year. Ignore every story about a trade war with China. Don’t adjust your portfolio based on Brexit talks or on economic news.

The 4 percent rule was back-tested to 1926. It would have survived rolling 30- year retirements that included the crash of 1929. It would have survived 30-year periods spanning World War I, The Great Depression, World War II the threat of nuclear war and run-away inflation.

That doesn’t, however, make it foolproof. If you’re worried that your money won’t last 30 years, don’t mess with your portfolio. Instead, withdraw an inflation-adjusted 3 percent per year instead of 4 percent.

Diversification, low costs, and a cool investment head are recipes for success. Speculation, on the other hand, is an expensive, foolish errand.


The $500,000 Portfolio’s Growth After Annual Withdrawals

January 1989 - February 28, 2019


 Andrew Hallam is a Digital Nomad. He’s the author of the bestseller, Millionaire Teacher and Millionaire Expat: How To Build Wealth Living Overseas

Internaxx Bank S.A. accepts no responsibility for the content of this report and makes no warranty as to its accuracy of completeness. This report is not intended to be financial advice, or a recommendation for any investment or investment strategy. The information is prepared for general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Opinions expressed are those of the author, not Internaxx Bank and Internaxx Bank accepts no liability for any loss caused by the use of this information. This report contains information produced by a third party that has been remunerated by Internaxx Bank.

Please note the value of investments can go down as well as up, and you may not get back all the money that you invest. Past performance is no guarantee of future results.


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