2% Withdrawal Rate - Stocks Only?

Let’s say you had a withdrawal rate of 2% (retired early).

Question: Would you hold any other asset classes than stocks?

If you had only 2% WR, I wonder if you would just hold bonds (assuming you could get >2% long term yields).

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I have no plan to go in this direction. But it would work and you would die a very wealthy person.

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I would probably calculate, what these 2% are in absolute numbers. E.g., if 50k income is sufficient for me (e.g. covering the most important fix costs), I would have 2.5m in bonds and everything above in stocks, probably.

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I read once that time of recovery after recessions and/or crash can be around roughky three years historically.

So I would probably keep 6%-12% of wealth in cash/money market to live 3-6 years out of that if needed, and the rest in stock.

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If it’s VT type ETFs , then most likely the dividends itself will cover the 2% requirements. This is good because then you don’t need to sell stocks anyways at time of recessions.

Having said that, if there is no expectation of higher withdrawal in future, perhaps some more should stay in fixed income.

I mean what is the value of having higher risk if it’s not needed.

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recent work by Scott Cederburg showed that even 4% works (and in his study actually works better) for 100% stocks if you have a home bias and the rest internationally diversified.

So 100% stocks and 2% is very conservative and your heirs will be pretty happy.


What do you mean timeframe?

He analyzed iIrc 30-year rolling periods starting from like the late 1800s to today.
Main thing was also having a big home bias, of 35% being optimal, and the rest being mcw internationally diversified funds (in his study only developed because of availble data going back that far, so VEA basically, but VT would probably work just as well today).

Regular target date fund type of allocations had like an 8% ruin probability, while the 100% internationally diversified stocks with home bias around 4%.

But smaller home bises i.e. 20% were not way worse off or anything, just that the 35%-50% range was optimal in his data.

But what I should add is that he analyzed regular retirement and not early. One would be wise to make a little more conservative estimate for an early retirement.
And also in practise you would need to act like a robot. Just imagine 2008 and all your retirement funds are stocks and they drawdown 50% and you still need to sell them to fund your life. You would need nerves of steel for that.

E: to add for completions sake: the reason for the findings were mainly that bonds are severely suffering from inflation spikes and not really recovering from those.
We saw something like that recently happening in 2021. Inflation spiked majorly and rates needed to be raised quickly, as consequence bonds not only lost a lot of their value, but also the nomimal value lost a lot of its purchase power. A 100$ nominal bond value from 2021 is only worth like 85$ in today‘s money. And how does such a bond with an 2% interest on it, ever recover that value and give a decent return again in a reasonable time? (Ignoring that it also lost value and the yield technically going higher as a consequence) It just doesn‘t.

Equities recover from inflation, because they are not nominal.


You are in luck, there are funds for that.

I would not focus solely on commodity futures though.

I invest myself in something like that. There are several managed futures/trend following etfs. They invest mostly on commodity, currency, bond, and equity futures.

A fund like KMLM (a significant holding in my portfolio) invests in commodity, currency and bond futures. It‘s goal is to be negatively correlated to equities. And it did achieve that very well since inception. It performed extremely well during the last inflation spike, while stocks and bonds crashed, it had a very high return.
Also they are very transaprent with their process.

I‘m also of the opinion that managed futures are superior to bonds.


I have not heard about the topic you mentioned.
But I found something that might be interesting for you. This video discusses about „ruin probability „ which means risk of running out of money once retired

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About commodities I’ve found this etf:

It even gives a 4% dividend in CHF

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Mainly diversification. Also past has shown that managed futures fund that trade in more markets have the tendency to do better.

Can‘t give you a clear answer here, but it has to do with volatility of the asset class.
The risk premium is both due to the asset itself and the trend-following. Trend following essentially reaps the time-series momentum premium.

Currently it‘s 10% in my portfolio, but I‘ll soon will implement about an additional 20-30% sleeve with a margin loan.

So having essentially 90% (maybe 100% in the future as well) stocks with 30-40% managed futures

For a retirement portfolio for myself, I would probably do something like 60/40 stocks/MF, and diversify into 2-3 MF funds


Gotta love KMLM during days like today.


2% real withdrawal rate gives a certain risk contingency and therefore changes the focus towards securing the return and the asset base.
In my view, a sensible allocation would be:

  • 20% (tax optimized) Swiss RE Funds, they should generate just about 2% real and serves as a CPI Hedge
  • 20% CHF Bonds, that will give you maybe 1% Real p.a. And that fund 10 years of current expense
  • 5% Gold, that will give you 0 real return yet allows in a doomsday scenario allows you to survive another 5 years
  • 55% shares that need to give you ~ 2.8% real return per annum to offset the reduced return from Bonds and Gold; as Global Market Cap should provide for about 3.25% perpetual return, you can further diversivy it as follows (to reduce your risk):
    • North America: 12.5%
    • Europe ex CH: 12.5%
    • Japan: 5%
    • APAC ex Japan: 5%
    • Emerging Markets: 5%
    • Global Small Caps: 5%
    • Switzerland: 10%

Then abbually Re-balance 50% of the Delta if the Target AA vs. actual AA and call it a day.


How would you imagine they could fail?
Futures are at this point 150 years old.

We have lots of long running baacktest on managed futures indices now as well.

The kfa mount Lucas index exists since 1988.

There have been max drawdowns of 30%, but the negative correlation to stocks has really long running data now as well.

https://www.mtlucas.com/mlm-index Some stuff on the mlm index, kmlm uses.

Also to prevent relying on only one fund I would diversify into at least 2, more likely 3.


Depends on the earnings & dividend yields, and how much security you need to have.

A common allocation in endowments is 85% stocks / 15% municipal bonds (due to the tax advantages in the US)

See my comment in your earlier thread

and this other paper by Jim Garland A Cash-Flow Focus for Endowments and Trusts.

Generally, 2% is probably “too low” in that it will ensure your assets will grow faster than you withdraw from them, and leave your offspring with a pile afterwards.

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And I believe if you manage to reduce your withdrawals a bit during really bad years, you’re at 100% success rate pretty quickly.


Exactly! This point was actually a real eye-opener for me: If you have spending flexibility, you can easily go through any bear market.

Actually, it’s pretty easy to create a perpetual withdrawal rate: Always withdraw 4% of your current net worth. This way, mathematically your portfolio will last forever. Of course, this requires enough net worth and/or enough spending flexibility.

It also works with withdrawing 70% of your current net worth…


You could also use the worksheet from Variable percentage withdrawal - Bogleheads to calculate a suggested withdrawal amount.