Using asset returns from the Simba dataset (https://www.bogleheads.org/wiki/Simba%2 ... preadsheet, rev22c) a 30 year retirement with an asset allocation of 50% stocks and 50% fixed income was modelled with annual rebalancing and constant inflation adjusted withdrawals taken at the beginning of each year. Fixed income (FI) ‘funds’ of four different maturities/durations were used, T-bills, short term treasuries (STT), total bond market (TBM), and long term treasuries (LTT). Note that, if I understand the Simba spreadsheet correctly, for TBM, before 1976 the returns were for US treasuries only, while post-1976 they were for all investment grade bonds.
The safe withdrawal rate (SWR), i.e., the maximum initial withdrawal expressed as a percentage of the initial portfolio value (%IPV) that ensured the portfolio was not exhausted before 30 years had elapsed, is plotted for each of the FI funds as a function of retirement start year in the following figure.
As is well known in these parts, the SWR varied considerably from retirement to retirement ranging from a minimum of below 4% in the mid-1960s, to a maximum of over 10% in the early 1980s. While it is a bit difficult to see the different behaviour of the various FI funds, it is clear that in some periods (e.g., late 1970s onwards) longer duration FI resulted in the highest SWR, while in other periods (e.g., late 19th and early 20th century) T-bills gave the highest SWR. Of course, it is important to note that it would not have been possible at the beginning of a particular retirement to know what duration FI would have subsequently provided the best outcome.
A clearer picture of the behaviour with time can be gained from the following graph where (upper panel) the highest SWR from the four FI funds and (lower panel) which FI fund produced the highest SWR are plotted as a function of retirement start year.
The results in lower panel illustrate how the highest SWR was delivered by different duration FI at different times. For example, longer duration FI was dominant in the periods from 1920 to 1940 and for 1980 onwards, while bills were dominant from approximately 1880 to 1910.
The following table shows the percentage of retirements using FI of a particular duration led to the highest SWR for the entire data set (‘all SWR’) and for a subset of the data where the best SWR was less than, an arbitrarily chosen, 5% (labelled as ‘SWR<5’). Therefore, SWR<5 represents the poorest historical retirements. Note: Rounding may mean that the numbers do not add up to 100.
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Percentage of retirements that produced highest SWR by FI fund Bills STT TBM LTT All SWR 31 25 11 33 SWR<5 41 33 11 15
By way of contrast, the FI fund that produced the lowest SWR by retirement start year are presented in the following table in a similar form as the previous table.
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Percentage of retirements that produced worst SWR by FI fund Bills STT TBM LTT All SWR 40 0 23 37 SWR<5 19 0 19 63
While the future is unknowable, the historical evidence would suggest that, in poor retirements, short term treasuries tended to be a better choice in terms of SWR than the intermediate maturity bonds in total bond market or long term treasuries.
edit: Title as per McQ's suggestion