Small Cap Value and Commercial Paper HSWR

Research on Safe Withdrawal Rates

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JWR1945
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Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Small Cap Value and Commercial Paper HSWR

Post by JWR1945 »

Here are some tables using Mike's data for the returns of Small Capitalization Value stocks. His data is for 1927-2003. I have used S&P500 data for 1921-1926 and the dummy data in our calculators for 2004-2010.

With 50% Small Cap Value stocks and 50% commercial paper, a plot of Historical Surviving Withdrawal Rates (HSWR, also known as Historical Database Rates) for 1921-1980 is fit with a line y = 0.3301x + 3.116 with an R-squared of 0.6936, where y is the Historical Surviving Withdrawal Rate and x is the percentage earnings yield 100E10/P. Data from 1926-1975 are fit with a line y = 0.3748x + 2.7804 with an R-square of 0.578.

With 80% Small Cap Value stocks and 20% commercial paper, a plot of Historical Surviving Withdrawal Rates for 1921-1980 is fit with a line y = 0.519x + 2.6862 with an R-squared of 0.6697. Data from 1926-1975 are fit with a line y = 0.7796x + 1.0006 with an R-squared of 0.7386.

In all cases, portfolios were rebalanced annually. The expenses were 0.20% of the current balance. Withdrawal rates are relative to the portfolio's initial balance. Withdrawal amounts were adjusted to match inflation as measured by CPI-U. The portfolio lifespans were 30 years. When withdrawals were made at a rate 0.1% higher than the Historical Surviving Withdrawal Rate, a portfolio would have failed within 30 years. When withdrawals were made at the Historical Surviving Withdrawal Rate, a portfolio would have survived for the entire 30-year period.

Have fun.

John R.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

Table of HSWR for 50% Small Cap Value stocks and 50% commercial paper.

Code: Select all

Year   100E10/P   SCV
1921    19.61    8.1
1922    15.87    8.0
1923    12.20    7.5
1924    12.35    7.6
1925    10.31    7.3
1926     8.85    6.6
1927     7.58    6.4
1928     5.32    5.5
1929     3.69    4.5
1930     4.48    4.4
1931     5.99    4.5
1932    10.75    5.1
1933    11.49    5.7
1934     7.69    4.8
1935     8.70    5.2
1936     5.85    4.3
1937     4.63    3.9
1938     7.41    4.6
1939     6.41    4.4
1940     6.10    4.5
1941     7.19    5.4
1942     9.90    6.2
1943     9.80    6.1
1944     9.01    5.9
1945     8.33    5.7
1946     6.41    5.9
1947     8.70    7.1
1948     9.62    7.4
1949     9.80    7.3
1950     9.35    7.6
1951     8.40    7.1
1952     8.00    6.7
1953     7.69    6.5
1954     8.33    6.6
1955     6.25    5.6
1956     5.46    5.2
1957     5.99    5.3
1958     7.25    5.7
1959     5.56    4.9
1960     5.46    4.9
1961     5.41    4.8
1962     4.72    4.6
1963     5.18    4.8
1964     4.63    4.4
1965     4.29    4.2
1966     4.15    4.1
1967     4.90    4.4
1968     4.65    4.3
1969     4.72    4.3
1970     5.85    4.7
1971     6.06    4.8
1972     5.78    4.7
1973     5.35    4.7
1974     7.41    5.6
1975    11.24    6.7
1976     8.93    6.0
1977     8.77    6.2
1978    10.87    7.0
1979    10.75    7.3
1980    11.24    7.4
Table of 1921-1980 Historical Surviving Withdrawal Rates for 50% Small Cap Value stocks and 50% commercial paper. This form is easier for copying into and Excel spreadsheet or a Word table.

Code: Select all

8.1
8.0
7.5
7.6
7.3
6.6
6.4
5.5
4.5
4.4
4.5
5.1
5.7
4.8
5.2
4.3
3.9
4.6
4.4
4.5
5.4
6.2
6.1
5.9
5.7
5.9
7.1
7.4
7.3
7.6
7.1
6.7
6.5
6.6
5.6
5.2
5.3
5.7
4.9
4.9
4.8
4.6
4.8
4.4
4.2
4.1
4.4
4.3
4.3
4.7
4.8
4.7
4.7
5.6
6.7
6.0
6.2
7.0
7.3
7.4
Have fun.

John R.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

Table of HSWR for 80% Small Cap Value stocks and 20% commercial paper.

Code: Select all

Year   100E10/P   SCV
1921    19.61    9.8
1922    15.87    9.9
1923    12.20    8.9
1924    12.35    9.2
1925    10.31    8.5
1926     8.85    7.5
1927     7.58    7.2
1928     5.32    5.8
1929     3.69    4.4
1930     4.48    4.6
1931     5.99    5.0
1932    10.75    6.9
1933    11.49    8.0
1934     7.69    6.2
1935     8.70    7.1
1936     5.85    5.4
1937     4.63    4.6
1938     7.41    6.0
1939     6.41    5.6
1940     6.10    5.8
1941     7.19    7.3
1942     9.90    9.0
1943     9.80    8.7
1944     9.01    8.1
1945     8.33    7.7
1946     6.41    7.4
1947     8.70    9.5
1948     9.62    10.2
1949     9.80    10.0
1950     9.35    10.3
1951     8.40    9.2
1952     8.00    8.5
1953     7.69    8.2
1954     8.33    8.4
1955     6.25    6.6
1956     5.46    5.7
1957     5.99    5.9
1958     7.25    6.5
1959     5.56    5.2
1960     5.46    5.1
1961     5.41    5.1
1962     4.72    4.6
1963     5.18    4.9
1964     4.63    4.4
1965     4.29    4.0
1966     4.15    3.9
1967     4.90    4.4
1968     4.65    4.1
1969     4.72    4.1
1970     5.85    4.8
1971     6.06    4.8
1972     5.78    4.6
1973     5.35    4.6
1974     7.41    5.9
1975    11.24    7.8
1976     8.93    6.6
1977     8.77    6.6
1978    10.87    7.9
1979    10.75    8.2
1980    11.24    8.2
Table of 1921-1980 Historical Surviving Withdrawal Rates for 80% Small Cap Value stocks and 20% commercial paper. This form is easier for copying into and Excel spreadsheet or a Word table.

Code: Select all

9.8
9.9
8.9
9.2
8.5
7.5
7.2
5.8
4.4
4.6
5.0
6.9
8.0
6.2
7.1
5.4
4.6
6.0
5.6
5.8
7.3
9.0
8.7
8.1
7.7
7.4
9.5
10.2
10.0
10.3
9.2
8.5
8.2
8.4
6.6
5.7
5.9
6.5
5.2
5.1
5.1
4.6
4.9
4.4
4.0
3.9
4.4
4.1
4.1
4.8
4.8
4.6
4.6
5.9
7.8
6.6
6.6
7.9
8.2
8.2
Have fun.

John R.
JWR1945
***** Legend
Posts: 1697
Joined: Tue Nov 26, 2002 3:59 am
Location: Crestview, Florida

Post by JWR1945 »

As a matter of clarification, the equations provide you with Calculated Rates, not Safe Withdrawal Rates. To determine Safe Withdrawal Rates would require calculating standard deviations and confidence limits.

Have fun.

John R.
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