Weekend Reading – Is 1.9% the new 4% safe withdrawal rate?

Weekend Reading – Is 1.9% the new 4% safe withdrawal rate?

Hey folks, 

Welcome to a new Weekend Reading edition, questionning whether just 1.9% is the new 4% safe withdrawal rate.

My take on that in a bit!

First up, a few recent articles in case you missed them!

These are some of the top Canadian stocks that I hope to buy and hold for pretty much forever!

I think this article about young people not needing to save makes no sense.

Weekend Reading – Is 1.9% the new 4% safe withdrawal rate?

I don’t make this stuff up!

According to this study, using a comprehensive new dataset of asset-class returns in 38 developed countries, the study highlighted that a 65-year-old couple willing to bear a 5% chance of financial ruin can only withdraw just 2.26% per year from their portfolio, a rate materially lower than conventional retirement withdrawal advice using the 4% rule.

I get my 1.9% rule from the catchy Barron’s title here. According to the study authors, this is what the withdrawal spending rule would be if you wanted the same probability of “financial ruin” (meaning, outliving your money) as the 4% rule had with U.S.-only data vs. developed countries, using new mortality data.

From the study:

“We use SSA mortality estimates for today’s young adults (retirement in 2065) and newborns (retirement in 2085) and find that the increased longevity materially impacts the safe withdrawal rate. For a retired couple willing to accept a 5% chance of financial ruin, the real withdrawal rate of 2.26% for today’s retirees drops to 2.02% for today’s young adults and to 1.95% for today’s newborns.”

Of note, you should know the base case simulation in the study above focuses on the joint investment-longevity outcomes for a couple retiring in 2022 at age 65 who chooses a portfolio strategy of 60% domestic stocks and 40% bonds. As you may know, a 60/40 portfolio has been absolutely hammered this year to date.

On the flipside, any 60/40 portfolio should rise again, “like the phoenix” to borrow some words from Vanguard:

Weekend Reading – Is 1.9 the new 4 safe withdrawal rate

Source: https://advisors.vanguard.com/insights/article/likethephoenixthe6040portfoliowillriseagain

1.9% for a safe withdrawal rate seems dire, considering the following – most Americans don’t or can’t save money.

“In 2021, the average account balance for Vanguard participants was $141,542; the median balance was $35,345. Vanguard participants’ average account balances increased by 10% since 2020, driven primarily by the increase in equity markets over the year.”

Source: https://institutional.vanguard.com/content/dam/inst/vanguard-has/insights-pdfs/22_TL_HAS_FullReport_2022.pdf

“The 401(k) system is the collection mechanism for retirement saving; the bulk of the money now resides in IRAs. The 2019 Survey of Consumer Finances offers a glimpse of how three years of solid economic growth, steady stock market returns, and the continued maturation of the 401(k) system affected households’ retirement savings. The typical household approaching retirement had $144,000 in combined 401(k)/IRA assets, up from $135,000 in 2016. These assets will provide only $570 per month in retirement, an amount whose purchasing power will decline over time with inflation. Overall, the system provides meaningful balances for only the top two income quintiles of households with 401(k)s. Moreover, only half of all households have any 401(k)-related holdings. This somewhat bleak assessment of the nation’s employer-sponsored retirement system can only have been worsened by COVID-19 and the ensuing recession.”

Source: https://crr.bc.edu/wp-content/uploads/2020/10/IB_20-14.pdf

What does this data suggest for you or me, the DIY investor, in Canada?

Not much, for me, really. 

You know from my site, I’m a HUGE advocate of spending less than you make, investing the difference, to buy and hold mostly dividend paying stocks for income but also a few low-cost ETFs for growth. That’s my recipe. Your mileage may vary.

As such, it is my plan to have my portfolio value worth far more than the equivalent of $144,000 USD in Canadian dollars (in a few years) to start semi-retirement with.

I’ve accomplished this via the following recipe, compounded over some 20+ years:

ETFs to generate retirement income

This is a personal finance triangle

Source: Canadian Financial Wiki.


At a high-level, this is pretty much everything you need to know and do to build-wealth.

So, at the top of the triangle, while investment portfolio value is fine and good, I’ve forever been a fan of growing income, spending the dividends and distributions, from what my portfolio generates.

Case in point: I recently published my latest monthly income update.

September 2022 Dividend Income Update

Part of our portfolio now generates close to $78 per day, every day, some of that tax-free, without any capital withdrawal rate whatsoever.

By “living off dividends”, as I work part-time, I can choose when to withdraw my capital, be strategic with our capital gains where they exist, and have a very predictable income stream for needs and wants.

Mark, be real. $28,000?

I can appreciate some readers may feel defeated when they see that number above. I know for a fact that bothers some poeple – they’ve told me so.

I don’t share it to frustrate or annoy anyone. Look at this chart. I hardly started there….

January 1, 2022 Dividend Income Target

You need to know it took us decades to get to where we are. We focused on that triangle above as a start and just kept on going…

I share these monthly income updates to inspire, to show others this is real progress in my life, and you have an opportunity to create your own income path – whether that is via individual stocks, ETFs, rental income, private equity, or anything else.

I don’t believe 1.9% is the new 4% safe withdrawal rate whatsoever. It’s probably somewhere in between if you want to be very conservative.

I do believe that figuring out how you will obtain meaningful, tangible income from your portfolio, instead of focusing on your portfolio value, is absolutely the right approach to take.

More Weekend Reading – beyond 1.9% for the new 4% safe withdrawal rate

My latest book giveaway is almost over, enter to win a free copy of Buy This, Not That here.

From The Globe and Mail, some reasons why the TSX will likely outperform the S&P 500 over the next decade (subscribers only). The jist of the article, and what to own for these returns:

“The 2020s mark a secular regime shift: higher inflation/rates/commodity prices and de-globalization, all of which are more supportive for the TSX vs. SPX. Historically, the relative performance of the TSX vs. S&P 500 has closely followed inflation and commodity cycles, and the 2020s’ expected inflation and commodity cycle should translate to the TSX outperforming over the next decade.”

I enjoy reading about the intersections between personal finance and investing, and workplace efficiency.

In Ray Dalio’s book Principles: Life and Work, the billionaire investor and founder of the largest hedge fund in the world, Bridgewater Associates, breaks down nearly everything he’s learned over the course of his career into a set of principles. Among them, these simple but effective meeting rules:

  1. Have a purpose. Too often I see this in my workplace – a meeting invite with no clear agenda let alone a hint about what the meeting is about in the meeting subject title. Sigh.
  2. Avoiding “topic slip”. This is challenging, and while having a meeting purpose with agenda should help, people do like to be heard and enjoy tangents. Consider a virtual parking lot or a whiteboard to note tangent ideas. Respect for the meeting facilitator and moderator helps too!
  3. Assign action items. Seems easy, and obvious, but taking personal responsibility isn’t always so obvious to all. 
  4. Align on decisions. This can be combined with meeting notes or use of a decision-log or other tools. Clear records, no matter how you do it, is key. 
  5. Strive for efficiency. Meetings are value-added when something is accomplished. From Ray: “While open communication is very important, the challenge is to do it in a time-efficient way.”

From the oldie but goodie file, I enjoyed figuring out what it might take to FIRE in Victoria, BC from my Money Mechanic friend. 

I enjoyed Dale Robert’s recent Sunday Reads, including some updates on his retirement stock portfolio. 

What’s the worst case scenario for stocks? A Wealth of Common Sense has some thoughts, likely a U.S. market down 30% or so could be expected. That means more pain ahead, maybe, possibly, we don’t really know!

Interesting MoneySense read from Jon Chevreau and the team there – on the subject of tontines – coming back into favour to support retirement income planning?

From the article:

“Tontines can be compared to life annuities—or for that matter, defined benefit pension plans. A tontine works by pooling savings from multiple investors. Essentially, those who die earlier subsidize the lucky few who live longer. 

Asked for a simple definition of a tontine, Guardian Capital managing director and head of Canadian retail asset management Barry Gordon said it is “a pool of assets that are shared by survivors over time.” In that respect, annuities and defined benefit pensions operate similarly, he said. Indeed, for Guardian Capital, a driving force was the lack of availability of defined benefit plans these days.”

Read on above for more on this interesting subject…

As always, check out my Deals page for any current offers and partnerships you can’t really find anywhere else!

Have a great weekend!


Further Reading:

Why the 4% doesn’t work for FIRE (Financial Independence, Retire Early).

I won’t follow the 4% rule myself, but if you want some quick math, it’s still a decent rule of thumb – with caution!

My name is Mark Seed - the founder, editor and owner of My Own Advisor. As my own DIY financial advisor, I'm looking to start semi-retirement soon, sooner than most. Find out how, what I did, and what you can learn to tailor your own financial independence path. Join the newsletter read by thousands each day, always FREE.

40 Responses to "Weekend Reading – Is 1.9% the new 4% safe withdrawal rate?"

  1. Hi Mark

    2 Questions on Bond \Bond Funds

    Q1: If global interest rates peak in 2023 and then plateau or begin to decline in 2024, would that be the time to jump back into BOND Etfs?

    Testing my understand: Bond ETF’s tend to go down in value in a rising rate environment , as the Bonds they contain are the old lower rate Bonds and new ones have a Higher rate.
    Bond ETF’s tend to go up in value as they are in a lowering rate cycle as the Bonds in the Fund have a higher rate than news ones issued.

    Being that it is obvious to anyone that rates are going up for a bit, Bond Funds and the portion of XBAL\VBAL funds in Bonds are a near guaranteed loser/drag for the near term.

    If Government Bonds hit 5-6% I might be interested in them, but not in an Bond Fund rather as individual Bonds, where if I wait I will get my coupon and the full value. I have never bought a Bond, is their a good primer on how an Individual investor could do this or is this a enigma exclusive to those in the financial industry?

    1. Hi BK,

      “It might” 🙂

      A few things impact bond prices: supply and demand, term to maturity, and credit quality. #4 and #5 are inflation and interest rates.

      Generally, investors who plan on holding their bond until maturity typically don’t need to worry about the movement of bond prices on the secondary market as they will be repaid their principal in full at maturity, barring a default. But for those looking to sell their securities sooner, an understanding of what drives secondary market performance is essential.

      Read more here:

      So, as long as interest rates go higher, and they might, I’m not sure it makes sense to own bonds. When interest rates flatten out, and when inflation comes down a bit more, it might make sense to own more fixed income. In an upside down world, I could see if interest rates go up to 4-5%, bonds become a bit attractive again; you’re buying low since bond prices have come down and coupon/interest payments stabilize to the bond holder.

      To your further point, as long as bond prices remain low, and therefore interset rates continue to rise as they might in 2023 and maybe, maybe stabilize in 2024 (?) then ETFs with a decent amount of bonds like VBAL or ZBAL or XBAL might suffer. You’re going to have to rely on heavily that is, the 60% stock portion to rise a bundle to generate returns.

      Just my thinking for the years ahead 🙂

      1. Good Stuff Mark, Thanks.

        My Dad had some sort of 10 year Government of Saskatchewan 9% Bond. Held till maturity, I thought that could sure make retirement less dramatic eh?

  2. A few years ago Andrew Hallam ran the figures on an early retiree couple, the Kaderli’s. Yes, they would have managed quite well since they retired in 1991, but he also took the figures back to 1973 when markets were falling and we had high inflation. On a 100% stocks (S&P 500 portfolio) they would have been wiped out by 2015 using an inflation adjusted withdrawal of 4% per year.

    “The balanced portfolio would have lasted longer. But even then, it faced a dim future.” Andrew’s words, not mine.

    I’ve been around long enough to see at least part of the Japanese bull market, and then the major decline starting in 1989. Before that decline Japan was experiencing average market returns of 20% per year since around 1950. MSCI says the average annual return on the Japan stock market has been 0.87% since 1994, and that’s not even inflation adjusted.

    Of course everyone keeps looking at the performance of the U.S. market over the last forty years, like this will last forever. Maybe, maybe not.

    1. Yes, I recall Andrew profiling them and visiting this couple in person over the years.
      I found this article from 2021:

      Certainly, they’ve done well with markets in the last 30 years.

      I don’t see huge equity returns myself. I just wrote Gary back on this thread in the comments, I expect about 6% on average, from 100% equities in the coming decades. Not an ounce more. I could be wrong of course but I simply don’t see (with demographic shifts, more retirees, less growth) whereby 10% or so earned over the last 10+ years in the U.S. stock market is ever going to happen.

      10-year returns of VTI recently were north of 11%
      Since inception, 2001, just over 7%.

      I’m banking on 6% at best and my portfolio and spending needs should be fine with 5% actually. Thinking 5-6% from Canadian market and same for the rest of the world.


      1. You could be right Mark, with your future return estimates. I wouldn’t know one way or the other. After forty years of investing I can’t predict the near or distant future so I don’t even bother to try. I only invest within my own personal circle of competence and that’s all. In my case, whichever Canadian sector in the taxable portfolio is lagging then one of the stocks within that sector gets any new money from a combo of savings and cash from dividends. Most recent add on was Telus in the Communications sector. In the TFSA and RRIF it’s just a case of re-investing quarterly in ZBAL. That’s about it.

        1. Ya, my crystal ball like you is always very cloudy 🙂

          I figure if I get up to 6% long-term equity returns, that’s good enough.

          I believe my “DOOMDSAY” scenario in my personal retirement plan calls for sustained 5.5% equity returns (with 100% stocks) on average with sustained 3% inflation on average for the next 40 years. I keep $50k cash in this scenario as well as an emergency fund that earns 1%.

          If things get worse than that, I have to cut some spending but otherwise it’s a die-broke scenario for me/us to age 95 and we still own our home/condo with no debt.

          I often wonder if things could be worse??

          Is ZBAL the only asset you own inside TFSA and RRIF?

          I assume you hold all your CDN dividend stocks in taxable then for dividend tax credit?


          1. Aside from some cash in both the TFSA and RRIF, yes it’s only ZBAL. Our non-registered account is larger than our combined TFSA’s and RRIF’s, so roughly this brings the fixed income allocation down to around 20%.

            In the 90’s our non-registered account held a mixture of Canadian, U.S. and foreign ADR equities. When I started the portfolio up again in 2003 after selling out in 1999 to have a big down payment on our house, I elected to go all-Canadian dividend companies. So yes, I went all in on the Canadian dividend tax credit in the taxable account, and I’ve had no regrets since.

  3. Hi Mark,
    Thanks again for sharing all of this great info. I personally love seeing your dividend chart and find it very motivating! We’re currently at 16k in dividends per year. Love seeing that if I follow your chart we could be at 31K per year…Can you remind me (or is there a link to think info) how much your contributing into your investments per year? Will this number increase over the next 8 years or stay the course?


    1. It’s motivation for me too!!

      Glad I can inspire, awesome to you and your journey.

      Happy to share:
      1. I/we max out both TFSAs, every year. So, in Jan. 2023 we hope to contribute $13,000 or $6,500 each.
      2. I make a few strategic purchases during the year inside taxable. Usually $5k or so. Some years more, some years less since only so much money coming in to go around.

      The rest of the growth comes from dividend increases and dividends being reinvested every month and quarter.

      Will this number increase, #1 and #2 above?

      Given we are starting to consider semi-retirement soon, the only thing I can hopefully bank on is maxing out the TFSAs in 2023 and 2024.

      We should be past $30k or $31k after that and then consider living off our portfolio + part-time work then in our early 50s.


      More details about our FI plan here – a post I hope to update in a few weeks:


  4. I believe people who have retired in the last couple of years with growth portfolio will need to drop there withdrawal to about 2 percent until market corrects. With a dividend portfolio your income has remained the same or increased as long as the shares are not sold and just taking out the dividends . Since 2009 the markets have been going up the next few years will be like the 80’s , buckle up and buy good stocks and we will come out in good shape .

    1. Theoretically if retirees had between 1-4 years worth of living expenses sitting in cash (I know, four years of expenses is too much to be sitting in cash – but two years might suffice), they could potentially ride out this bear market without having to withdraw anything form their portfolio. But yes, the next best thing is adjusting the withdrawal percentage down. This is why I love all this discussion. So many ideas!

      1. Ya, up to 4 years is too long and will get eaten away by inflation and opportunity cost for stock returns. That said, I think keeping some cash is always smart – for example – you could be buying equities now. It really depends on your ability to ratchet back spending if needed. I hope to. Some can, some can’t based on savings.

        Thanks Dreamy!

  5. There is a talk by Pfau and French at the Canadian Financial summit about the 4% rule and it didn’t even sound like they used this rule for retirement planning. I don’t know what i’ll do when i retire.

    1. Very smart to avoid any 4% rule 🙂 It’s a nice rule of thumb, for sure, but that’s where it ends.

      I assume you can rely on some CPP and OAS Christina, which is good, so your savings/investments can go from there?

  6. Wow, if 1.9% is the safe withdrawl rate than the calculus of retirement really changes. People would be wise to prioritize a part-time job in their retirement years (hopefully one they enjoy) or at the very least focus on finding a role with a pension in your younger years.

    Given the uncertainty involved, it seems gaurunteed that many retirees will have drastically undersaved or oversaved for their retirement. Could be a good argument for annuities, a topic I don’t see discussed much in the FI space.

    1. Yes, FIWOOT for the win – just in case 🙂 Most Americans don’t have much in the way of any retirement savings. I suspect we’re a bit better here in Canada but certainly far from perfect. Investors would be wise to read-the-room and invest in income producing assets and keep some cash handy to buy more such assets in the coming years. Higher inflation and some higher rates are here for at least 1-2 years IMO.

  7. Deane Hennigar (RBull) · Edit

    If we truly get to 1.9% withdrawal rates I’d say a lot of people will be in for a lot of hardship, and our government debt will rise enormously to fund the fall out, unless taxpayers don’t rebel at the idea of big tax hikes.

    1. Yes, agreed as well. I don’t think this is realistic at all but I would say that folks with a heavy bond portfolio in the coming decades could be in trouble. I don’t think I would enter retirement or semi-retirement with anything less than 60/40 or even 70/30 these days. Run from any advisor hoarding bonds. A bias to dividend paying equities, some GICs (yielding 4-5%) and some cash/cash wedge is where things are headed IMO.

      1. Deane Hennigar (RBull) · Edit

        Hard to say what will happen. Equities “seem” destined for lower returns longer term, but also hard to imagine longer term rates staying up higher.

        Haven’t owned bonds for around 18 mths now. Do have some Gics paying reasonable now. HISA not bad either.

        1. I think a solid mix of dividend payers, growers, and GICs is very smart but I’m biased because I’ve been thinking and writing about that plan of mine for years now. I won’t have any GICs near-term as you know but I hope to have my cash wedge intact ($50k) inside my corp. and various personal savings account ready to roll within a year. Almost there inside corp. in fact which means I’m going hard on TFSAs, RRSPs and taxable accounts in 2023. Pedal down.


          Out for a bike ride soon. Need some exercise!

          1. Hi Mark.

            Would you consider moving to a lower cost country for retirement?
            It seems reasonably to live in Portugal for US$3000/m (average income is $1200) and have US$1 million portfolio to rely on.


  8. Sounds like old news under the past decade of historically low interest rates, and especially now with moving targets of recent sharp increases in inflation and central bankers’ rates! Higher inflation and interest rates will be with us for several years to come and likely revisions to a theoretical “safe withdrawal rate”.

    1. Totally agree, Michael = higher inflation and interest rates will be with us for several years to come….investors would be wise to consider what that means for their retirement income streams.

  9. Hi Mark

    Great article.

    Karsten – who is known for his in-depth analysis of safe withdrawal rates – just posted an article that suggests SWRs of 4% or even a bit more may be alive and we’ll due to the market downturn reducing equity valuations and the associated Schiller CAPE (price-to-earnings ratio) which he shows has a major impact on portfolio success rates in the long term, as well as sequence of returns risk.

    Would be interested kn your thoughts as well:

    Peter from Kingston

    1. Karsten’s work is impressive to say the least. You might be interested I interviewed him too!

      I don’t like the 4% rule very much, I think it’s overused and superficial when it comes to drawdown rates. 4% is far too low for someone with lots of assets in their late-60s retiring now. 4% is too high for a 30-something who just “retired’ and is hustling about a book about early retirement 🙂

      Once you get through the first 5-years in retirement with your capital largely intact, I think many retirees can consider a variable percentage withdrawal strategy that is far superior than the 4% rule. Essentially, spend more $$ in good years, ratchet back some spending in bad years.


      Those are some quick thoughts! 🙂

      Feedback, happy to hear it. How are you navigating any drawdown?


      1. Hey Mark

        I’m 100% invested in Vanguard VSP, mainly in RRSPs to support a CoastFI strategy, which I implemented 4 years ago when I turned 50.

        The good news is that I have very secure part-time work combined with occasional consulting income, so zero drawdowns anticipated from my portfolio for the next decade (or more).

        I’ll also have pension, CPP, etc. Ditto for my spouse.

        So when there’s a market drawdown, I simply ignore it, and try to pick up more Vanguard units, plus continue with pension contributions (10% of income, fully matched).

        Will be focusing on TFSA investing going forward as the RRSP will be depleted by the dreaded RMDs starting in my early 70s – I am hoping that the starting age for RMDs will be extended sometime in the next decade – any thoughts on this?

        Keep up the great work, Mark!

        1. Interesting = “I’m 100% invested in Vanguard VSP” – I don’t know many 100% indexers. Simple but very effective as you know.

          CoastFI/FIWOOT (Financial Independence, Work On Own Terms) is where I’m headed 🙂

          No doubt you sound set, kudos, with CPP, etc. for both of you.

          RMD as in required minimial drawdowns/withdrawals?

          On that, I’ve found that slow, methodical RRSP/RRIF withdrawals are better than hoarding cash until the end. A lot of retirees are making slow withdrawals now and funneling RRSP/RRIF assets into TFSA. Those are some high-level thoughts.

          Back to you!

          Thanks for the kind words 🙂

  10. This may not be on topic Mark but I decided to vent on your site —— sorry! Last October,November and December we switched from an all dividend stock portfolio to VRIF, VBAL and VGRO as we are in our middle 70’s and we thought safety would be better served. Well as you know we have taken a real sxxt kicking. Not only have the ETF’s tanked but so has our income from our investments. I hope history repeats and things begin to improve sooner than later. Thanks for reading!

    1. Hang in, Gary. We have no idea what the financial future holds. VRIF is likely to deliver distributions and things will come back for VGRO eventually. Any reason you have both VBAL and VGRO? Just curious.

      1. It must have come to me in a dream. I couldn’t decided on which one so I put a third in each one. My income has been cut in half so I’ll have to decide what to redeem in January. We had enough cash for a year but I don’t think it will be enough. We could live on the income but we are getting older and our bucket list isn’t complete so we’ll bite the bullet and carry on.

        1. Things will eventually bounce back, Gary. Could be months, could be years. I wish I had a crystal ball for you and others. I really don’t.
          Have a good plan and stick to it as best you can. I think equity returns will however be lower in the coming decades. Maybe 6% for a 100% equity, global portfolio to be honest. No 10% returns on average for sure, that’s just me maybe. I’m conservative.


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