That chart, I believe, does not take into account dividend reinvestment. I picked their worst datapoint on a twenty year horizon, '61-'81. I plugged January '61-January '81 into this calculator [1]. With CPI adjustment turned on, the annualized return with dividend reinvestment was 2.3%. That's the worst twenty year period in history.
Another difficulty with this analysis is that retirees do not withdraw lump sums twenty years after they retire. They withdraw smaller amounts each year. I have created a spreadsheet to simulate a retirement starting in 1961 [2]. You were probably feeling a bit nervous in '81, with your nest egg down to two thirds of its original size. But even in this terrible, terrible scenario, by following the 4% rule, you arrive at the same amount of real wealth you started with after thirty years. If you were lucky enough to live for forty years of retirement, you're two and a half times as wealthy as when you began.
Please let me know if you see any errors in my calculations. I've made notes on how I arrived at each number in the comments on the columns starting in year 1961.
The actual worst year for early retirement was '65, when a pure 4% rule portfolio would have failed after twenty five years. But, if you build some engineering tolerances into your spending plans, then even that was survivable [3]. Engineering tolerances in this case are meant to refer to leaving yourself room so that you can spend less if you must.
Another difficulty with this analysis is that retirees do not withdraw lump sums twenty years after they retire. They withdraw smaller amounts each year. I have created a spreadsheet to simulate a retirement starting in 1961 [2]. You were probably feeling a bit nervous in '81, with your nest egg down to two thirds of its original size. But even in this terrible, terrible scenario, by following the 4% rule, you arrive at the same amount of real wealth you started with after thirty years. If you were lucky enough to live for forty years of retirement, you're two and a half times as wealthy as when you began.
Please let me know if you see any errors in my calculations. I've made notes on how I arrived at each number in the comments on the columns starting in year 1961.
The actual worst year for early retirement was '65, when a pure 4% rule portfolio would have failed after twenty five years. But, if you build some engineering tolerances into your spending plans, then even that was survivable [3]. Engineering tolerances in this case are meant to refer to leaving yourself room so that you can spend less if you must.
[1]: https://dqydj.com/sp-500-return-calculator/
[2]: https://docs.google.com/spreadsheets/d/1VXYx12gBECG537mswqRM...
[3]: http://www.gocurrycracker.com/the-worst-retirement-ever/