What caught my eye this week.

A long-time Monevator reader asked me this week why we haven’t written something in the vein of the Covid crisis Do Not Sell special that inspired a thousand (okay, four) T-Shirts?

The quick answer is – as my co-blogger The Accumulator said on that day in March 2020 – we don’t like to get involved in day-to-day market commentary. Especially not for passive investors.

This isn’t just because we don’t think we have much insight into where the market will go next.

(No great humility on our part, we think almost nobody has that edge).

Rather it’s also because we believe it’s unhelpful for most people to try to make the market timing decisions that thinking you know better can inspire.

Calm tweaks to allocations decided on a Sunday morning when the markets are closed are one thing.

Dumping half your stocks on Monday because a man on YouTube is shouting: very different.

Chronic disability

But there’s a more difficult explanation as to why this isn’t a Covid crash moment to my mind.

In short some of the drivers of this US sell-off are arguably more serious than a global pandemic. At least from an investing perspective, but maybe on a long-term human history view, too.

That’s because something is happening in the US that I don’t think we can dismiss as business-as-usual.

True, it’s too soon to know what America apparently going rogue will mean for geopolitics and trade.

And for sure if after all the shouting we just have a bit more defence spending in Europe, some self-defeating but limited tariffs, and an even more winner-takes-all society in the US, that’s hardly existential.

But if this does escalate into a 1930s-style tit-for-tat global trade war then we can probably look forward to a deep recession, if not a depression.

And that’s to say nothing of the obvious threats to stability of a truly disintegrating global order, if that came about too.

The nukes haven’t gone anywhere.

No vaccination against economic illiteracy

So how should markets price in all this?

Probably much as they are is my best guess. The declines seem pretty orderly to me.

That might sound odd after one of the fastest circa 10% corrections in US stock market history – and against a cacophony of ‘hold the lines!’ from US commentators that mostly make things feel worse.

But we could expect a lot worse given the potential lasting damage to growth and cooperation that we’d see from a Trump administration that truly did what it’s saying it’s going to do.

Without wanting to re-litigate every turn of the pandemic, once it was clear that most people recovered from infection and that the oldest were the most vulnerable, it was always likely to end relatively quickly.

We had a ton of medical history to show that.

Millions might die – did die – and the upheaval could have – is having – long-term social and political consequences. But global productivity didn’t have to be indefinitely impaired.

However that’s not true of destructive nationalistic trade wars.

The global economy will surely become less efficient. And nationalism goes hand-in-hand with conflict.

I hardly need to state the worst cases from the last century to demonstrate where this could lead.

Do not sell. Probably.

Of course most people shouldn’t sell on this escalating drama.

But that’s because a strategy of regularly trying to make such decisions will probably reduce your long-term returns, due to poor trading decisions.

It’s not because hindsight won’t show us that selling this particular time and buying back in one, five, or ten years time wasn’t retrospectively the right move.

However if you have that kind of foresight, you probably already know about it. But nearly everyone doesn’t. And nobody is even close to perfect.

(Spoiler alert: the shouting bloke on YouTube doesn’t make the grade.)

Never-ending stories

Remember too that – as always – there’s a confluence of factors behind this recent sell-off.

China unveiling of its supposedly el cheapo DeepSeek AI innovation has blown the froth off the largest US tech firms. These had become such an enormous share of the market – as discussed here and elsewhere – that even small de-ratings have huge consequences on the index level.

Then there’s the US exceptionalism story that was at its height by the end of 2024.

This basically boiled down to ‘US stocks go up the most because US stocks have gone up the most’.

I’m serious!

I could write a fancy treatise about capital going to where it’s treated best or the European regulatory burden, the privilege of having the world’s reserve currency, or the role of Silicon Valley VCs and high-skilled immigration in keeping North America on the cutting-edge.

But honestly, from a market perspective I think US stocks went up a lot for a very long time and that this probably sucked in too much money in the expectation of even more.

Whereas now investors are slashing their US holdings by the most ever, according to Bank of America.

Money is piling into a fiscally-emboldened Germany as it reportedly flees the US.

Global fund managers are even – pass the smelling salts – putting more money into the UK.

Finally, if we take Trump and Elon Musk at their word (you do you) then the US has embarked on an enormous shrinking of the state, ultimately in an effort to reduce its vast deficit and national debt.

Compare that with Germany – finally taking the spending brakes off – and you could paint everything we’re seeing as yet another QE/fiscal story. Capital leaving a retrenching US to go where money is getting easier in Germany.

Crashing bore

Could the US fall to proper bear market levels? Could it be down 20-30% by next year?

Yes, I think that’s quite possible.

But then again, it’s always possible. No need to send me a prize if it happens.

It’s nothing likely a certainty, however. And in some ways improbable.

American household and company balance sheets are in good shape. Meanwhile the US Central Bank has shown little stomach for deep drawdowns, so we could expect some kind of emergency rate-cut package to take the edge off any falls.

And this is not to even get into exactly what the US administration will do, versus how much is noise.

Trump is such a chaos agent, you could even argue his reputation has made this latest drawdown more orderly than it would be under a traditional US leader with a similar trade agenda.

While the enthusiasm for US tech stocks, say, got very giddy, I doubt hedge funds and other massive pools of capital went all-in on business as usual following Trump’s election last November.

Which in turn implies such institutions wouldn’t have gone overboard with leverage and the like, either.

It was perhaps telling that Bill Ackman said in his recent Pershing Square report that the fund didn’t put on any of the asymmetric bets that have made it billions previously. For Ackman’s taste the options and other securities Pershing Square uses to put on those trades never got cheap enough.

Which might tell us markets, perhaps surprisingly, weren’t overly-complacent about risk in 2024 after all.

Reinvigorating reading

We’re now going deep into the weeds for the tastes of most readers, though. So I’ll conclude with three good articles on the recent wobble.

They are well worth a read if you’re anxious:

• The price of admission – Charlie Bilello
• A correction, not a crisis – Optimistic Callie
• If equity markets didn’t fall as much their returns would be lower – Behavioural Investment

Have a great weekend!

[continue reading…]

Every month my sister sends me angry abuse over WhatsApp – although happily it’s not directed at me:

“Look at these idiots! Their stupid smug faces. What will they do in there every night? Binge watch GoggleBox while drinking cans of Stella in the fifth bedroom and then get lost looking for the third bathroom.”

Strong stuff, considering the object of her ire is invariably just whatever average-looking couple won this month’s dream property in the Omaze house lottery.

But my sister isn’t a misanthrope. Having a mock moan about the lucky winners is part of a ritual for her.

Cathartic I suppose. Maybe it’s partly what she pays Omaze £10 a month for.

Grand designs

After a year of these texts I took the bait and signed up to the same raffle myself.

Not to grump, mind you. I don’t need any excuses for that. 

Why then?

I suspect it was to give myself permission to daydream as materialistically as any Kardashian, albeit only for 15 minutes rather than for half-a-dozen TV series.

Omaze’s £3-5m properties are not so much out of my league as from another sport: one of those bling-y affairs with ‘World Series’ in the title.

And truthfully, even if I did have the money to buy an Omaze property for myself – so a net worth of £10m or more, by my reckoning – I don’t think I would.

There’s the running costs, the alienation of my friends. I’d rather have more investing money to play with.

So it’s more likely that a cute Kardashian with a crush is going to stalk me for six months than that I’d ever inhabit a ‘stunning six-bedroom country estate with its own luxury spa, wine cellar, and stables’.

But I do like nice things and I love nice homes.

And for £10 a month I get to be somebody different for a moment.

I’m not in it to win it

You might be shocked to hear that your supposedly financially astute friend on the Internet does something as dumb as playing a lottery.

But I mostly think it’s £10 well spent.

Besides the enjoyment factor, I suspect it’s a pressure valve that releases a bit of steam from my always being so returns-orientated with almost all my money for the last 30 years.

“Why not just look at the photos of each month’s prize home and save yourself £120 a year?”

Because I’m not stupid. Of course there’s statistically almost no chance of me winning. But the odds aren’t zero. And that makes all the difference.

“Buy a national lottery ticket instead. The odds are better and you can live wherever you like if you win!”

That’s very rational of you. And I’d agree if I was trying to maximise the expected value of my £10-a-month payment in financial terms.

But I’m not, because the expected value is nearly zero whether I play the lottery or do the house gamble.

If I was being sensible, I’d probably put the £10 a month into buying more Premium Bonds.

Even there though, the expected return on every incremental £10 is still near-zero. Only as the extra cash piled up over the years to tilt the odds on my total Premium Bond pot would I be having my cake (the chance of winning a million) and eating it (prizes won with average luck equating to a decent interest rate).

But that’s already more thought than I want to put into this silly £10 a month I throw away.

I just want to gawp at the ‘rustic fire-pit where you will gather your friends for long conversations overlooking the sea’ and dream.

Spendy and still thrifty

Everyone has a few things like this. They don’t make sense but they are fine to do anyway.

Writers as diverse as Ramit Sethi who will famously Teach You To Be Rich and Ermine over at Simple Living in Somerset are both totally okay with you spending some money on things that bring you joy.

For Sethi, penny-pinching is pointless. What matters is to find a way to support and live the life you love, rather than sleepwalking into a default mode of living.

Sethi is mostly against home ownership at today’s prices, for example. But supposing nothing brings you more pleasure than great tailoring? Then he has no problem with you spending thousands on a made-to-measure suit.

Ermine calls this living intentionally. He’s vastly more frugal than Sethi. Even so, I suspect he has a garage full of electronic gizmos that 95% of us would consider a total waste of time and money. And Mrs Ermine grows her own vegetables that would probably cost a fraction of the price in the shops.

More power to them! These are things that bring them joy and the relatively modest – and, crucially, easily afforded – cost doesn’t matter.

Save the money elsewhere.

Car-less and carefree

So much of the angrier disputes in the personal finance space come down to clashes that look like arguments about money but are really just squabbles about taste.

Even the almost irreproachable Mr Money Mustache is, to my mind, a little too harsh about driving what he calls too-big and too-expensive clown cars.

Don’t get me wrong! I have zero desire to spend any money on a clown car myself.

I’ve never owned even a normal car, and when I once worked out how much this had saved me – living in London, where life is fine without a car – and what those savings were worth compounded via my active investing, the number was so outlandishly high that I thought I’d see more readers rage-quit Monevator over it than Brexit.

However for many people – the cliché being men around my age – a dream car is something they’d willingly forego a thousand restaurant meals to own.

Now this is where I’m supposed to cite the sticker price of a truly expensive and obscure luxury vehicle.

But honestly I have no idea.

Is a Skoda Esprit a thing? What about an Aston Martian?

Romantic interlude: the French connection

The only time I recall ever wishing I owned a car was when I was 22 and doing badly at romance.

Still to develop the awesome armoury of lady-killing prowess that I can bring to bear today (note: my exes’ recollections may vary) I’d spent weeks trying to attract the interest of a disinterested French girl in a murky watering hole in a yet-to-gentrify Kings Cross.

We often ran into each other, thanks to our shared love of obscure indie bands. She even bought a copy of my fanzine!

And then one night she was actually with me at the bar, laughing – truly – at my jokes about Sartre, and furrowing her brow at my oh-so-insightful comments about the fusion of grunge and proto-BritPop.

So funny, she laughed, putting a hand on my shoulder.

Had I heard about the after-party in Hackney?

Obviously I hadn’t. But I mumbled something non-committal.

Cool, so did I have a car?

In those long ago pre-Uber days, getting in and out of still-dodgy Hackney was best done in a helicopter if you were a young French women living her best life in the capital.

But alas, I didn’t have a car.

A flicker of something on her face, and later she smiled at me not unkindly as she left with an up-and-coming journalist we both knew.

“He’s got a car!” she whispered with a wink over her shoulder.

Car parked

So yeah, there was that. And considering the episode still lives rent-free in my head after nearly 30 years, maybe I can’t truly say not owning a car has been 100% profitable.

But on the other hand, well, everything you’re thinking about a relationship built on wheels…

Plus of course I’ve got my bigger financial freedom fund at my back thanks to living a car-free life.

So no, I didn’t need to spend a cumulative six-figures over the years on cars.

Spending stereotypes at dawn

Besides, if I had chauffeured that French belle to somewhere off the Tube map that evening, then my life might have turned out completely differently.

Which would mean I might not have met my lovely girlfriend of today!

Although…while I’d be immeasurably poorer in uncountable ways if such an unthinkable outcome had occurred – okay, yes, she recently subscribed to Monevator – at least it would have saved us some friction over money.

You see my girlfriend, S., likes to buy clothes.

Fair enough, except she doesn’t seem to wear them very much.

I don’t mean she’s a nudist – although she is more curious about those beaches than I am.

Rather that I’m regularly sent photos of new outfits being tried on – or I’ll see them on her social media – but by her own admission most of these purchases are lucky to get an outing once a year.

Dressing down

To me, buying clothes not to wear them is ridiculous. If the sunshine holds, then this afternoon I’ll be heading out in my favourite multi-pocketed shorts that I’ve been wearing every week in summer for most of the past half-decade.

And let’s not even get into the environmental consequences of wanton clothes purchasing. (Here I fully agree with Mr Money Mustache on the ecological costs of clown car proliferation, too.)

But wait! I’m seeing her to-me-wasteful spending through my own lens of what matters.

I’m not looking at some £100 dress – unworn so far – through all the phases of the joy it’s bringing…

…the hunting, the rejecting, the anticipation, the looking at herself in the mirror and being happy with what she sees. The whimsical thoughts about when she might wear the dress and how it’ll make her feel.

S. is a bit younger than me. Long-time readers will know I think young people are already rich. A nice white shirt and well-fitted jeans and I think she’s a knockout. The rest would look better to me in her ISA.

But so what? This isn’t about me. There’s more in her ISA already than for many her age. And despite fairly modest earnings (by London standards) she’s also got no debt and even helps out her parents with their mortgage.

Who am I too judge an extra few dresses a year?

What’s more, for her part S. believes I put too much weight on my living space.

I book nicer hotel rooms than I need to – and I’m far more precious about my flat, which I mildly splurged out on to recreate the vibe of an upscale boutique hotel.

A hotel that S. would never pay a premium to stay in herself.

So who’s right?

Neither of us, of course. It’s pointless arguing about this stuff, so long as the major financial bases are being covered.

Nobody is right or wrong when it comes to how you waste money.

At the margin

I could conclude with a few academic studies that look at how best to spend your money.

Draw practical conclusions from research papers like To Do Or To Have or Spending Money on Others Promotes Happiness – or books such as The New Science of Smarter Spending.

But I called this post How To Waste Money for a reason. If I wanted to riff on How To Maximise The Impact Of Every Marginal Fifty Pence You Spend then I’d have done so. (Or more likely gone for a walk).

My point is I believe it’s totally okay to waste a bit of money now and then, provided you’re solvent and investing wisely.

Just be sure to waste money on things that are still – however silly – worth it to you.

Then save most of the rest.

Don’t sweat the small stuff

I guess this whole article might seem irresponsible to some people in the personal finance sphere.

But I write it in the certain knowledge that – like me – most Monevator readers are far more likely to suffer from Buffett’s Folly than from going crazy on the horses.

To my mind I’ve never been one for stinting on every penny, or for over-indexing on the latte factor.

But ‘to my mind’ is doing a lot of heavy lifting there.

The truth is I still rejoice at buying bargains with yellow stickers in my local M&S, despite my FIRE status.

And I’ve never had to budget, because I hugely underspend quite naturally.

Since my 20s I’ve always ‘paid myself first’ by putting a chunk of all I earn into savings and investments.

Indeed if I have any actionable financial advice to share today then it’s to automate your savings. Then you don’t have to sweat the lattes when it comes to spending whatever is left each month.

But you almost certainly do that already. And we’re in the minority.

How many would-be house raffle entrants do you think would write 2,000 words to justify a £10 flutter?

Answers on a postcard – although a postage stamp would suffice. The number is vanishingly small.

The luxury of losing a little

To conclude on a more downbeat note to show I haven’t suffered some kind of brain event in arguing for all this frivolity – a quick tale from my gym.

I’ve got to know one of the cleaners there quite well over the years.

The other day I came across her in the cafe with a bunch of lottery tickets spread out over the table. There must have been at least a dozen. She was checking them off manually against the results on her phone.

My first instinct was to tell her she should buy her tickets online so the checking is done automatically. No risk of missing out that way.

But after five decades I’ve finally learned to occasionally keep my mouth shut.

This was clearly part of her ritual. Going through the numbers with a pen and imagining with every new entry that it could be her.

So far, so similar to my Omaze-ing £10-a-month stupidity.

The difference, clearly, is what our little bets represented versus our respective financial situation.

If she buys this many tickets every week, then that must eat up a meaningful percentage of her disposable income.

Maybe even of her net worth, I don’t know.

I guess if she was a family member or close friend I would have lectured her. But it wasn’t my place, and instead I learned something.

“You have to try to win to make things different, don’t you?” she said in her heavy accent with a smile. “You have to hope and dream.”

I’m effectively an opt-in-only runner in the rat race. She’s not going to join me by saving and buying a tracker fund with – what – £50 a month? Not at her age anyway.

Maybe those lottery tickets are worth a lot more to her than to me after all.

Search “What is the UK safe withdrawal rate?” and the results are disappointing. Google’s AI response offers 4%, which as we’ll see is just plain wrong. Meanwhile it’s hard to get a straight answer from the humans amid all the financial content marketing.

Indeed there’s plenty of sketchy chat about the 4% rule. It’s a much-misunderstood figure – predicated on US numbers that aren’t reflective of the data from most other developed world countries, including the UK.

This matters, especially considering that some US financial experts believe the 4% rule may be too high even for Americans.

Investigating the UK safe withdrawal rate (SWR) provides useful counter-evidence, a sober corrective, and a uniquely British perspective on not running out of money in retirement.

Not safe! I need to mention that the so-called ‘safe withdrawal rate’ is a complete misnomer. Applying the SWR rules naively does not guarantee safely completing your retirement with money still in the bank. A SWR number is just a rule-of-thumb. It may not be enough to keep your portfolio off the retirement rocks. For that reason, some prefer the term ‘sustainable withdrawal rate’. It’s the same metric, minus the misleading advertising.

Okay, before we get to the UK’s SWR number, let’s recap what the safe withdrawal rate actually is and does.

What is the safe withdrawal rate?

Figuring out a safe withdrawal rate is useful for:

• Retirees who want to know how much they can withdraw from their pension pot each year, while minimising the chances of exhausting it over some given timeframe. (Say 30 years).

• Anyone wondering: “How much should I put in my pension?” A realistic SWR helps you calculate how big your retirement savings should be before you tell The Man where to stick it.

The SWR itself represents the maximum percentage of your portfolio you can withdraw as income in the first year of retirement.

For example, a 4% SWR suggests a £500,000 portfolio can sustainably support a £20,000 annual income.

After year one, you discard the SWR and simply multiply your established income by annual inflation to calculate the next year’s income. Hence you effectively live off the same real-terms income every year. So £20,000 in this example. 

The crucial thing is your initial withdrawal rate should be set low enough (based on historical precedent) that you can draw a stable real-terms income for the rest of your life, barring catastrophe. 

How is the safe withdrawal rate calculated?

The devil is in this detail! The safe withdrawal rate for the UK or any other country is derived from backtests of asset class real returns.

Torturing the data reveals:

• The highest withdrawal rate that could have been sustained…
• …for a particular retirement length, by a particular portfolio…
• …during the worst sequence of returns faced by retirees…
• …that’s captured by your chosen historical record

Got that?

For example, the famous 4% rule was originally formulated by financial planner William Bengen.

Bengen discovered a US retiree should choose 4% as the maximum safe withdrawal rate (known as MSWR or SAFEMAX).

The small print 

Bengen’s 4% number was – and is – conditioned on:

• A 30-year retirement. Longer retirements equal lower SWRs.
• A 50/50 US equity/bond portfolio. Different asset allocations and assets produce different results. As do different datasets. 
• US inflation. It’s been fairly benign in comparison to the UK experience.
• Not incorporating costs and taxes. We pay those in the real world.
• The portfolio surviving the worst-case returns in recorded financial history. Clairvoyants can withdraw more if they know they’re living through better times. They should withdraw less if they predict fortune will deal their plans an unprecedented blow
• Annual rebalancing. Change the rebalancing rules and you change the number.
• Withdrawing the same inflation-adjusted income every year for the length of the retirement. No more, no less.

From that cluster bomb of caveats we can deduce that:

• Change any of the conditions and you change the SWR.
• The SWR doesn’t account for unparalleled future scenarios. (Especially if your only sample is from the most successful stock market on Earth.)
• SWRs are just heuristics. They need to be modified to suit real-world circumstances.
• Costs and taxes reduce your SWR.
• You may be able to improve your SWR number by using different asset allocations from those usually incorporated into standard SWR tests.
• US historical returns are exceptionally good. They fail to capture the worst-case scenarios embedded in other country’s datasets.
• There’s no reason to suppose that the US will continue to enjoy such favourable conditions.
• Retirees in other countries are ill-advised in adopting the US SWR simply because they can invest in US assets.

I’m not trying to put you off using an SWR here. Far from it.

The safe withdrawal rate lies at the heart of my own retirement planning.

But the 4% rule dominates this conversation like a big orange cheeto, so I want to lay out why that number can’t be taken at face value. 

As far as I’m concerned, the starting point for British residents should be the UK’s safe withdrawal rate, not America’s.

The rest of this article will hopefully show you why. 

Safe withdrawal rate UK

Traditionally, SWR studies calibrate on 30-year retirements, sustained by annually rebalanced equity/bond portfolios.

So we’ll start there and aim to improve our withdrawal rate, by applying some reasonable tweaks, later in this series. 

Here’s the chart of UK SWRs from 1870 up to the last 30-year retirement cohort, the class of 1995:

Data from JST Macrohistory1, FTSE Russell, A Millennium of Macroeconomic Data for the UK and ONS. March 2025.

Each datapoint shows the maximum SWR that a retiree could employ to enjoy 30-years of inflation-adjusted fixed income withdrawals, for a retirement that began in any year from 1870.2

For example, the graph shows us that someone retiring in 1870 could initially withdraw 7.5% from their 60/40 portfolio without emptying it before the 30-year retirement’s end on New Year’s Eve 1899.

The best year was 1975 for most portfolios.3 The class of ’75 could have larged it up with a 15.9% SWR on a 100% stock portfolio. (But note: that’s not as amazing as it sounds because UK equities crashed 73% between 1972-74. So by 1975 the retirees had 100% of a lot less portfolio than they had in 1972.)

The worst times for Brits to begin their golden years were 1910 and 1937 (depending on your asset allocation). 

Safety first

1910 and 1937 are the SAFEMAX years. Their numbers give us the highest SWR that would have sustained the portfolio for the given length of retirement, across all historical scenarios.

The best SAFEMAX UK safe withdrawal rate is 3.1% for 30-year retirements. 

In other words, our version of the 4% rule in the UK is the 3.1% rule.

Everything’s bigger in America!

And you only drum up the 3.1% SWR using a 100% equities portfolio, too.4 The more bonds you add, the worse things get.

The 3.1% rule

I really think the 3.1% rule could catch on, you know. But before I get carried away with the trademarking, let’s find out how much it squeezes your income relative to the 4% rule.

• £500,000 x 3.1% = £15,500 sustainable real income.
• A 4% SWR provides £20,000.

What size portfolio do you need to support £20,000 with a 3.1% SWR?

• £20,000 / 3.1% = £645,161

That’s a sickener. Your starting portfolio needs to be 29% larger with the 3.1% rule versus a 4% SWR.

But hang in there! It will get better, but first, it’s gotta get worse.

Here’s the full safe withdrawal rate UK table including longer retirement periods:

Safe withdrawal rate (%) UK equity/bond portfolios by retirement length 

Years / Equities	30	35	40	45	50
40%	2.6	2.3	2	1.8	1.7
50%	2.8	2.5	2.2	2	1.9
60%	2.9	2.6	2.4	2.2	2.1
80%	3	2.8	2.6	2.4	2.3
100%	3.1	2.9	2.7	2.5	2.4

These SWRs delivered a 100% success rate. SWR research typically includes 0% to 20% equity portfolios. But I haven’t because I suspect they matter to few Monevator readers. For similar reasons I’ve excluded shorter retirements. It won’t be hard for me to dial ’em up if anyone wants the info.

Doubtless many Monevator readers will be hoping to stretch out their mortal coil a little longer than 30 years. And the trade-off is clear: Mo years mo money.

Sorry my Gen Z friends.

You’ll also notice the SWR uptick gained from reducing bond exposure (i.e. holding more equities) is quite large.

The 100% equities SWR is fully 35% larger than the 40% equities number for a 40-year retirement.

That’s very different from the optimal US withdrawal rate, which includes a substantial bond allocation.

Wade Pfau calculated that any US equity allocation between 20% and 44% lies within 0.1% of the best SWR for a 40-year period – while I previously found that an 80% global equities allocation was best for 30-year or longer retirements with the Timeline dataset, with 70% being a hair’s breadth behind. 

We’ll look at a broader range of asset allocations in more depth later in the series.

Charging ahead

Finally, we best not forget portfolio charges. The rule of thumb is:

• Calculate your costs as a percentage of your portfolio’s value
• Reduce your SWR by half that percentage

For example, the running costs of our No Cat Food retirement portfolio are around 0.3%. That includes ETF OCFs, platform charges, and dealing fees.

So using that as a guide, we’d have to knock 0.15% from our chosen SWR.

Why Brits shouldn’t use the US 4% safe withdrawal rate

You can buy an S&P 500 ETF and US Treasury bonds. So why can’t we Brits just declare for Team America and supersize our SWR?

Because it doesn’t work. Here’s the SAFEMAX table for portfolios formed on US equities (unhedged, GBP returns) and US Treasuries (GBP hedged).

Safe withdrawal rate (%) UK: US equity/US Treasury portfolios

Years / Equities	30	35	40	45	50
40%	2.8	2.7	2.5	2.5	2.4
50%	2.9	2.8	2.7	2.6	2.6
60%	3	2.9	2.8	2.7	2.7
80%	3.1	3	2.9	2.9	2.8
100%	3.2	3.1	3	3	2.9

SAFEMAX year is 1969 except for 40/60 portfolios – 35-50yr retirements, SAFEMAX 1965. Additional US data from Aswath Damodaran. March 2025.

Well, these are better withdrawal rates. Sometimes impressively so for longer retirements.

But the thing that’s jumping out at me is the distinct lack of 4 per cents. Or anything like them.

In fact, for the baseline 30-year retirement portfolio, buying American only upgrades us from the 3.1% rule to 3.2%. Disappointing.

The problem is that the UK’s inflation record is considerably worse than the US’s.5 And a safe withdrawal rate is founded on real returns. So while it’s true the S&P 500 has left our equities trailing, British price pressures still knocked the shine off American exceptionalism.

This means you can bedeck your portfolio in the Stars and Stripes, but there’s a risk it’ll be hampered like a Dodge Viper stuck in single-lane traffic on a Devonshire country road.

The bond-gnawing brutality of UK inflation also explains why the best US-orientated GBP portfolio is still 100% equities in contrast to more balanced Stateside recommendations.

Counterintuitively, Blighty’s SWR actually goes up if you bench US Treasuries and bring UK gilts back on.

Yes, there are differences in the maturities counted in the datasets. But a significant factor is also likely to be that British bond investors demand a fatter yield to compensate for bigger UK price shocks. Whereas US bondholders can happily settle for a skinnier inflation premium less suited to British conditions.

Ultimately though, a US equity/bond portfolio suffers from the same fundamental problem that a Union-Jacked one does: inadequate inflation protection.

Albion’s way

This isn’t a problem that’s likely to go away. US CPI increased 13.3% during the recent bout of high inflation from 2021-24. Ours rose by a chunkier 20%.

We have a more open economy than the US. One that’s more vulnerable to importing inflation from abroad.

As we’ll see later in the series, the appropriate response to this is to hold a better mix of assets. 

Portfolio ruin: the danger of overcooking your SWR

Am I being nerdy and pernickity?

Well it wouldn’t be the first time – but just so you know this next chart shows what happens if you apply the 4% rule to a 30-year retirement starting in 1910:

These retirees went broke inside 17 years. The portfolio loses money in real terms for ten of the first 11 years.

Meanwhile inflation goes through the roof: up 158% from 1915 to 1920.

Every year our retirees scale up their withdrawal to cover inflation, swigging ever larger rations from their dwindling reserves.

Healthy returns arrive during the remaining five years of the portfolio’s shortened life but by then it’s too late. The portfolio has already entered a death spiral as the retirees withdraw 180% more in 1921 than they did in 1910.

There are simply too few assets left for growth to cover outgoings. The money’s gone before Christmas 1926.

Granted, in reality very few people would watch their resources evaporate like this without taking action. Budget cuts would ensue or you’d go back to work, or both.

But the point is that taking too much income from the start risks living later years in bleak austerity. 

How often does the 4% rule fail in the UK?

This next table shows you the percentage of retirement periods (%) that could not sustain a 4% SWR for different UK equity/bond portfolio allocations:

Years / Equities	30	35	40	45	50
40%	36	45	53	67	75
50%	29	37	47	54	63
60%	24	31	41	45	54
80%	17	21	26	30	36
100%	12	17	22	24	27

Those are unacceptable failure rates in my view. And the sheer size of the numbers indicates that the UK’s problem isn’t limited to a few benighted retirements that were ravaged by two World Wars. 

Superficially, the UK’s SAFEMAX years of 1910 and 1937 seem easy to dismiss. I can almost hear the devil on my shoulder saying: “Don’t worry about it. That’s ancient history. Nobody would be stupid enough to start a world war today.”

But I’m much less confident about that than I was. 

I don’t know about you, but I’m feeling pretty twitchy about the prospect of British peacekeepers in Ukraine – operating without adequate American support. Not to mention the prospect of a rising China and the closing of Thucydides Trap. 

But we don’t need to debate the probability of a war between World Powers. Just cast your mind back to the US asset-based portfolios we looked at earlier. There the SAFEMAX years were 1969 and 1965. 

These pasty SWRs were induced by 1970s economic malaise, not by existential conflict. 

UK OK

Alright, that’s enough doom and gloom.

This post has been about making public the kind of data that Americans take for granted.

And because we’re starved of information on the UK safe withdrawal rate, many Brits are told it’s fine to borrow the US one.

In truth though, the 4% rule does not travel well.

But while ours may not be as good as theirs, there’s plenty we can do to beef up a realistic, UK-centric SWR. We’ll explore how to do that in the next part of this series.

Take it steady,

The Accumulator

1. Òscar Jordà, Katharina Knoll, Dmitry Kuvshinov, Moritz Schularick, and Alan M. Taylor. 2019. The Rate of Return on Everything, 1870–2015. Quarterly Journal of Economics, 134(3), 1225-1298. [↩]
2. We need a full 30 years of data to calculate the maximum safe withdrawal rate, hence no numbers yet for post-1995 retirements. The SWR number for each retirement cohort can only be known in retrospect. [↩]
3. The 40/60 portfolio could only muster a relatively measly 10.9% SWR in 1982. [↩]
4. For some reason, you’re allowed to assume you could have known the ideal retirement asset allocation in advance, which you couldn’t. This condition is called ‘Perfect foresight’. Not a gift of mine unfortunately. [↩]
5. It’s debatable as to how much of the gap is an artefact of different headline inflation methodologies. For instance RPI vs CPI. [↩]