🧭 When and how do you start withdrawing from a Permanent Portfolio? 💰

[frugal]

Hi everyone!

I’ve been diving into the Permanent Portfolio strategy — the classic allocation of 25% stocks, 25% bonds, 25% gold, and 25% cash — and I really appreciate its simplicity, resilience, and balance across market conditions.

That said, most of the information I find focuses on the accumulation phase. I’d love to hear thoughts from those who are already retired, semi-retired, or just planning for the withdrawal phase. Specifically:

When do you start withdrawing?
• Is it mostly age-based (e.g., at 60 or 65)?
• Or do you wait until the portfolio hits a certain value (e.g., 25x or 33x your annual expenses)?
• Anyone doing barista FIRE or early retirement with it?

How do you withdraw?
• Do you take money proportionally from all four assets?
• Or withdraw from the most overperforming asset and rebalance at the same time?
• Do you follow a fixed percentage (like 4% rule), or adjust withdrawals based on performance?
• How do gold and cash behave in practice during decumulation?

Other doubts I have:
• What kind of rebalancing schedule works best during retirement?
• Does anyone use buckets or laddering strategies inside the Permanent Portfolio framework?
• Any good tools, spreadsheets or simulators that work for this kind of setup?

I know this strategy is more conservative than most, but for those of us who like peace of mind over chasing high returns, it seems like a great long-term fit.

Would love to hear from anyone who has experience, theory, or even just ideas on how to make the most of the Permanent Portfolio in retirement. All input is welcome!

Thanks in advance!

[mathjak107]

it’s no different than any other portfolio .

we have been using bob clyatts 95/5 method of withdrawal for a decade now .

we look at the balance each dec 31 .

we get to set as spending goal posts the higher of 4% of the balance or in a down year , 4% of the balance or 5% less then we were taking . which ever is higher is what you take

that’s it , done .

so if you have 100k portfolio than you will keep 96k invested .


it’s a nice easy system and no inflation adjustment is needed as it self adjusts .

divide 96k by 4 and that is the level you should end up with left in each investment


next year you have 105k as a balance .

so its 4% of 105k or 4200 and the remaining assets are adjusted to the balance .

firecalc actually has a withdrawal method tab for 95/5


buckets are no different but they allow your allocation to change . the reason is that there are no rules as to when you refill bucket one that you are spending from .

so if you wait longer to refill bucket one your allocation to equities is growing higher and higher .

in a worst case example one can let bucket one drain , refill from bucket two and end up with almost 100% equities as an allocation before finally refilling buckets one and two . you can be 85 and be 100% equities if you delay refilling long enough

the cash bucket in the pp serves the function of being the other end of the barbel, for the long term treasuries .

if you spend that down and don’t instantly refill and rebalance you lopsided the barbel so at the end of the day it’s really the same whether you use buckets or not.


the simpler the method the better and we find 95/5 works incredibly well plus it’s dynamic so it reflects exactly where your balance stands

as far as when to draw . that’s up to you .

i had to draw from the day i quit getting a pay check , maybe even a bit before since i went to 4 days before actually retiring.

so i retired at 62 , took ss at 65 since i still to this day work one day a week doing training for my old company and love it . but even the one day gave me to much to collect ss until the year i was going to be full retirement age .

this week is actually ten years since i stopped working the 4 days and got a meaningful paycheck.

so after pulling out 6 figures a year from our accounts we are way higher in balance today then we were the day we retired a decade ago .


markets have been great for us and our investments kept us well ahead and growing .


we hit a new all time record yesterday as far as our invested assets go.

what’s nice is that at this point our portfolio is up so much that we can actually draw 100k a year more than we do because we have ten years of life left then we did . the planning is for a lot less years now than the 30 years we started at .

so while we set these goal posts we are under so every couple of years we will just spend big .

we bought a 80k car in 2023 , last year my wife and i dropped 40k on new cameras and lenses since we both are avid photographers.

so we always find ways to enjoy the money now . but i can tell you this .

it was the strong compounding we saw and the pedal to the metal investing we did that left us in this shape prior to retirement.

both of us were never high earners so strong compounding was so important to us

[frugal]

[mathjak107]

the problem with the old 4% swr as it stands. is it does not self adjust .

meaning that 90% of the already 125 rolling 30 year periods we have had , you ended 30 years with more than you started with using 50/50 to 60/40

so without a system of raises in place besides inflation adjusting , to much money can sit and not be enjoyed .

a system of raises isn’t easy to come up with . kitces has a method but it’s to much work remembering past amounts .

so the dynamics of 95/5 work beautifully for us

[frugal]

Mat,

is this correct?

Assumptions:
Initial balance: €1,000,000

Annual withdrawal: Up to 5% of the current balance, but only if the resulting balance remains above 95% of the portfolio’s all-time high (HWM - High Water Mark)

High Water Mark (HWM): The highest value the portfolio has ever reached (updated as needed)

Table: 95/5 Rule in Practice
Year Annual Return Balance Before Withdrawal HWM (All-Time High) 95% of HWM Max Allowed Withdrawal (5%) Actual Withdrawal Final Balance
1 +8% €1,080,000 €1,080,000 €1,026,000 €54,000 €54,000 €1,026,000
2 +10% €1,128,600 €1,128,600 €1,072,170 €56,430 €56,430 €1,072,170
3 -15% €911,345 €1,128,600 €1,072,170 €45,567 €0 €911,345
4 +5% €956,912 €1,128,600 €1,072,170 €47,845 €0 €956,912
5 +12% €1,071,741 €1,128,600 €1,072,170 €53,587 €0 €1,071,741
6 +8% €1,157,480 €1,157,480 €1,099,606 €57,874 €57,874 €1,099,606
7 -20% €879,685 €1,157,480 €1,099,606 €43,984 €0 €879,685
8 +6% €932,466 €1,157,480 €1,099,606 €46,623 €0 €932,466
9 +15% €1,072,336 €1,157,480 €1,099,606 €53,617 €0 €1,072,336
10 +9% €1,168,846 €1,168,846 €1,110,404 €58,442 €58,442 €1,110,404

Explanation:
Years 1–2: Portfolio grows, new all-time highs are reached, and 5% withdrawals are fully allowed.

Year 3: Sharp drop (-15%). Because the portfolio falls below 95% of its highest historical value, no withdrawal is made to protect the capital.

Years 4–5: Despite gains, the portfolio has not yet recovered to the 95% threshold — withdrawals are still restricted.

Year 6: A new all-time high (HWM) is achieved, allowing full withdrawal again.

Years 7–9: Another drop and partial recovery, but still under the 95% rule — no withdrawals allowed.

Year 10: New HWM is set, allowing a full 5% withdrawal again.

Key Benefits:
In good years: You can take full 5% withdrawals and enjoy the gains.

In bad years: The rule limits or pauses withdrawals, preserving capital.

After 10 years, the portfolio still ends up above the starting value — with less risk of running out of money.

[frugal]

The Main Issue with the 95/5 Rule: What if You Can’t Withdraw in a Given Year?

As we’ve seen in the previous table, in years when the portfolio drops or doesn’t recover enough, the 95/5 rule prevents you from making a withdrawal to protect capital. That’s great for long-term sustainability...
But what if you depend on those withdrawals to live?

Realistic Solutions for Years with No Withdrawal
1. Create a Safety Reserve (Buffer)
Set aside 1 to 3 years’ worth of living expenses in advance, outside of the main portfolio.

This reserve should be separate from the portfolio governed by the 95/5 rule.

It can be in cash, term deposits, or other very low-risk assets.

You only draw from this buffer in years when the 95/5 rule blocks withdrawals.

Example:
Estimated annual expenses: €40,000

Emergency reserve: €120,000 (3 years)

In years when withdrawals are allowed → replenish the reserve if needed

In bad years → live off the reserve

Advantages:

Maintains lifestyle stability

Avoids withdrawing during market downturns, protecting long-term growth

2. Allow Partial Withdrawals Instead of None
Instead of an all-or-nothing approach, apply a more flexible version of the 95/5 rule:

❝ Allow smaller withdrawals even when the portfolio is below 95% of its peak, instead of freezing withdrawals completely. ❞

Example:
Portfolio has fallen below 95% of its peak → instead of €0, you withdraw just 2% of the current balance.

Advantages:

Still protects the capital, but provides some income for basic needs

More practical for people living off the portfolio

3. Combine with Another Strategy: Floor and Ceiling
Many retirees or drawdown-focused investors combine the 95/5 rule with a "floor and ceiling" strategy:

Set a minimum ("floor"): the lowest amount you allow yourself to withdraw.

Set a maximum ("ceiling"): the highest you’re willing to withdraw in strong years.

In practice:

In bad years: withdraw only what’s necessary (e.g., 2–3%)

In good years: you can withdraw more (e.g., 6–7%) when the portfolio is significantly above its initial value

Advantages:

Adapts to market conditions

Provides income flexibility while maintaining a conservative approach

4. Have Complementary Income Sources
If you're living off your portfolio, it's wise to supplement your income to reduce pressure on withdrawals:

Rental income

Dividend-paying investments

Part-time work or consulting

Pensions (where applicable)

These income sources help you get through the lean years when portfolio withdrawals are restricted.

Quick Simulation: 10 Years with a 2-Year Reserve
Year Portfolio Withdrawal Reserve Used Notes
1 €40,000 €0 Good year, full 5% withdrawal allowed
2 €42,000 €0 Good year
3 €0 €44,000 Bad year, use reserve
4 €0 €44,000 Bad year again, use reserve (year 2)
5 €46,000 €0 Good year, back to withdrawals
6 €0 Need to cut expenses or work
7 €0 - Risky if no other income source

So, a 2–3 year buffer gives you flexibility and time for recovery, which is the goal of this rule.

Conclusion
If you want to live solely from your portfolio using the 95/5 rule, you need to combine it with one or more of these strategies:

Maintain a 2–3 year emergency reserve

Use flexible or partial withdrawals when below 95%

Combine with “floor and ceiling” rules

Have passive income or part-time earnings to cushion the bad years

The 95/5 rule is excellent for protecting capital over the long term, but it needs practical tools to cover the bad years — otherwise it becomes unrealistic for monthly living needs.

[Xan]

frugal, flooding the forum with AI text isn't particularly helpful. Please give us your thoughts/concerns rather than just pasting from somewhere else.

[mathjak107]

frugal , i do depend on those withdrawals to live so i dont follow your question .

if you are concerned about the 5% drops in down markets. , they are irrelevant since your draw is so much higher than it would have been if you used the standard constant dollar method which is the conventional 4% swr inflation adjusted .

so if you planned around the standard draw rate you are drawing a lot more if you have up markets prior to a down market. so you are still ahead .

we had that in 2022 which was a down year.

a two year buffer brings nothing to the party at all .

a safe withdrawal rate isn’t effected by one or two years being down . it is effected by a prolonged period of down ,far longer than two years cash would cover.

in order for the proverbial 4% swr to fail you need to see less than a 2-1/2% real return the first 15 years of a 30 year retirement.

every failure to date of which there were 5 , 1907 , 1929, 1937 , 1966 , and 1965 failed because the 15 year average fell below .

in fact the 30 year averages were pretty normal , but the 15 years killed them

so lets look at the first 15 years in those time frames determined to be the worst we ever had.
..

1907--- stocks minus 1.47%---- bonds minus .39%-- rebalanced minus .70% ---inflation 1.64%
.

1929---stocks 1.07%---bonds 1.79%---rebalanced 2.29%--inflation 1.69%
.

1937---stocks -- 3.45%---bonds minus 3.07%-- rebalanced 1.23%--inflation 2.82%
.

1966-stocks minus .13%--bonds 1.08%--rebalanced .64%-- inflation 5.38% it is those 15 year horrible time frames that the 4% safe withdrawal rate was born out of since you had to reduce from what could have been 6.50% as a swr down to just 4% to get through those worst of times.


here are the full 30 years which were not bad

30 year outcomes , are fairly decent

1907 stocks returned 7.77% -- bonds 4.250-- rebalanced portfolio 7.02- - inflation 1.64--

1929 stocks 8.19% - - bonds 1.74%-- rebalanced portfolio 6.28-- inflation 1.69--

1937 stocks 10.12 - - bonds 2.13 - rebalanced portfolio -- 7.24 inflation-- 2.82

1966 stocks 10.23 - -bonds 7.85 -- rebalanced portfolio 9.56- - inflation 5.38

for comparison the 140 year average's were: stocks 8.39--bonds 2.85%--rebalanced portfolio 6.17% inflation 2.23%