Guide · 7 min read · figures through 2024
How much of a Fat FIRE portfolio belongs in stocks?
A comparison of stocks, bonds and T-bills across forty-year withdrawals, including the worst historical period for each mix.
Cash has less short-term volatility than stocks. Over a forty-year retirement, however, inflation and ongoing withdrawals create a different risk: the portfolio may lose purchasing power too quickly to fund the full period.
What each mix returned, after inflation
Compounded across the whole 97-year record, with every year deflated by that year's actual CPI:
| Allocation | Real return a year | 40-year windows survived at $35,000 | Rate that never failed |
|---|---|---|---|
| All stocks A broad US large-cap index, dividends reinvested. The most growth and the deepest drawdowns. | 6.7% | 57 of 58 | 3.35% |
| 80 / 20 stocks and bonds Stocks with a fifth in 10-year Treasuries — the usual Fat FIRE accumulation mix. | 6.0% | 58 of 58 | 3.59% |
| 50 / 50 stocks and bonds The classic balanced portfolio. Shallower falls, and a slower climb. | 4.6% | 56 of 58 | 3.38% |
| Cash and T-bills 3-month Treasury bills, rolled. Almost no nominal risk, and inflation takes most of it. | 0.3% | 4 of 58 | 1.67% |
A $1,000,000 portfolio spending $35,000 a year — a 3.5% rate — over 40 years, started in every year the record allows. The last column is the highest rate that would have survived every one of those starts.
T-bills struggled over forty-year withdrawals
T-bills returned 0.3% a year after inflation across the record. Over four decades that is not a cautious portfolio; it is a portfolio that loses to the cost of living while you are spending from it. The all-stock mix returned 6.7% a year over the same span.
Then why not hold everything in stocks?
Survival is only one measure. An all-equity portfolio can spend years far below its starting value, which may make the planned withdrawal difficult to maintain. A 50/50 or 80/20 mix changes two parts of that experience:
- A shallower hole. The worst drawdowns are materially smaller, which is what makes the plan psychologically survivable.
- Something to spend that is not stock. In the first bad years — the ones that actually end retirements — the bond sleeve is what you sell instead of equities at the bottom.
Read honestly, the record says the sustainable withdrawal rate is fairly flat across the middle of the range and collapses at the cash end. 80 / 20 stocks and bonds sustained 3.59% over forty years and 50 / 50 stocks and bonds sustained 3.38%; cash sustained 1.67%. Somewhere between half and ninety percent equities is defensible on this data. Twenty percent equities is not.
The Fat FIRE version of the question
A Fat FIRE portfolio is usually large relative to its owner's fixed costs, and that changes the right answer in a way the textbooks miss. If the essential spending is a small fraction of the portfolio, the part that funds it can be held conservatively and the rest can be held for growth, because the growth part is not what feeds you next year. Splitting the portfolio by job rather than by a single blended percentage is usually the clearer way to think, and it tends to land near a 80/20 blend anyway.
Whatever you settle on, test it against the years that break plans rather than against the average. That is what the simulator is for, and the allocation switch is right there in the panel.