The conventional wisdom is simple: hold a 60/40 portfolio, withdraw 4%, and you'll probably be fine.
Then 2008 happens.
With tariff shocks rattling markets and the S&P down sharply this week, the question every near-retiree is asking is the same one they asked in 2008: can my portfolio survive this?
I ran 10,000 Monte Carlo simulations to find out — not with the usual assumption that stocks and bonds move independently, but with the correlation spikes that actually occur during crises.
The results were worse than I expected.
A standard Monte Carlo simulation treats asset classes as loosely correlated. US stocks and international stocks might have a correlation of 0.85 in normal markets. Stocks and bonds are weakly negative.
That's fine for normal years. During 2008, correlations spiked:
When everything falls at once, diversification — the entire point of 60/40 — partially fails.
Most free retirement calculators model each asset class independently, drawing random returns from separate distributions. That underestimates how bad a crash actually is for a diversified portfolio.
I used QuantCalc's stress tester with these parameters:
I ran it twice: once with normal correlation assumptions, and once with crisis correlations modeled via Cholesky decomposition (the same math institutional risk teams use to model correlated drawdowns).
| Scenario | Success Rate | Median Ending Balance | Worst 5% Outcome |
|---|---|---|---|
| Normal correlations | 87% | $1,240,000 | Portfolio depleted by year 22 |
| Crisis correlations (2008-type) | 71% | $680,000 | Portfolio depleted by year 16 |
The gap is stark. Under normal assumptions, you have a comfortable cushion. Under crisis conditions, nearly 1 in 3 simulations fails.
And the worst-case scenarios are dramatically worse: portfolio depletion 6 years earlier.
The 4% rule was derived from historical US data where stocks and bonds had a moderately negative correlation — bonds went up when stocks went down, cushioning losses.
That relationship has broken down multiple times:
If you're planning to retire in the next 5 years, your plan needs to survive the correlated crash, not just the average one.
The most useful number isn't success rate — it's the breaking point: the exact market crash percentage where your plan flips from "probably fine" to "probably not."
For the scenario above:
For reference: the S&P 500 dropped 37% peak-to-trough in 2008. A 60/40 portfolio lost about 34%. That's uncomfortably close to the crisis-correlation breaking point.
This isn't an argument against 60/40 or the 4% rule. It's an argument for testing your specific plan against realistic crisis scenarios.
Three practical steps:
QuantCalc's stress tester runs 10,000 Monte Carlo simulations with crisis correlation modeling. It finds your portfolio's exact breaking point — the maximum crash it survives. Free, runs in your browser, no account needed.
With markets reacting to tariff uncertainty, now is exactly the time to stress-test your plan — not after the next drawdown.
Full methodology. QuantCalc is an independent educational tool. Not affiliated with, endorsed by, or sponsored by any asset management firm. Return assumptions derived from publicly available research publications. Not financial advice.
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