Does starting valuation predict a safe withdrawal rate?
CAPE (the cyclically adjusted price-to-earnings ratio, or Shiller P/E10) is how many years of inflation-adjusted profit you pay for a share of the stock market. A CAPE of 20 means you pay 20 years of average earnings; a CAPE of 40 means 40.
It matters for withdrawals because paying more for the same earnings tends to mean lower returns afterwards. Below, the chart compares the CAPE at the start of each year with what a retirement that began that year was worth 10 to 50 years later, and the table groups start years by CAPE.
Today
CAPE in January 2026: 39.6
Higher than 100% of the 71 start years (1926 to 1996) with a full 30-year record. The most expensive of those was 27.1, in 1929. More recent retirements started at higher valuations but haven't reached 30 years yet: 2000 began at 43.8, above today, and its 4% withdrawal has lasted 26 years so far. Switch the chart below to a 10- or 20-year horizon to see how those years did.
Over time: valuation at the start vs. what 30 years left
Lines: portfolio after 30 years, starting with $1,000,000 and withdrawing 4%, by investment mix. Grey: CAPE that January.
Outcomes by starting CAPE
Highest first-year rate that lasted 30 years, grouped by the CAPE when each retirement started. 100% S&P 500, no fees.
| CAPE at start | Start years | 4% lasted 30 years | Median max rate | Lowest max rate |
|---|---|---|---|---|
| Under 15 | 36 | 36 of 36 | 9.25% | 5.62% (1974) |
| 15 to 20 | 21 | 21 of 21 | 5.81% | 4.17% (1973) |
| 20 to 25 | 13 | 10 of 13 | 4.47% | 3.79% (1966) |
| Over 25 | 1 | 0 of 1 | 3.77% | 3.77% (1929) |
The two move in opposite directions: the higher the CAPE at the start, the lower the rate that lasted. The correlation is -0.77 on a scale from -1 to +1, where 0 means no link and -1 means they move in exact lockstep in opposite directions. -0.77 is a strong link, not a perfect one: starting valuation explains roughly 59% of the difference between good and bad start years.