Everybody ages and when retirement comes closer into view, people start thinking seriously about their options once they are no longer able to work – pensions, investments and then importantly, when and what to withdraw from them.

This question could be pertinent to an increasing number globally as we enter a general demographic shift, with the number of people aged 60 or older doubling to 2.1 billion by 2050.

The overall picture for global retirement assets seems to have expanded as well, reaching almost $70 trillion in 2025, representing a nearly 10% year-on-year increase. Despite this, 46% of individuals lack long-term financial plans and 38% feel their retirement security has become more fantasy than reality.

Even with retirement assets in place, much of the discussion about withdrawal strategies focuses on the proportion retirees should withdraw each year without exhausting their savings and how that proportion holds up across different economic and demographic conditions.

However, a more illuminating question could be what are the key forces that drive the behaviour of such strategies over time? One of the most important, and often less visible, aspects of its answer is the return experienced during a person’s retirement.

Long-term averages do not account for uncertainty
Investment discussions often focus on expected returns or long-term averages. These are useful for setting expectations but they do not always reflect what individuals actually experience in retirement.

In practice, outcomes are shaped by what returns look like after inflation, market conditions, asset allocation, and the timing of investment gains and losses over the course of retirement. As a result, the return ultimately experienced by retirees may differ meaningfully from long-term market averages.

What matters, therefore, is not simply the return generated by markets but the return that is actually realized in practice – the real return available to support retirement spending.

Realized real returns are inherently uncertain. In many cases, they can also be more limited than what long-term averages might suggest. This is where fragility begins to emerge.

To examine this in more depth, it is helpful to consider how a commonly used withdrawal framework behaves under different return environments.

The analysis is based on a commonly used withdrawal approach: an initial withdrawal of 4% of the retirement corpus, with annual adjustments for inflation.

Instead of anchoring the analysis to a fixed time horizon, the focus is on how long the corpus can sustain under different realized real-return scenarios.

This brings into focus a central question: how sensitive is sustainability to the realized returns?

Small differences in returns compound over time
Over long periods, even modest differences in realized real returns can lead to materially different outcomes.

To illustrate this, the analysis considers a range of plausible real return scenarios and examines how the same withdrawal framework behaves under each.

The patterns that emerge are intuitive but important:

Around 4% real return – outcomes remain broadly stable.
Around 3% – sensitivity begins to emerge.
Around 2% – sustainability reduces meaningfully.
Around 1% – risk of early depletion increases significantly.
These differences become clearer when viewed over time.

The chart shows how outcomes diverge gradually. Early in retirement, paths appear similar. Over time, small differences compound, leading to increasingly different trajectories.

In some cases, this divergence results in early depletion, while in others the corpus sustains for much longer. The point at which this divergence becomes pronounced and, in certain scenarios, leads to depletion is clear.

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