I absolutely agree with everyone that this isn't a feasible plan--the times when you'll get high returns on cash (or equivalents) tend to correlate with times of high inflation, so you'll still be losing money in real dollars.

No, the scenario in the OP doesn't always work (5% return on 1MM, if you're withdrawing 3.5%), due to inflation.

If you don't trust the market and you want to live off of interest baring accounts you're going to have to save a very long time. I don't care to do any of that math for you bc its a waste of time IMO.

I'll do some of the math on that, because it sounds fun!

Let's look at it a few ways:

1) Let's figure out how high of a return would we need on our cash if we wanted to get the same success rate as a standard portfolio.

If I assume a 4% SWR (25x expenses saved up), and assume a 100% cash portfolio, and use historical inflation rates

Assumed Rate of Return on Cash | | Success Rate |

1% | | 12.93% |

2% | | 25.86% |

3% | | 31.9% |

4% | | 38.79% |

5% | | 72.41% |

6% | | 84.48% |

7% | | 88.79% |

8% | | 99.14% |

Even if you could get 7% return on your cash, year after year, every year for 30-years (won't happen), you're STILL at a success rate (89%) lower than a simply 75/25 portfolio.

2) Looking at the scenario posed in the OP (1MM, 5% return on cash, 35k annual spend, historical inflation), it has an 84.48% success rate (coincidentally(?) the same as getting 6% but spending 40k from our table above). Still a lower success rate than a standard stock/bond mix, and again, the liklihood of getting 5% every year for 30 years seems low.

3) Looking at what WR we'd need to use, assuming various rates of return, in order to get a 95% success rate:

Assumed Rate of Return on Cash | | Withdrawal Rate to Have 95% Success | | Amount Needed to Save | |

1% | | 1.5% | | 66x expenses |

2% | | 1.78% | | 56x expenses |

3% | | 2.1% | | 48x expenses |

4% | | 2.44% | | 41x expenses |

5% | | 2.82% | | 35x expenses |

So rather than saving up 25x expenses, to get a 95% success rate, as you would with a equities/bond portfolio, if you want a similar 95% success rate with cash, you'd instead need to save between 35x and 66x your expenses (depending on if you got between 1% and 5% return on your cash).

In other words, you'll likely need to save up twice as much as you would otherwise. That's a lot of years of your life to give up, rather than learning and becoming comfortable with investing in equities, and with volatility.