How to Specify Withdrawal Rate

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dnbush
Posts: 5
Joined: Mon May 10, 2021 4:11 pm

How to Specify Withdrawal Rate

Post by dnbush »

I'm a bit new at this but most of the tool's info is fairly intuitive except that I can't see where I am able to specify a withdrawal rate. I have entered the info for SS and Pension income but I also am withdrawing from my investment portfolio and I can't find where I am able to enter that amount or percentage.

Can anyone help? Thanks
jimr
Posts: 711
Joined: Thu Feb 28, 2008 6:48 pm

Re: How to Specify Withdrawal Rate

Post by jimr »

The planner doesn't let you set a specific withdrawal rate. The reason is that if the annual portfolio withdrawal was done as a straight percent of the remaining portfolio value, then the portfolio could never run out of money and the resulting probability of success would always be 100%.

Instead, the intent is that users will enter a desired annual retirement spending amount rather than a withdrawal percent.

If you set the spending policy to stable, that requested spending amount will be funded each year until the portfolio runs out of money (considered a failure) or until the end of the plan arrives (if the portfolio is not depleted by then, that's considered a success).

With the spending policy set to flexible, the requested spending amount amount that gets funded can be adjusted based on how well the portfolio is maintaining its value as the plan continues. This helps to preserve the portfolio value during simulation paths that get an unlucky sequence of portfolio returns. When the portfolio value declines, the percent of the requested spending that gets funded may get reduced, down to the minimum percent of expenses to fund configured in settings. Because there's a floor that controls the minimum percent of expenses that get funded, it's still possible for the portfolio to run out of money before the end of the plan which results in a probability of success less than 100%.
dnbush
Posts: 5
Joined: Mon May 10, 2021 4:11 pm

Re: How to Specify Withdrawal Rate

Post by dnbush »

OK, I get it. Thank you for explaining. Another question if you don't mind...

On the main information panel, does the "Annual Retirement Income" include those things like SS and Pensions that I specify on the "Additional Inputs" or is it in addition to those?
jimr
Posts: 711
Joined: Thu Feb 28, 2008 6:48 pm

Re: How to Specify Withdrawal Rate

Post by jimr »

The Annual Retirement Income input is in addition to anything you enter in additional inputs. You can verify this by looking in the detailed view tab, By default the table in that view shows the after tax income, but if select the "show more details" radio button on the top right, then right click on any column header and select "show all rows" you'll get a table with lots more data. right-clicking on any cell in the table pops up a menu that has an option to export the table to excel for easier viewing.
dnbush
Posts: 5
Joined: Mon May 10, 2021 4:11 pm

Re: How to Specify Withdrawal Rate

Post by dnbush »

Alright so then if my total income annually consists of SS, pensions, and money withdrawn from my investments and I have on the Additional Inputs my SS and pensions then I should include on the "Annual Retirement Income" field only the money withdrawn from my investments. Do I have that correct?
jimr
Posts: 711
Joined: Thu Feb 28, 2008 6:48 pm

Re: How to Specify Withdrawal Rate

Post by jimr »

It shouldn't include the amount withdrawn from investments. All portfolio withdrawals are handled automatically by the simulation logic, based on the amount of spending you say you need. The simulation model assumes that all investment income is reinvested back into the portfolio.
dnbush
Posts: 5
Joined: Mon May 10, 2021 4:11 pm

Re: How to Specify Withdrawal Rate

Post by dnbush »

Oh. So then if I don't count those withdrawls as income I would only then include SS and pensions on the "Additional Inputs" and then put $0 for Annual Retirement Income?
jimr
Posts: 711
Joined: Thu Feb 28, 2008 6:48 pm

Re: How to Specify Withdrawal Rate

Post by jimr »

That sounds correct based on what you've indicated.
dnbush
Posts: 5
Joined: Mon May 10, 2021 4:11 pm

Re: How to Specify Withdrawal Rate

Post by dnbush »

Great. Thank you so much for your patience with me and your help!
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