Questions on RMD @ 72, spending multiplier

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FRPJunkie
Posts: 33
Joined: Wed Feb 24, 2016 8:17 am

Questions on RMD @ 72, spending multiplier

Post by FRPJunkie »

Jim,

Will there be (or is there) a standalone version that allows RMDs to be taken at 72? This seems to be an option in the online version as it appears in the screenshot in the FAQ. But my standalone version only allows age 70 in the settings screen.

Also can you explain in more detail how the spending multiplier works? I'm trying to get the planner to achieve a steady, percent-based safe withdrawal number rather than the dollar figure used for expenses. I've been attempting to do this by increasing the spending adjustment multiplier (up to 4) and the Maximum Percent of Expenses to fund (for the latter, as high as 180%).

However, the output is still showing a 4% withdrawal rate pre-SS and a very low withdrawal rate after SS (1-2%). Basically, I want to smooth things out and assign a 3% WR. Can this done somehow?

EDIT: Spending policy is set to Flexible.

jimr
Posts: 614
Joined: Thu Feb 28, 2008 6:48 pm

Re: Questions on RMD @ 72, spending multiplier

Post by jimr »

First, the latest standalone version (04-03-02) let's you adjust the RMD start age. If you have the latest version, you should see that option in settings. The download page is here: https://www.flexibleretirementplanner.com/wp/download/

The spending adjustment multiplier controls how fast "percent of expenses to fund" adjusts with the flexible or conservative spending policies. By default, the percent of expenses to fund adjusts by at most the inflation rate each year (in either direction) based on portfolio performance. In real life, this simulates retirees skipping their spending "COLA" in years when the market isn't doing well and their portfolio shrinks below the amount they started with at retirement.

Setting the spending adjustment multiplier to something other than 1 can increase or decrease this annual adjustment rate. For example, if the spending adjustment multiplier is set to 4, each year the percent of expenses to fund could adjust by as much as 4 times the inflation rate (if inflation is 3%, percent of expenses to fund could drop from 100% to 88% in a single year).

FRPJunkie
Posts: 33
Joined: Wed Feb 24, 2016 8:17 am

Re: Questions on RMD @ 72, spending multiplier

Post by FRPJunkie »

jimr wrote:
Mon Jan 20, 2020 11:09 am
First, the latest standalone version (04-03-02) let's you adjust the RMD start age. If you have the latest version, you should see that option in settings. The download page is here: https://www.flexibleretirementplanner.com/wp/download/

The spending adjustment multiplier controls how fast "percent of expenses to fund" adjusts with the flexible or conservative spending policies. By default, the percent of expenses to fund adjusts by at most the inflation rate each year (in either direction) based on portfolio performance. In real life, this simulates retirees skipping their spending "COLA" in years when the market isn't doing well and their portfolio shrinks below the amount they started with at retirement.

Setting the spending adjustment multiplier to something other than 1 can increase or decrease this annual adjustment rate. For example, if the spending adjustment multiplier is set to 4, each year the percent of expenses to fund could adjust by as much as 4 times the inflation rate (if inflation is 3%, percent of expenses to fund could drop from 100% to 88% in a single year).
Thanks. My version says "Version 04.02.17 Build Date: 02-17-19"

So that's not the most recent? It runs on Java (I am on Mac Catalina)

Thanks for that other clarification. Is there a way to model a specific withdrawal rate, as described above?

jimr
Posts: 614
Joined: Thu Feb 28, 2008 6:48 pm

Re: Questions on RMD @ 72, spending multiplier

Post by jimr »

The best way to try to model a more constant withdrawal is to either set expenses based on trial and error or activate the goal seek feature in settings. With goal-seek, you can set the probability of success to your target value and the planner will try to find the maximum withdrawal amount that still leaves the probability of success at the target value.

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