Annual Spending versus actual withdrawal

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elque
Posts: 1
Joined: Tue Jul 07, 2009 4:28 pm

Annual Spending versus actual withdrawal

Post by elque »

I have been trying to put the FRP through some paces using a "zero volatility" and "zero tax" scenario. I am finding that a "stable" spending limit of x generates withdrawals that are 10% higher. For example, a stable retirement rate of $36,000 will create steady $40,000 withdrawals in the simulation. Is there a hardcoded fudge factor in the model?
jimr
Posts: 821
Joined: Thu Feb 28, 2008 6:48 pm

Re: Annual Spending versus actual withdrawal

Post by jimr »

First, thanks for trying out the planner, and for the comment.

The short answer is no, there's no fudge-factor built into the planner.

With the volatility and tax rate set to zero, and the spending policy set to stable, the withdrawal amounts should be very straightforward.

I may be missing something, but I just did a quick run of the planner with the default inputs and the following overrides:
Income and investment tax rates -> 0
Taxable Portfolio -> $1,000,000
Investing style, custom -> 8.5 avg, 0 std dev
Retirement Spending -> 36,000
Spending policy -> Stable

When I ran the simulation and looked at the output in the detailed view tab, I saw that both planned expenses and median total withdrawal come out at 36,000

Is there something else that I'm missing that's needed to reproduce what you're seeing?

Thanks,

Jim
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