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Detailed Instructions: Safe Withdrawal Rate Calculator
Why use this calculator?
To simulate and compare advanced withdrawal strategies like Variable Withdrawal Strategies (VWS) against rigid Fixed Withdrawal strategies. It allows testing of "guardrails" (caps and floors) to see how they stabilize income and preserve capital. (Note: Simulations use inflation-adjusted "Real Dollars")
How to use it
Configure the Initial Balance and Base SWR. Then tune the strategy parameters: "SWR Adjustment Factor" (0 for Fixed, near 0 for % of Portfolio, ~50 for Variable), Change Caps (limits on income fluctuation), and Withdrawal Floor.
Example Inputs
Try these inputs to interpret the results correctly:
| Parameter | Example Value | Description |
|---|---|---|
| Initial Balance ($) | $1,000,000 | Starting portfolio value. |
| Safe Withdrawal Rate (percentage) | 5.0% | Base Safe Withdrawal Rate percentage. |
| SWR Adjustment Factor (%) | 50 (for VWS) | Adjustment factor:
|
| Max Annual Increase (%) | 5% | Limits on how much the withdrawal amount can increase in a single year (VWS only). |
| Max Annual Decrease (%) | 2.5% | Limits on how much the withdrawal amount can decrease in a single year (VWS only). |
| Withdrawal Floor (%) | 90% | Minimum income floor as a percentage of the initial withdrawal amount (VWS only). |
| Retirement Duration (Years) | 30 | Length of retirement in years. |
| Real Return (%) | 5.8% | Average annual investment return (inflation-adjusted). |
| Standard Deviation (%) | 6.1% | Volatility of annual returns. |
Note on Real vs. Nominal Dollars: Simulations use "Real Dollars" (inflation-adjusted). This means a 0% return maintains purchasing power, while positive returns approximate growth above inflation.
Example Output
Fixed Withdrawal Strategy (4% SWR)
Variable Withdrawal Strategy (5% SWR, VWS)
Variable Withdrawal Strategy (5% SWR, VWS) - Final Balance Histogram
Variable Withdrawal Strategy (5% SWR, VWS) - Withdrawal Amount Box Plot