Adjustable spending firecalc?

[pj.mask]

Firecalc is pretty good but is anyone aware of a calculator that allows you to cut spending based on portfolio value?

Like a portfolio value x% below previous peak = y% reducing in SWR?

The reason I ask is because I plan on something like 60% discretionary expenses so if s...omething hits the fan a 30-40% reduction in spend wouldn’t be a problem, even for a few years.

I would rather spend 4% in good years and cut down to 2% in bad as opposed to keeping a 3% (or at least explore that option). Most because I feel probability of the down side is low and worth the bet while still being prepared.

Thoughts?

 

[COcheesehead]

Retire Plan app https://itunes.apple.com/us/app/retireplan/id435739013
It a paid app, $4.99, but you control all the inputs and one of them is variable spending levels as opposed to a constant spend, which is sort of what you're looking for.

 

[USGrant1962]

I have not seen anything like your equation modeled in the ER/WR literature. What you describe could have wild swings and doesn't correspond to what most all retirement WR research is about (dependable, predictable income off a portfolio).

In your example your WR target is 3%. Say you have a $1M portfolio - so in a normal year you draw $30K.

In a bad year, say after a portfolio drop of 30%, you are suggesting also dropping your WR to 2%, so only drawing 2% of $700K = $14K.

Or in a good year, say portfolio is up 30%, draw 4% of $1.3M = $52K.

Most people are not interested in +/-50% swings in their retirement income.

If you can bear that kind of cut in a bear market - I think a more straightforward "X% of remaining portfolio" meets your objectives and is modeled in FIRECalc and other tools. X% of remaining portfolio will automatically spend more when flush, less when lean.

 

[pj.mask]

I totally understand people want more steady income but consider something like this:

Normal spend would be $120k

Variable spend would be $140k but cut to 100k in the event of a downturn. If that additional $20k/yr is used for vacations and business class upgrades; sure I understand the pain is cutting back but I can’t find any way to model let’s say 4% SWR with a downturn reduction.

It’s a bet, to be sure, but I think if you don’t retire in a time like now (high PE, no recent downturns) then you would be more likely to not ever have to make that downward adjustment (after 5-10 years of good markets you would be at a 2-3% of current value)

 

[USGrant1962]

It sounds like what you are looking for is the % of current portfolio approach. You would draw say 4% of whatever your start-of-year portfolio was.

So starting at $3M you would draw $120K. In a 30% downturn you would end up with about $2M at the start of the next year. So you would take 4% of that, or $80K.

I suggest that you experiment with the "Percentage of Remaining Portfolio" option on the Spending Models tab of FIRECalc and see if it does what you are looking for.

 

[samclem]

I suggest that you experiment with the "Percentage of Remaining Portfolio" option on the Spending Models tab of FIRECalc and see if it does what you are looking for.

+1. I think this will work for you. The output format is nice, too, showing lines that depict the spending you can do.