Here's the specific firecalc example
of a 52-year-old today (in 2014) who is trying to simulate retirement 10 years from now at age 62 (in 2024) using the Bernicke spending method. In my firecalc scenario I set inflation to 0% so I wouldn't have to add spreadsheet columns to revert the future values to present values.
Here is the spreadsheet
that firecalc produces for this scenario. I hid some of the columns that have zero values or aren't relevant to my question (how the portfolio is split between equities & bonds), and placed a blue bar in column V to separate out some extra calculated columns I've added to help understand what's happening.
In the first 10 years, the calculated annual withdrawal is zero (difference between one year's ending portfolio and next year's starting portfolio). This is fine.
The first withdrawal happens at the start of the 11th year, when the retiree is 62 years old. Perfect. But... that first withdrawal is $233K even though I had set the Spending box on the main tab to $300K. Clearly the withdrawals have been getting scaled down for nine years, or at least the years after age 56, but that's not what I intended when I entered $300K as the starting spending (withdrawal) amount.
Widthdrawals taper off until the retiree is 76 years old, and that's again what I expected in the Bernicke spending model. The reduction early on is about 3.5% but as high as 5.7% at age 75. I haven't read the Bernicke paper myself but firecalc describes Bernicke's widthdrawal tapering this way: "If selected, this option will reduce your inflation-adjusted yearly spending by 2-3% per year starting at age 56, and then stabilizing at age 76 to keep up with inflation
". So this is a question, maybe not a bug report - is 3.5% initially ramping up to 5.7% the correct amount to reduce the withdrawal annually? Hopefully someone will double-check my spreadsheet math to see that I'm not way off here. I certainly don't mind being corrected.