Spreadsheet to ease SWR calculations using Guytons Decision Rules

[walkinwood]

I liked the approach taken by Guyton and Klinger in this paper, though I don't feel comfortable with the high initial SWR that they propose in later tables.
FPA Journal - Decision Rules and Maximum Initial Withdrawal Rates

I put together a spreadsheet (attached) to make it easier to determine the annual withdrawal using only the previous year's inflation, and value of portfolio at the beginning of the current year.

There is one assumptions made. a)The Capital Preservation Rule & the Prosperity Rule would not apply at the same time. Also, the Inflation Rule is used even though the paper seems to drop it in later calculations.

The spreadsheet has some example portfolio values to force the Capital Preservation Rule and the Prosperity Rule to come into play. It shows how your annual withdrawal as a percentage of portfolio self-corrects as your portfolio value goes up and down.

I would like your input on the spreadsheet. Is it correct? Useful? Suggestions to improve?

 

[EngineeringMyFinances]

Haven't had a chance to look at the spreadsheet yet. But reading the article you linked, I read the following:

In Guyton's original article, he increased the time frame to 40 years, citing increasing life expectancies.

Fair enough, depending on your age of retirement. Then it goes on to say:

He introduced three decision rules ....... These decision rules were systematically applied throughout a retirement distribution period beginning in 1973,

If you notice the parts I've emphasized by underlining, I'm wondering how this works out. Did Guyton invent a time machine? Does he have data through 2013? More importantly, is the future data provided? I'll be sure to look for it in the spreadsheet.

 

[stevelb]

Walkinwood- Thank you. This is a nice piece of work. I have been giving serious thought to using Guytons Decision Rules and this will be very helpful.

 

[ronin]

I compared the Guyton rules to the method used here using an excel spreadsheet: http://www.analyzenow.com/ and found this method to be superior. I also added the Guyton rules to the analyzenow method but didn't find the increased complexity to be worth it.

 

[stevelb]

ronin - Which method is superior? The Dynamic Pro at www.analyzenow or Walkinwood's spread sheet using the Guyton rules? Not really too familar with the Dynamic Pro - yet.

 

[walkinwood]

Engineering,

Guyton's original study (same journal, oct 2004) used the 'perfect storm' you cite. The original study only used a single 30 year worst case period and extended this to 40 years by
"... assuming a conservative average annual return of three percent above inflation from 2004–2012"

This study shows the results based on monte-carlo simulations.

Ronin,
Thanks for the link.

 

[FRPGuy]

Re: Guyton withdrawal decision rules

A while back I created a Monte Carlo based retirement planner that implements withdrawal decision rules similar to Guyton's.

It's available online for free at: http://www.flexibleRetirementPlanner.com

I tried to document everything and have built up a pretty good FAQ which is up on the site. Please don't hesitate to ask questions if anything doesn't make sense.

Regards,

Jim

 

[ronin]

ronin - Which method is superior? The Dynamic Pro at www.analyzenow or Walkinwood's spread sheet using the Guyton rules? Not really too familar with the Dynamic Pro - yet.

Sorry I wasn't clear. Actually I think most of my work and reference material is on my work computer, so I was going from memory. I will be back in the office at the end of next week and I can look at the specifics and give better links then. I think Hebeler's hybrid method was preferable to me but it depended on what exactly you were after. I think it was discussed previously in this thread: http://www.early-retirement.org/forums/f28/endowment-method-of-retirement-spending-21754.html