Another layer
Ditto for my answer: You add last year's CPI or other chosen number. (And I understand you're not necessarily using the rule, just curious). And given that, I'd like to add a perspective to the inflation adjustment rule.
I've noticed that in general, I don't necessarily spend 3% more the following year, just because we had 3% inflation. I almost think many of us take a long time to realize "things have gotten more expensive". So year 1, we take our 4%, year two, we might get 3% inflation, but maybe we don't really notice. (maybe our 4% is a little more than we need, so the inflation just eats up some of the slack), maybe year 3-4 we start noticing that our checkbook balance is getting uncomfortably low toward the end of our chosen pay period, and we bring it up to our spouse, who says, well...let's keep an eye out the next couple months and see if it's just an anomaly...another few months goes by, rinse and repeat, and us "slow to wake" retirees are only adjusting for inflation once every 3-4 years. Obviously this is a gross overgeneralization but even as a thirty-something business owner, I've always noticed this "lag" to realize that we need more money.
