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Question about FIRECalc spending models
Old 03-19-2013, 10:11 AM   #1
Dryer sheet wannabe
Join Date: Aug 2012
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Question about FIRECalc spending models

Question about FIRECalc spending models. Is the default inflation assumption the same as Safemax?

At the top of the page on the Spending Models tab, FIRECalc says the following, but I'm not sure if I understand it correctly: "If you leave this section alone, FIRECalc assumes you will continue to spend the same amount (after adjustments for inflation) every year for 30 years."

Is this the same as the Safemax model? I'm not sure because I don't see a place to set the initial first-year withdrawal rate as a percentage? I only see the "Percentage of Remaining Portfolio" option, which doesn't seem the same as Safemax?

From what I understand, William Bengen's Safemax model is to withdraw a set percentage the first year (usually 3 or 4%), and then adjust that dollar amount each year for inflation. So, after the first year, you never again multiply your ending assets by 3% to get the withdrawal rate.

For a good explanation of Safemax, see Retired Syd: See Dick and Jane Retire - Retirement: A Full-Time Job who writes: "You withdraw 3% of your assets only the first year and then adjust that dollar amount each year for inflation. After the first year, you never again multiply your ending assets by 3% to come up with the withdrawal rate." Or see Wade Pfau: Retirement Researcher Blog: William Bengen's SAFEMAX who writes, "The 4% part just refers to the percentage of initial retirement assets withdrawn in the first year. In subsequent years, that dollar amount is adjusted for inflation. The actual withdrawal percentage in subsequent years will fluctuate based on market returns and withdrawals."

Is a Safemax calculation option available in FIRECalc?

Thanks for any help in clarifying if this is available!
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