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A withdrawal strategy sets your yearly spending from the portfolio instead of from your ordinary expenses. You can use one two ways: save it on your plan, so the projection, chance of success and reports spend by it, or run the comparison, which reruns your plan once for each withdrawal rule you pick and sets each rule’s spending path and survival beside your plan’s own spending.
The comparison never changes your plan, and it ignores any strategy saved on it: its baseline is always your own expenses.
- Choose a Method. Only that method’s settings appear; each starts at the value the rule is usually quoted with, and every one can be changed.
- Choose a Start: the plan’s start, a milestone or an age. Before it, your plan spends its own expenses; once it starts, the strategy stays on.
- Optionally tick Minimum or Maximum and give each an amount in today’s dollars or as a % of portfolio.
- Choose how Other income is used (below), and save.
Unticking Set spending with a withdrawal strategy and saving keeps your choices but returns the plan to its own expenses. A milestone that starts a saved strategy can’t be deleted until you change the start.
- Set the Initial withdrawal rate (%), from 0.1 to 20. It starts at 4.
- Choose when withdrawals start: a milestone under Withdrawals start at milestone, or a whole age under …or at age. The milestone defaults to one whose name contains “retir”.
- Optionally set Monte Carlo trials per rule (up to 500; 0 skips them) and a Seed, so a rerun gives the same result.
- Tick the Rules to compare and select Compare withdrawal rules.
Every rule works from the portfolio: the total of all your account balances at the start of the year, before that year’s growth. In the first year every rule except the life-expectancy rule spends the initial rate times that portfolio. Spending never exceeds the portfolio.
| Rule | Each later year |
|---|---|
| Constant dollar | Last year’s spending plus the year’s inflation, whatever the portfolio did. |
| Constant percentage | The initial rate times this year’s portfolio. |
| Guyton-Klinger guardrails | Last year’s spending plus inflation, except no raise after a year of negative portfolio return while the withdrawal rate is above the initial rate. Then cut 10% if the withdrawal rate is above 120% of the initial rate, unless 15 or fewer plan years remain, or raise 10% if it is below 80% of it. |
| Vanguard dynamic spending | The initial rate times this year’s portfolio, held between 2.5% below and 5% above last year’s spending plus inflation. |
| IRS life-expectancy percentage | This year’s portfolio ÷ the IRS life-expectancy factor for your age: the Single Life Table before 72, the Uniform Lifetime Table from 72. Also used in the first year. |
| Fixed amount (saved only) | The amount you enter, in today’s dollars, so it rises with inflation. Untick Raise with inflation each year to hold the first year’s dollar amount. Also used in the first year. |
| 1/N (saved only) | This year’s portfolio ÷ the years left in the plan, this year included. The final year spends what is left. Also used in the first year. |
| Variable percentage withdrawal (saved only) | This year’s portfolio × a percentage that spends it evenly over the years left at an assumed real return, withdrawn at the start of each year. The return blends a stock return (5% by default) and a bond return (1.9%) by your plan’s bond allocation for the year, so the percentage rises as the years left shrink. Also used in the first year. |
| Kitces ratchet (saved only) | Last year’s spending plus inflation. When the portfolio is at least 150% of its starting value plus inflation, spending also rises 10%, at most once every three years counted from the start. Spending is never cut by the rule. |
| Clyatt 95% rule (saved only) | The larger of the initial rate times this year’s portfolio and 95% of last year’s spending. |
The comparison offers the first five rules with their built-in settings; a saved strategy offers all ten, with every setting editable.
All five react differently to the same bad year. With a 4% rate, a $1,000,000 portfolio that falls to $800,000 after a −15% year, 3% inflation and ages 65 to 66:
| Rule | Year one | Year two |
|---|---|---|
| Constant dollar | $40,000 | $41,200 |
| Constant percentage | $40,000 | $32,000 |
| Guyton-Klinger guardrails | $40,000 | $36,000 |
| Vanguard dynamic spending | $40,000 | $40,170 |
| IRS life-expectancy percentage | $43,668 | $36,364 |
| Fixed amount: $40,000 | $40,000 | $41,200 |
| 1/N: 30 years left | $33,333 | $27,586 |
| Variable percentage: 30 years left, 60% stocks | $54,122 | $44,116 |
| Kitces ratchet | $40,000 | $41,200 |
| Clyatt 95% rule | $40,000 | $38,000 |
The life-expectancy rule divides by 22.9 at 65 and 22.0 at 66. The variable percentage is 5.41% with 30 years left and 5.51% with 29.
| Last year’s spending | $40,000 | |
|---|---|---|
| Withdrawal rate on $800,000Above 4% after a losing year, so no inflation raise | 5.0% | |
| Upper guardrail: 120% × 4% | 4.8% | |
| × | Cut, because 5.0% is above 4.8% | 0.90 |
| = | Year-two spending | $36,000 |
A saved strategy can have a Minimum, a Maximum or both. Each is either today’s dollars, raised with your plan’s inflation, or a % of portfolio, a share of the year’s starting portfolio. The method’s own rule runs first, then the minimum, then the maximum, so the maximum wins if the two conflict. The bounded amount is what the next year’s rule treats as last year’s spending. Spending still never exceeds the portfolio.
| 95% of last year’s $40,000 | $38,000 | |
|---|---|---|
| 4% of the $800,000 portfolioThe rule keeps the larger: $38,000 | $32,000 | |
| Maximum: 4.5% of $800,000 | $36,000 | |
| = | Year-two spending, and next year’s “last year” | $36,000 |
| Choice | What the strategy amount means |
|---|---|
| Income covers the strategy amount first; surplus is saved | The amount is the year’s ordinary spending, as in the comparison. Income pays for it first; only a shortfall is withdrawn, and income above it is saved by your income allocation rules. |
| Spend the withdrawal plus all net income | The amount is what leaves the portfolio. You spend it plus your income after taxes and fixed costs, so nothing is saved. Required distributions count toward the amount; any part of them above it is reinvested. In a year the rule starts partway through, the income left over from the months before it is saved as your plan would save it, and only the rule’s prorated amount is added to spending. |
Either way, tax on the withdrawal is paid on top of it through your drawdown order, so the amount you choose is what you get to spend. Fixed costs that your income can’t cover are still withdrawn, even beyond the strategy amount.
A saved strategy and a comparison rerun are simulated the same way. Before the start point, the run is identical to your plan without a strategy. From the start, the rule’s amount replaces your ordinary expenses, prorated in a partial year. In the year a rule starts, your own expenses run until its start month (the milestone’s month, or your birthday month for a start age) and the rule’s amount covers the remaining months. These keep running as planned on top of it: payroll deductions, expenses paid from specific accounts, loan payments, property costs, charitable gifts and health coverage.
Unless you choose to spend the withdrawal plus all net income, the rule sets spending, not the withdrawal. Income, required distributions and Social Security still come in first, and any shortfall is withdrawn through your drawdown order with its taxes, exactly as in How shortfalls are funded. A plan fails under a rule the same way it fails on its own.
A saved strategy also applies in every Success odds trial, reacting to that trial’s returns. In the comparison, the deterministic run uses your plan’s assumptions. When you ask for Monte Carlo trials, every rule, and your own plan, is run through the same set of simulated market histories, so their success rates are comparable. As with Success odds, the rates are estimates.
The chart shows each rule’s spending in today’s dollars, with your plan’s spending dashed. Today’s dollars remove your plan’s assumed inflation. A partial first year is shown at its annual rate.
| Column | What it measures |
|---|---|
| Starting spending (nominal $) | Spending in the first year the rule applies |
| Median real spending, Lowest real | Across the years from the start, in today’s dollars |
| Largest real cut | The deepest fall from an earlier peak, in today’s dollars |
| Years below plan | Years the rule spent less than your plan’s expenses |
| Deterministic | Survives, or the year the run first fails |
| Monte Carlo success | Share of trials that never fail, when trials were requested |
- Constant dollar
- Guyton-Klinger
- Vanguard dynamic
- Life-expectancy percentage
A 60/40 portfolio in a qualified Roth IRA, so taxes don’t intervene, run through the returns and inflation of 2000–2018. Every rule survives. The life-expectancy rule drops at 72 when its divisor moves from the Single Life Table (18.0 at 71) to the Uniform Lifetime Table (27.4 at 72).
Show data
| Age | Constant dollar | Constant percentage | Guyton-Klinger | Vanguard dynamic | Life-expectancy percentage |
|---|---|---|---|---|---|
| 65 | $40,000 | $40,000 | $40,000 | $40,000 | $43,668 |
| 66 | $40,000 | $37,698 | $40,000 | $39,000 | $42,676 |
| 67 | $40,000 | $33,834 | $39,389 | $38,025 | $39,514 |
| 68 | $40,000 | $29,446 | $34,627 | $37,074 | $35,461 |
| 69 | $40,000 | $32,597 | $34,627 | $36,148 | $40,506 |
| 70 | $40,000 | $32,862 | $34,627 | $35,244 | $42,106 |
| 71 | $40,000 | $31,788 | $34,627 | $34,363 | $41,968 |
| 72 | $40,000 | $32,881 | $34,627 | $33,504 | $28,081 |
| 73 | $40,000 | $32,637 | $34,627 | $32,666 | $28,920 |
| 74 | $40,000 | $26,898 | $34,595 | $31,849 | $24,833 |
| 75 | $40,000 | $28,103 | $34,595 | $31,053 | $26,915 |
| 76 | $40,000 | $29,857 | $34,595 | $30,277 | $29,662 |
| 77 | $40,000 | $30,035 | $34,595 | $29,520 | $30,814 |
| 78 | $40,000 | $31,421 | $34,595 | $29,796 | $33,433 |
| 79 | $40,000 | $34,549 | $34,595 | $31,286 | $38,128 |
| 80 | $40,000 | $37,074 | $34,595 | $32,850 | $42,430 |
| 81 | $40,000 | $35,796 | $34,595 | $34,100 | $42,237 |
| 82 | $40,000 | $36,114 | $34,595 | $34,402 | $44,168 |
| 83 | $40,000 | $38,843 | $34,595 | $36,122 | $48,978 |
In that history the guardrails rule cut once, at 68, and then held about $34,600 a year; the dynamic rule sat on its 2.5% floor for twelve years; constant percentage (in the data view) fell as low as $26,898.