This calculator is based on the data and ideas contained in
Intercst's Millennium Edition RE calculator. I don't see this as replacing that
or the other spreadsheets on the REHP. Instead, I see it as a “browsing” tool,
for exploring maximum withdrawals and some different strategies.Click to download the
zip file.
There are a few new features, which were my primary
motivation for doing this calculator:
Arbitrary
term; you can get safe rates for 27 years, for example.
Arbitrary
starting year. If you don’t want pre-1935 data to be used, you can omit
it.
You
can simultaneously display results of three different strategies - Inflation-Adjusted
Fixed Withdrawal (same as Intercst's spreadsheets), Fixed
Withdrawal (not adjusted for inflation) (same as Intercst's
with inflation “turned off” as might be appropriate for mortgage
payments), and Fixed Percentage Of Remaining Equity Portfolio
(somewhat like Galeno has described). Note, however, that each strategy
is calculated on the withdrawals entered in its section.)
A Find
W/D function will iterate to find the maximum withdrawal that
will achieve a given safe rate. You may do this with either the Inflation-Adjusted
Fixed Withdrawal or the Fixed Percentage Of Remaining
Equity Portfolio model. In the latter strategy, you may specify
a minimum annual withdrawal in unadjusted dollars. A check box near the
button in the bottom of the screen allows you to set the minimum to be the
greater of the unadjusted minimum withdrawal specified or the
inflation-adjusted withdrawal established in the “Intercst” model.
A Find
% Equity function, will iterate to find the split between equity and fixed
income, for a given withdrawal and fixed income investment, yielding the
safest rate. (In many cases, there will be multiple splits achieving the
same safe rate; the lowest and highest are reported, to give you starting
points for further research.)
Optional:
For a given withdrawal, report what years would have been bad years to
retire, and how long the portfolio would have lasted. (This is only
implemented for the Inflation-Adjusted Fixed Withdrawal
strategy. And if the withdrawals are too high, only the first 40 or so bad
years are listed.) To activate this, check the box on the right, near Find
W/D in the Inflation Adjusted Fixed Withdrawal
strategy section.
Display
Data, if checked, will open a text window, display the settings, and enter
the average withdrawal for the years following a retirement year plus the
ending portfolio for the three withdrawal strategies. You can copy this
data to Excel or other tools. The columns are labeled “Intercst” for the
withdrawals and portfolio that use Inflation-Adjusted Fixed
Withdrawal, “Flat” for those using a fixed and unchanging
withdrawal amount, and “Galeno” for the strategy of withdrawing a Fixed
Percentage Of Remaining Equity Portfolio.
Verbose,
if checked, will display, in addition, the actual withdrawal for each year
of the term following every possible retirement year, had you followed the
“Intercst” model or the “Galeno” model. CAUTION: This takes about 10
minutes on my 500MHz, 128MB RAM machine.
Notes:
Where interest rates
were unavailable, as with 5 year Treasuries in several years, I used the
lesser return of Commercial Paper or Intercst's extrapolated TIPS.
Please observe that the
Fixed Percentage Of Remaining Equity Portfolio model, as the name
implies, calculates the withdrawal amount basedonly on the equity portion of the portfolio. Unexpected
results will occur if you allocate a significant portion to fixed income,
and use this section to calculate withdrawals.
Software
updated 10/29/00; notes updated 3/25/01; career updated (retired!) 5/1/01