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On-line Version of the Safe Withdrawal Calculator.


On-line Version of the Safe Withdrawal Calculator.

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This article was posted on May 1, 2001.

A frequent contributor to the Motley Fool Retire Early Home Page message board, dory36, has developed on on-line version of the Retire Early Safe Withdrawal Rate Calculator spreadsheet. It is easier to use for readers who don't have much experience with Microsoft Excel.

The on-line calculator also features several improvements over the Excel version. Among them are the ability to select a pay out period of any length rather than being limited to the 10-year increments in the Excel version, and the flexibility to choose a shorter data series than the complete 1871-2000 database for your analysis. You'll find the calculator and instructions for use at the following link:


This is an outstanding retirement calculator. Many thanks to dory36 (who recently joined the ranks of the early retired) for taking the time to develop the program and generously posting it for others to use.

Why don't the results from the on-line calculator
match the Excel spreadsheet?

There is a difference in when the annual withdrawal for living expenses and investment expenses is taken between the two calculators. The on-line calculator (http://capn-bill.com/fire/ ) makes the withdrawal at the start of the year, the Excel spreadsheet (see Safe Withdrawal Calculator ) withdraws these funds at the end of the year. In practice, neither method matches how a typical retiree manages his portfolio. Few retirees withdraw a full year's worth of living expenses at the start of the year and let it sit without earning interest. Similiarly, the management expenses for a mutual fund are not front-end loaded. You don't pay a full year's worth of management expenses on your mutual fund at the start of the year. Mutual funds actually withdraw their fee from an account throughout the year on a daily basis.

The average of these two results is probably close to the "real" safe withdrawal rate. They appear in the table below.

Retire Early Safe Withdrawal Study - (1871-2000)
Withdrawals indexed to the CPI-U, 0.20% annual exp. ratio
Pay Out Period 10 Yrs 20 Yrs 30 Yrs 40 Yrs 50 Yrs 60 Yrs
Optimal Stock Allocation 48% 66% 74% 77% 82% 85%
Max. Initial Inflation Adjusted Withdrawal Rate . .
Excel Spreadsheet 8.84% 5.16% 4.26% 4.08% 3.86% 3.70%
On-line Calculator 7.67% 4.84% 3.93% 3.80% 3.71% 3.59%
Average 8.26% 5.00% 4.10% 3.94% 3.79% 3.65%

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Copyright 2001 John P. Greaney, All rights reserved.

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