Morningowl,
Under the Criteria for marking a cycle as "failed" section, if you change the Yearly Withdrawal falls below to $10,000... all it is doing is considering the simulation a "failure" if your withdrawal falls below $10,000. In your screenshot, I can tell that you set your spending to $50,000/yr (inflation adjusted). Therefore, your simulation will never "fail" because it stays above $10,000.
That particular option is intended to be used with Spending Methods that are variable. So, If you have a variable spending method that moves around, but you consider it a "failure" to get below say $20,000... you can set it there. OR you can set a Spending Floor of $20,000, which won't actually allow it to go that low.