Author Topic: Questions cfiresim 4% vs. Spending Ceiling  (Read 889 times)

dabears847

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Questions cfiresim 4% vs. Spending Ceiling
« on: October 08, 2015, 12:18:54 PM »
So I've punched in a scenario into the calculator and I'm curious on thoughts of greater minds on the data.

Scenario A: Floor spending $35,000, Ceiling $40,000 equals 99.1% success
Scenario B: Floor spending $35,000 and 4% Ceiling equals 99.1% success

1. Why is the success rate the same, my initial thought is that the success rate would be substantially lower due to large spending swings when the portfolio is growing.
2. The 4% ceiling allows numerous draw periods from 140,000 to 40,000 in upward markets.
3. Is it more important to look at the additional spending as an opportunity of additional compounding growth vs. spending the excess? The graphs look very similar. 

Thoughts?

Cfiresim below:
Statistics

Success Rate

Avg. Portfolio at Retirement

99.13% $955,000

Ending Portfolio

Yearly Withdrawals

Total Withdrawals


Average: $1,208,922 $50,283 $1,508,477
Median: $1,112,516 $42,375 $1,325,140
St. Dev.: $600,411 $18,948 $426,038
Highest: $3,740,710 $145,640 $2,696,520
Lowest: $-75,889 $35,000 $1,053,200

Withdrawal Analysis

First 5 Years

Beginning Third

Middle Third

Final Third

Average: $40,188 $42,880 $51,500 $54,631
Median: $38,200 $39,046 $44,914 $46,068
St. Dev.: $5,303 $9,606 $19,132 $22,003
Highest: $66,598 $117,241 $145,640 $123,462
Lowest: $35,000 $35,000 $35,000 $35,000
Failures: 0 0 0 3

Dip Analysis

Portfolio Dips(cycles)

Max Dips(in a cycle)

Withdrawal Dips(cycles)

Max Dips(in a cycle)

Cycles dipped >10% below initial: 70 30 0 0
>20% below initial: 59 29 0 0
>40% below initial: 43 23 0 0
>60% below initial: 21 18 0 0

ndividual Dips

Portfolio Dip

Cycle Start / Dip Year

Withdrawal Dip

Cycle Start / Dip Year

Lowest Dip: $-75,889 1966/1990 $35,000 1876/1877
2nd Lowest Dip: $-60,909 1966/1989 $35,000 1876/1877
3rd Lowest Dip: $-16,342 1966/1988 $35,000 1876/1877
4th Lowest Dip: $6,251 1969/1993 $35,000 1876/1877
5th Lowest Dip: $23,340 1969/1992 $35,000 1876/1877

dabears847

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Re: Questions cfiresim 4% vs. Spending Ceiling
« Reply #1 on: October 08, 2015, 12:29:01 PM »
This might answer the question... seems the answer might be in the average ending portfolio balance or highest ending portfolio.

Ceiling Calculations below, $40,000

Statistics            
Success Rate   Avg. Portfolio at Retirement         
99.13%   $955,000          

   Ending Portfolio   Yearly Withdrawals   Total Withdrawals   
Average:   $1,427,889    $38,242    $1,147,263    
Median:   $1,162,012    $40,000    $1,168,011    
St. Dev.:   $934,367    $2,260    $51,934    
Highest:   $5,765,768    $40,000    $1,198,200    
Lowest:   ($75,889)   $35,000    $1,053,200    

Withdrawal Analysis   First 5 Years   Beginning Third   Middle Third   Final Third
Average:   $38,141    $38,190    $38,251    $38,179
Median:   $38,200    $39,088    $40,000    $40,000
St. Dev.:   $1,857    $2,086    $2,328    $2,364
Highest:   $40,000    $40,000    $40,000    $40,000
Lowest:   $35,000    $35,000    $35,000    $35,000
Failures:   0   0   0   3
Dip Analysis   Portfolio Dips(cycles)   Max Dips(in a cycle)   Withdrawal Dips(cycles)   Max Dips(in a cycle)
Cycles dipped >10% below initial:   67   30   0   0
>20% below initial:   56   29   0   0
>40% below initial:   40   23   0   0
>60% below initial:   21   18   0   0
Individual Dips   Portfolio Dip   Cycle Start / Dip Year   Withdrawal Dip   Cycle Start / Dip Year
Lowest Dip:   ($75,889)   1966/1990   $35,000    1876/1877
2nd Lowest Dip:   ($60,909)   1966/1989   $35,000    1876/1877
3rd Lowest Dip:   ($16,342)   1966/1988   $35,000    1876/1877
4th Lowest Dip:   $6,251    1969/1993   $35,000    1876/1877
5th Lowest Dip:   $23,340    1969/1992   $35,000    1876/1877