cfiresim Variable Spending Plan

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Greg in Idaho
Posts: 117
Joined: Tue Dec 27, 2016 12:59 pm

cfiresim Variable Spending Plan

Post by Greg in Idaho » Fri Mar 03, 2017 12:41 pm

In the menu of spending plan options on cfiresim, I'm currently taken with the Variable Spending Plan, which is described as follows in the FAQ/Tutorial:

"Variable Spending: allows for small deviations in spending within those values when the market dictates it. The Z-value determines how much your spending changes during the market changes. The method then tracks an inflation-adjusted version of your Spending amount. Example: If your portfolio is up 10%, Z-value is 0.5, and Spending was $40k, your new spending is now (1+(10% * 0.5)) * $40k = (1.05)*40k = $42000. Example2: If your portfolio then is down 25%, Z-value is still 0.5, Spending was $42000, your new spending is now (1-(25% * 0.5)) * $42k = (0.875)*42000 = your $36750. So, the z-value just provides a value of how much your spending reacts to your portfolio health. If the Z-value is lower, your spending swings less. If it is higher, it swings more. Add in the universal Spending Floor/Ceiling for guardrails, and you've got yourself a pretty good spending method."

Can anyone provide some background or references for this plan...where does it come from? Other names for it?

When I saw the VPW, I actually thought it was doing something like this, rather than what is described in the BH wiki on the topic, so now I'd like to learn more about what I thought I was using, which is what is described above as the Variable Spending Plan.

Thanks...

Topic Author
Greg in Idaho
Posts: 117
Joined: Tue Dec 27, 2016 12:59 pm

Re: cfiresim Variable Spending Plan

Post by Greg in Idaho » Fri Mar 03, 2017 12:48 pm

I'm also wondering whether the floor and ceiling values that you can set are inflation adjusted or not (I'm assuming so, but I don't see that assumption being pointed out)...

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ERMD
Posts: 291
Joined: Thu Dec 26, 2013 11:26 am

Re: cfiresim Variable Spending Plan

Post by ERMD » Fri Mar 03, 2017 12:58 pm

not familiar with cfiresim, but it seems to be an overly technical reflection of what happens in real life as people are drawing down retirement assets. except in real life, it's probably much more gestalt-y.
between scotch and nothing, i'll take scotch. -- faulkner

Topic Author
Greg in Idaho
Posts: 117
Joined: Tue Dec 27, 2016 12:59 pm

Re: cfiresim Variable Spending Plan

Post by Greg in Idaho » Sat Mar 04, 2017 10:14 am

OK, I'll take a stab and suggest it comes from Bengen's floor and ceiling rule...but I'm not sure

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