*precisely*. You just perform a simple amortization calculation in real dollars.

The "safe withdrawal rate" is the number of real dollars, as a percentage of the initial amount, that will, when withdrawn every year, reduce the balance to zero at the end of the specified time period.

Unless I've screwed up on the calculation...

Using the Excel PV function, if the real interest rate (above the CPI adjustment) is I, the number of years is N, and if you assume that the withdrawal is made annually at the beginning of the year, then the safe withdrawal rate is

-1/PV($A6,B$5,1,0,1)

For various interest rates and time horizons, the safe withdrawal rates would seem to be:

----------25-------30-------35

1.00% 4.50% 3.84% 3.37%

1.30% 4.65% 3.99% 3.53%

1.50% 4.76% 4.10% 3.64%

2.00% 5.02% 4.38% 3.92%

2.50% 5.30% 4.66% 4.22%

3.00% 5.58% 4.95% 4.52%

3.50% 5.86% 5.25% 4.83%

4.00% 6.15% 5.56% 5.15%

4.50% 6.45% 5.87% 5.48%

For some reason, traditionally, SWR's are illustrated for a 30 year "time horizon." This doesn't really seem appropriate for (say) a 65-year-old woman, but never mind, that's my wife's problem, not mine.

Notice that a 1.3% real interest rate is sufficient to achieve a 3.99% withdrawal rate over 30 years.

Now, in the case of TIPS, there is a problem, because 30 year TIPS are no longer offered and even 20 year TIPS seem to be rarely offered. If you use 10 year TIPS there is no assurance of what the interest rate will be when the TIPS matures and must be rolled over, or even that TIPS will still be available.

I bonds, however, continue to earn interest for 30 years, and by a curious coincidence

*they happen to be earning exactly a 1.3% real interest rate right now*. Of course you need to do something or other about the first five years, during which I bonds charge a three month's interest penalty for redemption.

Oh, so was I exaggerating when I claimed a "4%" rate when the table shows only 3.99%? The answer could be, no, not exactly, because the rate is actually just a tad higher if you assume that withdrawals are made monthly instead of making the entire year's withdrawal at the start of the year. With monthly withdrawals, a 1.3% real interest rate allows a 4.02% safe withdrawal rate.