Planning your retirement withdrawals can feel complicated, but it doesn’t have to be. This checklist is your simple, step-by-step companion to using my Safe Withdrawal Rate (SWR) Calculator.
Step 1: Gather Your Key Numbers #
Before you can test your plan, you need to know your starting point. Take a moment to gather these essential inputs. The better your input, the better your output.
- ✅ Initial Portfolio Value: What is the total amount of your retirement nest egg? I’m talking here about your invested assets.
- ✅ Retirement Duration: How many years are you planning for your retirement to last? (e.g., 30, 40, or 50 years). Be realistic.
- ✅ Historical Period: What range of years do you want to test against? Using the full available history (e.g., 1871-2024) provides the most robust stress test.
- ✅ Withdrawal Rate (%): What percentage of your initial portfolio do you hope to withdraw in your first year? (start with 4%, and then gradually change this number to fit your risk profile. Myself I’m going for 3.4%).
- ✅ Portfolio Allocation: How is your money invested? Use the calculator to add your assets (like US Stocks, US Bonds, etc.) and make sure the total allocation adds up to exactly 100%.
- ✅ Annual Fees: What is the total expense ratio (TER) or management fee for your investments? Be honest here. Use sites like https://seekingalpha.com/ to look up the TER.
- ✅ Inflation: Will your withdrawals need to keep up with the cost of living? For realistic planning, always select “US Inflation”.
- ✅ Withdrawal Frequency: How often will you take money out? Choose from Yearly, Semi-Annually, Quarterly, or Monthly.
Step 2: Run the Simulation #
With your numbers in hand, this is the easy part. Put your numbers from Step 1 into the calculator.
- ✅ Double-Check Your Inputs: Crosscheck and make sure the figures you enter make sense.
- ✅ Confirm 100% Allocation: Ensure your portfolio allocation total is exactly 100%. The “Total” label will be green.
- ✅ Click “Calculate”: Press the button and let the simulator run. It will use decades of data to see how your plan would have held up.
Step 3: Understand Your Results #
The simulation is done, and now you have your results. Here’s how to translate them into actionable insights, from most to least important:
- ✅ Chance of Success: This is your headline number. It’s the percentage of times your plan succeeded across all historical scenarios. A higher number means more resilience. What level of certainty do you feel comfortable with? 90%? 95%?
- ✅ Worst Duration: In the scenarios that failed, how long did your money last in the absolute worst case? This tells you about your plan’s margin of safety.
- ✅ Worst Terminal Value: This shows you the lowest ending balance. If it’s $0, it confirms that failures occurred. If it’s a positive number, it means your portfolio survived every single scenario.
- ✅ Median Terminal Value: This is your middle outcome, giving you a realistic idea of what to expect, avoiding the extremes of the best and worst cases.
Your Next Move:
- Not happy with the success rate? Go back to Step 1 and try a slightly lower Withdrawal Rate. You’ll be amazed at how much a small change can improve your odds.
- Want to learn more? For a deeper dive into the methodology and a full walkthrough of the results, check out the complete guide: How to Use the SWR Calculator: A Practical Guide.
This is a crucial step forward to get some financial clarity. Use this checklist anytime you want to test a new assumption or track your progress toward a secure retirement.
Drop me a comment with what features you’d like to see in future SWR calculator updates.