Show notes may be found below the videos
Part 1: Walkthrough of the SWR Toolbox
Do you want to avoid the biggest retirement risk? This simple to use tool will let you model your safe withdrawal rate and help ensure you don’t run out of money. In this walkthrough video, we teach you how to use this powerful, flexible, and FREE tool created by Karsten Jeske. Using the SWR Toolbox, you can ensure that you have a personalized plan that works with your own financial situation.
Part 2: Eric + Jason discuss how they’re using the SWR Toolbox and how Jason is struggling to spend as much as he can safely do in early retirement
How much money can you safely spend in retirement? In part two of this series on safe withdrawal rates, we discuss the #1 tool we’ve found to help you answer that question. Topics covered include the SWR Toolbox, our thoughts on Social Security, the challenges of spending in retirement, and how to get comfortable with increasing your withdrawal rate.
Part 3: Walkthrough of the CAPE-Based Rule tab in the SWR Toolbox
Do you like the idea of a portfolio withdrawal strategy that can’t run out of money? This walkthrough video is the third part in our Safe Withdrawal Rate (SWR) series, and teaches you how to model a variable withdrawal strategy based on the CAPE ratio. Using this powerful and FREE tool created by Karsten Jeske, you can design a personalized plan that works with your own financial situation.
Download the Safe Withdrawal Rate (SWR) Toolbox
- The Safe Withdrawal Rate Toolbox is available via Karsten Jeske’s Early Retirement Now blog. The current version can be downloaded via Part 28 of the SWR series. This is also the post where the revisions to the calculator are described. To see the history of this tool, you’ll need to go back to Part 7. We found reading both posts to be essential to really understand how the tool works. Please ensure you follow the directions in the video to make your own copy of the tool. There’s no need to email Karsten to request edit rights!
Essential Blog Posts
Safe Withdrawal Rate series: This is the landing page for the 57-part SWR series (it will surely continue to grow) for which Karsten is best known. Be sure to start with the guidance he provides on how to navigate this great but expansive content. Many essential topics are covered in the series and not all of them involve deep dives into math! While we think all of his posts are interesting, you’ll find guidance below about the specific articles we think are most important to the topic of this video – in addition to Parts 28 and 7 listed above.
In Part 3 of this series, we covered the CAPE-Adjusted Safe Withdrawal Rate tab in the Toolbox, and described what the Shiller CAPE is. For those who want further details, there’s ample material available on Karsten’s blog for you to review. In addition to the introduction to the feature provided in Part 28, Big ERN recently wrote several posts concerning a new “better” CAPE ratio – i.e. CAPE model 2 in the SWR Toolbox. This article introduces the concept, while the next, “The 4% Rule Works Again! An Update on Dynamic Withdrawal Rates based on the Shiller CAPE – SWR Series Part 54” dives into details on how the SWR Toolbox employs this factor to model a variable withdrawal strategy. To go a level deeper on the foundations of this approach, including how to evaluate these types of strategies, you’ll definitely want to read Part 18: Flexibility and the Mechanics of CAPE-Based Rules.
Sequence Risk is more important than your average return rate. Surprised? Be sure to check out Part 15: More Thoughts on Sequence of Return Risk. As mentioned in the video, SWR is overwhelmingly determined by the first 10-15 years of portfolio drawdown.
Are you the kind of person who wants all the gory details about the math underlying the SWR Toolbox? If so, you won’t want to miss Part 8: Technical Appendix. It’s got all the information you need to fully understand how Karsten’s approach works. There are also some good references at the bottom of the post on related material found elsewhere.
Did you know we’ve spoken to Karsten twice before? “What the FIRE Community Gets Wrong” was the first time he came on Two Sides of FI. We covered a lot of ground in this episode about safe withdrawal strategies – so much so that we also released a follow-up video called “Karsten Spoke, We Listened. Here’s What We Learned”. These two episodes are popular with our audience for a good reason and are definitely worth viewing for anyone interested in SWR strategies.
Our second conversation with Karsten also featured Fritz Gilbert (from The Retirement Manifesto), in a continuation of their debate about the merits of bucket strategies. In “What’s Wrong with This Popular Retirement Strategy?” we covered a lot of ground that you won’t want to miss!
Other Show Notes
cFIREsim (or Crowdsourced Financial Independence and Retire Early Simulator) is a very popular and powerful FIRE calculator created by Lauren. We found a lot of value in this tool throughout our FIRE journey, and clearly many others do as well. In the developer’s words, “What can cFIREsim do? At its core, you can enter information in the a few simple inputs and return the basic simulation. At its most complicated, it can determine your portfolio success based on 80 individual portfolio adjustments, multiple types of inflation, multiple types of market returns, and graphically show you the results. There are many options to choose from outside of the ‘Basic Inputs’ “, including a number of variable withdrawal strategies under “Spending Plan”.
Variable Percentage Withdrawal (VPW) is another method besides CAPE-adjusted WR for allowing market conditions to influence the amount you take out of your portfolio in drawdown. As mentioned in part 2, VPW is popular among some adherents the Bogleheads approach to investing. As you’ll read at this link, this method “adapts adjustments to portfolio withdrawal amounts to the retiree’s retirement horizon, asset allocation, and portfolio returns during retirement… to allow the retiree to spend most of the portfolio using return-adjusted withdrawals. By adapting withdrawals to market returns, VPW will never prematurely deplete the portfolio.”
stickK is the app Eric mentioned in Part 2 to help track adherence to a goal – like keeping to spending your planned withdrawal rate. Created from a behavioral economics framework, stickK allows you to create “Commitment Contracts, [which are] a binding agreement you sign with yourself to ensure that you follow through with your intentions—and it does this by utilizing the psychological power of loss aversion and accountability to drive behavior change.” We’ve not tried this yet but this is a pretty appealing (an a little scary) idea!
You can find information on the tools we mention in each episode along with additional information in the Resources section of this site.