The classic 4% rule is a 30-year heuristic. Judging every plan against a flat 4% line misreads shorter horizons. A 72-year-old drawing 4.6% is not failing, so the KPI compares your initial draw rate against a ceiling that depends on your remaining horizon.
The bands
The green ceiling comes from historical worst-case survivable initial rates for a US 60/40 portfolio, interpolated by remaining years: about 8% at 10 years, 5% at 20, the canonical 4% at 30, 3.6% at 40. Amber runs from the ceiling to one percentage point above it; red is beyond that.
Because the whole plan runs in today's dollars, the rate is inflation-consistent by construction. No "adjust for inflation each year" footnote needed.
Three places to read it
- The KPI grades your plan's initial rate against the ceiling for your horizon.
- The Expenses tab's Withdrawal rate by age chart plots the running rate as a curve, against the ceiling re-computed for the years remaining at each age, so the ceiling line rises as the horizon shortens, and a widening gap between the two is the plan working rather than drifting. The same per-year rate appears in the spending chart's hover read-out.
- The year-by-year table's Withdrawal % column shows the same running draw rate along the median path: the spending draws plus the RMD, less the excess RMD that went straight back into taxable because money that never left isn't a withdrawal. It also includes both kinds of HSA draw and the dollars that funded the year's tax bill. Taxes are in deliberately: the 4%-rule research this rate is graded against measures gross withdrawals, and leaving the tax out read a tax-deferred-heavy plan one tone safer than it is. It drifts up in down markets and typically falls when Social Security starts.
One-time spending is set aside first
All three readings above leave out the year's one-time costs, and divide by what is left after them. A house bought for cash, a car, a gift to a child: that is money you committed on purpose, once, and the ceiling these rates are graded against describes a draw that repeats every year for the rest of your plan.
Counting a purchase in it turns your own plan red in the year it does exactly what you told it to do. On a $1,000,000 portfolio drawing $40,000 a year, a $500,000 purchase reads as a 54% withdrawal rate against a 4% guideline. The rate that means something is the $40,000 you go on living on, over the $500,000 you go on living from.
The money is not hidden. Hover the KPI in the year of a purchase and it names the amount set aside and what the portfolio really paid out; the year-by-year table has its own One-time column beside the rate; and the spending chart draws one-time costs as their own band.
In the rare case that one year's one-time spending takes the whole portfolio, there is no ongoing rate to state and the KPI says so rather than showing a number.
It is one middle outcome, measured whole
Every figure here is a median across the simulated paths, and the paths are measured one at a time before the middle one is taken: what each path drew, what each path's own purchase took out of it, and what each path had left. That sounds like a technicality and is not. Paths disagree about which account pays for a year: one still has taxable money, another has spent it and is into its Roth. So taking a middle figure per account and adding those up describes no path that ever ran, and in a year with a large purchase it can hide an ongoing draw entirely.
Not the same rate the guardrail watches
Two different ratios in this app share the name "withdrawal rate", and they are not interchangeable:
- This one, meaning the KPI, the chart, and the year-by-year table, counts the dollars actually drawn from the portfolio to live on, tax bill included and one-time costs set aside.
- The trigger behind *My expenses, cut back in bad years* counts this year's budget after any earlier trims, less Social Security and pensions, so it too is a withdrawal, but before tax, and over the portfolio net of any one-time expense committed this year.
The two are close but not the same, so the trimming rule's cut/raise thresholds are not drawn on the Withdrawal rate by age chart: laid over this line they would suggest cuts and raises at slightly the wrong moments. What the rule actually did is in the Spending strategy panel's own chart, and how often it fired is the line under the picker.
Under A share of my portfolio there is no trigger rate at all. That is a different rule, and picking it means you did not pick trimming. It reads the same start-of-year balance this KPI divides by and sets spending from it directly, so the rate stops being a warning about the plan and becomes a description of the rule you picked. The app treats it that way: the KPI drops its green/amber/red grade and the chart drops its safe-ceiling line, because that ceiling is the highest fixed real draw that survived history. A rising share (VPW) deliberately climbs past it with age, and grading the rule's own schedule against a fixed-plan benchmark would paint its design as danger.
Treat it as a smoke alarm, not the verdict. The success rate from the full simulation is the real test. Amber with a high success rate usually means your chosen spending rule, whether trimming or a share of the portfolio, or later income is doing real work. Check what that cost on the panel's lean-year tile.