How Much to Accumulate for Retirement? (Excel analysis)

OldScientist

jamesd said:

DT2001 said:

Have I misread? Is it more than10% in a year?
Withdrawals will have started at maybe 25% higher than the 4% rule (adjusted for theUK)

It can be more than ten percent in a year if that year has greater than 10% inflation and the inflation increase is skipped by following the withdrawal rule, due to negative return over the previous year.

The capital reservation rule will impose a cut of ten percent on the after inflation planned income (so inflation increase then cut by 10%) if the percentage of the current value of the pot being withdrawn exceeds the upper guardrail, set at 20% above the initial percentage withdrawal rate. This rule is not used in the final 15 years of the plan.

If looking at GK implementations, check to see that there are real cuts above, equal to and below 10% in historic sequences to verify that both rules are incorporated. If all are 10% the withdrawal rule is missing.

Thee's no law limiting how many times these rules can be used and you can potentially see many years of ten percent cuts sequentially if the capital preservation rule is exceeded for a long time. This is the sort of sequence that can result from say a  40% equity drop followed by no recovery for a decade.

There are many ways to address this. Tools can often include "floor" spending levels. Those set a lower limit and the initial withdrawal rate is reduced to allow for that. Alternatively a different rule can be used for some of the money. It's also my normal practice to suggest extensive use of state pension deferral and that protects against some bad sequence issues by raising the combined income floor. Level annuities could be used to handle poor initial cases due to bad market performance rather than high inflation. You can also consider Guyton's work on reducing sequence of return risk by varying the asset allocation depending on the price/earnings ratio.

jamesd is correct, under poor conditions GK (and other dynamic withdrawal approaches) can cut spending quite a lot. In the following graph, the modelled withdrawal rate for 30 year retirements with a UK 60/20/20 (stock/bonds/bills) portfolio and an initial withdrawal rate with GK of 5.5% (all rules except portfolio management). There are no failures and the minimum final portfolio value, in real terms, is 10% of the initial portfolio value.



The black line is the mean spend over the retirement, the blue lines are the minimum and maximum spends over the retirement. The annual spend can drop as low as 1.5% (this is with a portfolio of large cap stocks - adding in small stocks will improve this a bit - possibly as much as 0.3%).

DT2001

Linton said:

DT2001 said:

Linton said:

DT2001 said:

Linton said:

DT2001 said:

If you employ a strategy that requires no chance of downward adjustment of income you will be overly cautious.
Flexibility allows you to have a greater overall level of income.

If retiring before SPA without any guaranteed income maybe a combination of cash reserve and flexibility is ideal. It is the time when supposedly you’ll be spending most in retirement (unless needing care later on) but if you can tweak the timing of say long haul holidays by a year or so you must improve the longevity of your pot.

It isnt a matter of being cautious but rather of using your assets  to their best advantage.  In particular a 60/40 portfolio is seen as reasonable for retirement.  There should be plenty of money in the 40% to avoid selling equities for at least 5 years and for taking your long-booked luxury holiday.  Better to see the 40% as part of your armoury rather than simply as padding .  This implies that you should devote as much time to the allocation of your non-equity assets as you do to your equities.

I can't see that the savings from simply cutting excess expenditure for the short term without seriously reducing your standard of living are going to be significantly large to justify the pain. Rather than reacting in a panic to a crash by cutting all your expenditure by as much as say 25% for a year or two it would be better to plan to reduce expenditure by a few % for the rest of your life which is something you probably would not notice.  Such a small change would probably be reversed when your equities recovered anyway.

Sorry, I didn’t understand that your cash buffer was part of the 40%.

Guyton-Klinger would give you a better starting withdrawal rate which even after a 10% reduction would still be more than your ‘normal’ SWR.

If it is part of your plan to react to crashes there shouldn’t be a panic.

When I first calculated my ‘number’ I had 50% of my annual budget in my holiday fund so adjusting for prevailing market conditions wouldn’t worry me. Maybe having been self employed for 25 years with quite a variable income it is ‘normal’ for me to continually adjust expenditure without a feeling of lowering my living standards.

Why should the cash buffer not be part of the 40%?  It seems a great waste for the 40% just to be sitting there not doing very much.  Another part of my 40% is in corporate bonds providing income.  Every fund must have a positive purpose, there is no money for mere padding.  The 60/40 split is simply a measure of overall diversification.

I dont believe in SWRs other than to provide a sanity check, but rely more on a year by year spreadsheet with pessimistic assumed long term return, inflation rates, and normal living costs.  So Guyton Klinger is not applicable either. A measure of the risk is the amount of money left over at the end of plan.  Major one-off expenditure is justified by the proposed expenditure not reducing the safety margin to a worrying level.  Only known expenditures are explicitly planned.

I thought 60/40 portfolio was 60% equities 40% bonds. So your portfolio could be shown as 60/20/20.

If you don’t believe in SWRs do you adjust your spreadsheet annually and your spend according to your updated forecast?

At the moment safe bonds on their own cannot fulfil their traditional role of non-equity. So one has to choose other options to diversify. These include cash and particular niche investments.  So I regard 60/40 as 60% equity  and 40% non equity.

yes, I update the spread sheet with actual values of expenditure and investment return each year.  However assumed future inflation, investment return and normal required expenditure are not changed. The assumed expenditure is now well in excess of actual thanks to Covid and to low inflation over the past 15 years. So the plan represents a target more than a constraint for expenditure.

So as you are not meeting your target for expenditure and your ‘pot’ is growing are you considering an annuity to cover at least some of your spend? This would meet your criteria of minimising risk and if inflation linked cover that downside of cash. I am assuming you are 65+ as you refer to “the past 15 years”, apologies if that isn’t the case.

If your original pessimistic assumptions had been optimistic how did the plan cope with that?

OldScientist

Further to my post above, if the withdrawal rule is omitted, so an inflation increase is always added (which G-K appear to advocate in their 2006 paper), then to avoid failures (i.e. where the money runs out), the initial withdrawal has to be dropped to 3.6% and the historical mean, max and min withdrawals turned out as follows (same portfolio as before)...



While the lowest withdrawal is still 1.5%, this now occurs during a lot fewer retirements. Not entirely unexpectedly, it appears that the trade off is between a higher initial spend but more likely to have to drop this significantly at a later date or a lower initial spend and less likely to have to drop the withdrawals.

MK62

Audaxer said:

Thrugelmir said:

Audaxer said:

Thrugelmir said:

Audaxer said:

pensionpawn said:

Audaxer said:

pensionpawn said:

Linton said:

BritishInvestor said:

Audaxer said:

SouthCoastBoy said:

It seems most people take the swr as the way forward. My understanding of swr is that the pot will be preserved at the swr? Is that incorrect? 

Whether or not the pot will be preserved will depend on the Sequence of Returns. If for example you get a poor sequence of returns in the first decade of retirement, the pot might not last throughout retirement if you don't have a cash buffer to draw from in loss years.

I'm not sure the cash buffer is going to be a massive help (certainly not if you take it from the equity allocation).

https://finalytiq.co.uk/cash-reserve-buffers-withdrawal-rates-old-wives-fables-retirement-portfolio/

 - None of the strategies tested matched what it is proposed here that one does with a buffer. ie use it for covering crashes
 - The strategies were mostly tested when bond returns were of some significance - one of the major reasons for choosing a cash buffer is that safe bonds now seem to be sub-optimal.  If bond were returning say 5% the need for cash would be significantly reduced.
 - In retirement I would think most people are prepared to sacrifice returns if necessary to reduce risk

If having a large cash buffer enables you to sail through a crash worry-free when you would otherwise lie awake at night then a cash buffer is a massive help.

Essential for the early years however as time (decades) go by and your funds hopefully continue to grow significantly, you can start to whittle down the cash holding as with decreasing years ahead it has performed it's role.

If your investments grow significantly in retirement, I would say that is a good reason for converting more to cash to enable you to lower your risk profile and spend more of it if you want. As others have previously said, there is no point in being the richest person in the graveyard.

I think it depends on the value of your holding compared to what you need to withdraw pa. If you have £400k in funds and £100k in cash, are 65 and drawdown £20k per year it may be worth keeping your 5 year cash safety net. However if you now have £800k in funds and still £100k in cash at 75 you may well be asking what sort of catastrophic world event is going to leave you struggling to get by at 80 after you've used all your cash? Bearing in mind you have a full SP and say £0.5M equity in your house. What we don't spend from our drawdown each year will go into savings such as an ISA, however besides that I'm not going to significantly add to my cash buffer.

That's fine, but if your investments have grown to that extent, I'm not looking at it from the point of view of being more cautious. In your example, if your investments have gone up to £800k and you had £100k cash, you could if you wanted to, convert a bit more of the £800k to cash, say another £100k, to spend it on luxuries over the next few years or give some to good causes.  You would still have £700k in investments and £100k cash, which would still be enough to drawdown £20k per year for your remaining years. My point being, you can't take it with you.   

Periods of good returns are more often or not followed by famine. There are two types of investors those that have been humbled, and those that are yet to be. When markets are high it's easy to become intoxicated with the thought of having reached the mountain peak and standing there admiring the view. 

I know that, but there are also some of us that will just continue to accumulate in retirement, when in some cases spending rates could be comfortably increased. In the example given by the previous poster, £100k could have been removed from that portfolio, for example to fund a major house move, and there would still have been more than enough to fund the rest of their retirement. On the basis that the £20k annual income required was still under 3% of the remaining portfolio, that is a pretty safe withdrawal rate, especially with the addition of a 5 year cash buffer. 

If equity markets falter and inflation persists. Then the overall return on the portfolio may disappoint.  Holding cash is no cert substitute for the positive returns generated by Government Bonds over the past 40 years. Seems to be more a case of investors convincing themselves it is. 

If a 3% drawdown with a 5 year cash buffer doesn't turn out to be a Safe Withdrawal Rate, a lot of retirees will be in trouble.

.....me included....

BritishInvestor said:

Audaxer said:

Thrugelmir said:

Audaxer said:

Thrugelmir said:

Audaxer said:

pensionpawn said:

Audaxer said:

pensionpawn said:

Linton said:

BritishInvestor said:

Audaxer said:

SouthCoastBoy said:

It seems most people take the swr as the way forward. My understanding of swr is that the pot will be preserved at the swr? Is that incorrect? 

Whether or not the pot will be preserved will depend on the Sequence of Returns. If for example you get a poor sequence of returns in the first decade of retirement, the pot might not last throughout retirement if you don't have a cash buffer to draw from in loss years.

I'm not sure the cash buffer is going to be a massive help (certainly not if you take it from the equity allocation).

https://finalytiq.co.uk/cash-reserve-buffers-withdrawal-rates-old-wives-fables-retirement-portfolio/

 - None of the strategies tested matched what it is proposed here that one does with a buffer. ie use it for covering crashes
 - The strategies were mostly tested when bond returns were of some significance - one of the major reasons for choosing a cash buffer is that safe bonds now seem to be sub-optimal.  If bond were returning say 5% the need for cash would be significantly reduced.
 - In retirement I would think most people are prepared to sacrifice returns if necessary to reduce risk

If having a large cash buffer enables you to sail through a crash worry-free when you would otherwise lie awake at night then a cash buffer is a massive help.

Essential for the early years however as time (decades) go by and your funds hopefully continue to grow significantly, you can start to whittle down the cash holding as with decreasing years ahead it has performed it's role.

If your investments grow significantly in retirement, I would say that is a good reason for converting more to cash to enable you to lower your risk profile and spend more of it if you want. As others have previously said, there is no point in being the richest person in the graveyard.

I think it depends on the value of your holding compared to what you need to withdraw pa. If you have £400k in funds and £100k in cash, are 65 and drawdown £20k per year it may be worth keeping your 5 year cash safety net. However if you now have £800k in funds and still £100k in cash at 75 you may well be asking what sort of catastrophic world event is going to leave you struggling to get by at 80 after you've used all your cash? Bearing in mind you have a full SP and say £0.5M equity in your house. What we don't spend from our drawdown each year will go into savings such as an ISA, however besides that I'm not going to significantly add to my cash buffer.

That's fine, but if your investments have grown to that extent, I'm not looking at it from the point of view of being more cautious. In your example, if your investments have gone up to £800k and you had £100k cash, you could if you wanted to, convert a bit more of the £800k to cash, say another £100k, to spend it on luxuries over the next few years or give some to good causes.  You would still have £700k in investments and £100k cash, which would still be enough to drawdown £20k per year for your remaining years. My point being, you can't take it with you.   

Periods of good returns are more often or not followed by famine. There are two types of investors those that have been humbled, and those that are yet to be. When markets are high it's easy to become intoxicated with the thought of having reached the mountain peak and standing there admiring the view. 

I know that, but there are also some of us that will just continue to accumulate in retirement, when in some cases spending rates could be comfortably increased. In the example given by the previous poster, £100k could have been removed from that portfolio, for example to fund a major house move, and there would still have been more than enough to fund the rest of their retirement. On the basis that the £20k annual income required was still under 3% of the remaining portfolio, that is a pretty safe withdrawal rate, especially with the addition of a 5 year cash buffer. 

If equity markets falter and inflation persists. Then the overall return on the portfolio may disappoint.  Holding cash is no cert substitute for the positive returns generated by Government Bonds over the past 40 years. Seems to be more a case of investors convincing themselves it is. 

If a 3% drawdown with a 5 year cash buffer doesn't turn out to be a Safe Withdrawal Rate, a lot of retirees will be in trouble.

A lot of retirees invest in a completely different way to that specified in the research so I don't think it's realistic for them to base their assumptions on this.

If you look at what has improved SWR historically, be it small-cap, value, EM etc (primarily due to greater returns), someone investing in a large-cap growth fund charging ~1% pa with a PE ratio far in excess of the overall market - you have to wonder what a reasonable SWR is. 

...everyone's portfolio is different, so everyone's results will differ if their portfolios are all subjected to the exact same drawdown method.....these discussions on SWR can only ever really be taken in the "general" sense. One person's 60/40 portfolio might be similar to another's....or it could be radically different.....even single MA funds with that split can vary a lot in composition.

Linton

DT2001 said:

Linton said:

DT2001 said:

Linton said:

DT2001 said:

Linton said:

DT2001 said:

If you employ a strategy that requires no chance of downward adjustment of income you will be overly cautious.
Flexibility allows you to have a greater overall level of income.

If retiring before SPA without any guaranteed income maybe a combination of cash reserve and flexibility is ideal. It is the time when supposedly you’ll be spending most in retirement (unless needing care later on) but if you can tweak the timing of say long haul holidays by a year or so you must improve the longevity of your pot.

It isnt a matter of being cautious but rather of using your assets  to their best advantage.  In particular a 60/40 portfolio is seen as reasonable for retirement.  There should be plenty of money in the 40% to avoid selling equities for at least 5 years and for taking your long-booked luxury holiday.  Better to see the 40% as part of your armoury rather than simply as padding .  This implies that you should devote as much time to the allocation of your non-equity assets as you do to your equities.

I can't see that the savings from simply cutting excess expenditure for the short term without seriously reducing your standard of living are going to be significantly large to justify the pain. Rather than reacting in a panic to a crash by cutting all your expenditure by as much as say 25% for a year or two it would be better to plan to reduce expenditure by a few % for the rest of your life which is something you probably would not notice.  Such a small change would probably be reversed when your equities recovered anyway.

Sorry, I didn’t understand that your cash buffer was part of the 40%.

Guyton-Klinger would give you a better starting withdrawal rate which even after a 10% reduction would still be more than your ‘normal’ SWR.

If it is part of your plan to react to crashes there shouldn’t be a panic.

When I first calculated my ‘number’ I had 50% of my annual budget in my holiday fund so adjusting for prevailing market conditions wouldn’t worry me. Maybe having been self employed for 25 years with quite a variable income it is ‘normal’ for me to continually adjust expenditure without a feeling of lowering my living standards.

Why should the cash buffer not be part of the 40%?  It seems a great waste for the 40% just to be sitting there not doing very much.  Another part of my 40% is in corporate bonds providing income.  Every fund must have a positive purpose, there is no money for mere padding.  The 60/40 split is simply a measure of overall diversification.

I dont believe in SWRs other than to provide a sanity check, but rely more on a year by year spreadsheet with pessimistic assumed long term return, inflation rates, and normal living costs.  So Guyton Klinger is not applicable either. A measure of the risk is the amount of money left over at the end of plan.  Major one-off expenditure is justified by the proposed expenditure not reducing the safety margin to a worrying level.  Only known expenditures are explicitly planned.

I thought 60/40 portfolio was 60% equities 40% bonds. So your portfolio could be shown as 60/20/20.

If you don’t believe in SWRs do you adjust your spreadsheet annually and your spend according to your updated forecast?

At the moment safe bonds on their own cannot fulfil their traditional role of non-equity. So one has to choose other options to diversify. These include cash and particular niche investments.  So I regard 60/40 as 60% equity  and 40% non equity.

yes, I update the spread sheet with actual values of expenditure and investment return each year.  However assumed future inflation, investment return and normal required expenditure are not changed. The assumed expenditure is now well in excess of actual thanks to Covid and to low inflation over the past 15 years. So the plan represents a target more than a constraint for expenditure.

So as you are not meeting your target for expenditure and your ‘pot’ is growing are you considering an annuity to cover at least some of your spend? This would meet your criteria of minimising risk and if inflation linked cover that downside of cash. I am assuming you are 65+ as you refer to “the past 15 years”, apologies if that isn’t the case.

If your original pessimistic assumptions had been optimistic how did the plan cope with that?

I intend to look at annuities when/if I get to my mid 80's when annuity rates are significantly better and long term inflation is less of an concern. I am now in my early 70's.

Minimising risk only applies to that money which is essential to meeting day to day living costs.  Holding a large cash and low risk investments buffer is sufficient mitigation at the moment.  That could become more of a problem in the future since about 50% of our day to day expenditure is paid from fixed rate annuities.  Before the 2008 crash annuity rates were reasonably attractive and drawdown was a niche option.

If the plan had proved to be optimistic as shown by insufficient wealth remaining at the end of the plan the planned expenditure would have been reduced until the plan worked.  That was one reason for not trying to minimise initial planned expenditure in retirement which was set at a higher value than the actual whilst working.

NoMore

I think you've scared the OP off! six pages in and he's never responded.

Easy question to ask, hard to answer.

MK62

OldScientist said:

jamesd said:

DT2001 said:

Have I misread? Is it more than10% in a year?
Withdrawals will have started at maybe 25% higher than the 4% rule (adjusted for theUK)

It can be more than ten percent in a year if that year has greater than 10% inflation and the inflation increase is skipped by following the withdrawal rule, due to negative return over the previous year.

The capital reservation rule will impose a cut of ten percent on the after inflation planned income (so inflation increase then cut by 10%) if the percentage of the current value of the pot being withdrawn exceeds the upper guardrail, set at 20% above the initial percentage withdrawal rate. This rule is not used in the final 15 years of the plan.

If looking at GK implementations, check to see that there are real cuts above, equal to and below 10% in historic sequences to verify that both rules are incorporated. If all are 10% the withdrawal rule is missing.

Thee's no law limiting how many times these rules can be used and you can potentially see many years of ten percent cuts sequentially if the capital preservation rule is exceeded for a long time. This is the sort of sequence that can result from say a  40% equity drop followed by no recovery for a decade.

There are many ways to address this. Tools can often include "floor" spending levels. Those set a lower limit and the initial withdrawal rate is reduced to allow for that. Alternatively a different rule can be used for some of the money. It's also my normal practice to suggest extensive use of state pension deferral and that protects against some bad sequence issues by raising the combined income floor. Level annuities could be used to handle poor initial cases due to bad market performance rather than high inflation. You can also consider Guyton's work on reducing sequence of return risk by varying the asset allocation depending on the price/earnings ratio.

jamesd is correct, under poor conditions GK (and other dynamic withdrawal approaches) can cut spending quite a lot. In the following graph, the modelled withdrawal rate for 30 year retirements with a UK 60/20/20 (stock/bonds/bills) portfolio and an initial withdrawal rate with GK of 5.5% (all rules except portfolio management). There are no failures and the minimum final portfolio value, in real terms, is 10% of the initial portfolio value.



The black line is the mean spend over the retirement, the blue lines are the minimum and maximum spends over the retirement. The annual spend can drop as low as 1.5% (this is with a portfolio of large cap stocks - adding in small stocks will improve this a bit - possibly as much as 0.3%).

....and for me, that kind of income variation is far too much - hence why I use my own "version" of variable withdrawal rather than G-K, or any of the other "oven-ready" methods. My take on this is a bit like yours, but my final conclusion is that 5.5% is just too high an initial withdrawal rate.......it might work out (and indeed has in the past), but the risk of failure, imho, is just too high, and, again imho, failure doesn't just mean exhausting the pot.....income reducing to little more than a quarter of the starting figure is a failure in my book......though I accept that this could be a viable method for anyone whose overall position can cope with that magnitude of income variation (mine can't).

NannaH

We can only dream of annuity rates going back to early 2000’s levels.
My late FiL got over £10k a year from his £150k DC pot on a single life annuity.  

DT2001

MK62 said:

OldScientist said:

jamesd said:

DT2001 said:

Have I misread? Is it more than10% in a year?
Withdrawals will have started at maybe 25% higher than the 4% rule (adjusted for theUK)

It can be more than ten percent in a year if that year has greater than 10% inflation and the inflation increase is skipped by following the withdrawal rule, due to negative return over the previous year.

The capital reservation rule will impose a cut of ten percent on the after inflation planned income (so inflation increase then cut by 10%) if the percentage of the current value of the pot being withdrawn exceeds the upper guardrail, set at 20% above the initial percentage withdrawal rate. This rule is not used in the final 15 years of the plan.

If looking at GK implementations, check to see that there are real cuts above, equal to and below 10% in historic sequences to verify that both rules are incorporated. If all are 10% the withdrawal rule is missing.

Thee's no law limiting how many times these rules can be used and you can potentially see many years of ten percent cuts sequentially if the capital preservation rule is exceeded for a long time. This is the sort of sequence that can result from say a  40% equity drop followed by no recovery for a decade.

There are many ways to address this. Tools can often include "floor" spending levels. Those set a lower limit and the initial withdrawal rate is reduced to allow for that. Alternatively a different rule can be used for some of the money. It's also my normal practice to suggest extensive use of state pension deferral and that protects against some bad sequence issues by raising the combined income floor. Level annuities could be used to handle poor initial cases due to bad market performance rather than high inflation. You can also consider Guyton's work on reducing sequence of return risk by varying the asset allocation depending on the price/earnings ratio.

jamesd is correct, under poor conditions GK (and other dynamic withdrawal approaches) can cut spending quite a lot. In the following graph, the modelled withdrawal rate for 30 year retirements with a UK 60/20/20 (stock/bonds/bills) portfolio and an initial withdrawal rate with GK of 5.5% (all rules except portfolio management). There are no failures and the minimum final portfolio value, in real terms, is 10% of the initial portfolio value.



The black line is the mean spend over the retirement, the blue lines are the minimum and maximum spends over the retirement. The annual spend can drop as low as 1.5% (this is with a portfolio of large cap stocks - adding in small stocks will improve this a bit - possibly as much as 0.3%).

....and for me, that kind of income variation is far too much - hence why I use my own "version" of variable withdrawal rather than G-K, or any of the other "oven-ready" methods. My take on this is a bit like yours, but my final conclusion is that 5.5% is just too high an initial withdrawal rate.......it might work out (and indeed has in the past), but the risk of failure, imho, is just too high, and, again imho, failure doesn't just mean exhausting the pot.....income reducing to little more than a quarter of the starting figure is a failure in my book......though I accept that this could be a viable method for anyone whose overall position can cope with that magnitude of income variation (mine can't).

I agree that none of us should, as you describe it, use an “oven-ready” method. I reckon, at worst, We’ll be reliant on our pot for 40% of our maximum number so can take a riskier option, if we want.

It is a balancing act and is affected by other options/circumstances and willingness/ability to be flexible e.g. can you downsize, move to a cheaper area, would you, would you take in a lodger or do Airbnb, do want to leave a legacy. Maybe most importantly when do you want to retire.

So getting back to the original question of how much to accumulate I’d suggest reading a few of the threads on this forum and you’ll find some that will resonate with you and then research further.
My mother lived quite happily on her SP plus £50k inheritance for 20 years and her care home fees are covered by selling her property. Our plans will cost more, we’ll retire before SPA and be able to help our children with finances. No easy answer.

jamesd

OldScientist said:

Further to my post above, if the withdrawal rule is omitted, so an inflation increase is always added (which G-K appear to advocate in their 2006 paper), then to avoid failures (i.e. where the money runs out), the initial withdrawal has to be dropped to 3.6% and the historical mean, max and min withdrawals turned out as follows (same portfolio as before)...

While the lowest withdrawal is still 1.5%, this now occurs during a lot fewer retirements. Not entirely unexpectedly, it appears that the trade off is between a higher initial spend but more likely to have to drop this significantly at a later date or a lower initial spend and less likely to have to drop the withdrawals.

I didn't notice such an implication in the 2006 paper. I'm also confident that Guyton disagrees with the idea of not skipping the inflation increases because he's said in interviews that small cuts are important and that's how the small cuts are made.

In an interview with Kitces, Guyton mentioned providing a sample withdrawal policy statement and he provided one that's an example of the type his firm uses today, with the withdrawal rule present. And of course the withdrawal rule featured in that discussion as necessary.

Don't skip the withdrawal rule. It's arguably the most important of them all and it makes a bigger difference than a large but temporary cut just when markets are down.