Use this sheet next year for your Recalculation of your Safe Spending Amount for 2025.
Posted on December 8, 2023

None of us could Recalculate to a real increase in our Safe Spending Amount (SSA) for the upcoming calendar year (see Chapters 2 and 9, Nest Egg Care [NEC]). Last week I displayed a detailed spreadsheet that showed the history of ten withdrawals of our SSA. This post contains a “short form” spreadsheet you can download and use for your calculations: you set up the parameters for the first year and your appropriate SSR% for all years; then you have to enter five numbers each December 1; the spreadsheet then does the calculations. You use this sheet next year to see if you have or have not earned a real increase in your Safe Spending Amount (SSA) for spending for 2025.


The spreadsheet is basically the same one in the post this same week last year, but I added a fourth column because none of us could calculate to a greater, real SSA this year. If we don’t calculate to a real increase next year, I’ll have to add another column.


We stick with this sheet until the combination of portfolio returns and increasing SSR% over time result in a real increase in our SSA. When that happens, we’ll start, in effect, a “new plan”. We no longer assume this current sequence of returns is similar to the Most Harmful sequence of returns in history. We throw away this sheet, and we start riding along a new sequence of retrurns with a simpler, two-column sheet.


== The spreadsheet ==


Last week I entered the five numbers for this year’s calculation. 1) SS COLA as the measure for inflation issued in October and 2) the 12-month returns I get from the Morningstar site on December 1 for the four components of our portfolio. The sheet then calculates the real return this year for our portfolio – the one Patti and I follow – 6.37%. The sheet also calculates that our real SSA (based on $1,000,000 starting portfolio) remains the same in real spending power for the third year: $50,500.


On Dec 1 (last week), I entered the appropriate numbers in the yellow boxes on year’s spreadsheet.


I added a fourth column for next year’s calculation. Next year I’ll enter the appropriate numbers in the five cells highlighted in yellow, and the spreadsheet will calculate our real portfolio and our SSA for 2025.


I’ll enter the appropriate numbers in the yellow boxes next Dec 1 (2024).


I also entered our age-appropriate SSR% for next year: that’s 5.50%; the spreadsheet will use that to correctly calculate to see if we have earned a real increase in our SSA. I get the correct SSR% for each future year as described in this post.


== How far away is a real increase? ==


I can calculate the real portfolio return we’d need this coming year for a real increase in our SSA: 18.7%. That’s better than I would have assumed at ther 11-month mark: we all had a good November for both stocks and bonds. But 18.7% is high – roughly triple the expected return on our portfolio based on long-run average returns. It is not totally out of question: our real return for our portfolio in 2017 was 16.6%, more then 2½ times our expected return.




Conclusion. In December – just after I get the 12-month returns ending November 30 from the Morningstar site – I calculate to see if Patti and I earned a real increase in our Safe Spending Amount (SSA) for the upcoming year. I showed the history of ten years of calculations in the post last week. This week I provide a simpler, short form calculation spreadsheet that shows our calculation for this year, and I set up it up for the calculation next year. You can download this spreadsheet for your calculations.

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