The excellent Eric Amzalag, CFP, RICP tells some refreshing truths about traditional financial "advice"...

https://youtu.be/jR5cynx2_aw?si=rm0s4PPs7F2zs6l1

He touches on the same ideas about risk, loss aversion, position sizing, and variable withdrawals, as Merton and TPAW do.

The ratchet system he recommends is inferior, but is certainly a step in the right direction, beyond 'simple' SWR.

This is an excellent article, thanks for posting.

I have recently used the tool to adjust my withdrawal trajectory, allowing higher spending in the first 10 years of retirement, and it has made a significant difference. I'm off to the Caribbean tomorrow!

It's interesting that the Merton share in TPAW is directly related to the Kelly fraction used in betting.
https://en.wikipedia.org/wiki/Kelly_criterion

Mathematically, it's the investment equivalent.

The Merton share also introduces the idea of Utility.

A common way to measure Utility is by the metric CRRA (Constant Relative Risk Aversion), which empirical experiments indicate is how most people behave when faced with uncertainty.

Most people have a CRRA of around 2 or 3.

A CRRA of 1 equates to a Full-Kelly bettor.
A CRRA of 2 equates to Half-Kelly, etc.

If we plug stocks excess real return and volatility into the Merton equation for a person with average CRRA,

Say 5% excess real return for stocks
Say 18% volatility (standard deviation) for stocks
Say 2.5 CRRA

We get a Merton share of

5% / (18%^2 * 2.5) = 61.7% allocation to stocks, which is very close to the classic 60/40 allocation.

But that would only apply if the investor only had their investment portfolio to sustain them.

Add in SP, DB etc., and they are treated as coming from bonds, so the stock allocation to the savings portfolio will rise, without altering the Total Portfolio risk.

This is just one of the sophisticated insights of TPAW and the Lifecycle Model.

It's all based around the concept of Utility. (for a retiree, that's not "wealth" but spending[which may include legacy])

Ultimately, the Utility for you is the shape of your spending graph as produced by TPAW.

The input numbers, e.g. CRRA, expected returns, spending tilts, etc. are all just means to an end to optimise that Utility, and you don't really need to understand the math.

Just understand the graph - which you yourself have created - and you're good to go...

Without seeing your plan, it's hard to judge fully.

However, if you look under Risk>Risk Tolerance>Relative Risk aversion (RRA) corresponding...

we find that "aggressive" starts at slider value 15, which corresponds to a RRA of 1.94. (note: if you have set Decrease Risk Tolerance with Age > 0 the RRA today will be higher, leading to a lower stock allocation from the Merton equation example below.)

Furthermore, if you are using the recommended "regression prediction" for returns, the equity risk premium has narrowed recently to just 2.6% (5.1%-2.5%). Bonds have picked up; it's not that stocks have fallen.

Plugging these numbers into our Merton equation we have:-

2.6%/(18%^2 * 1.94), which gives us a 41% stock allocation.

So, in current conditions, 41% may be deemed "aggressive". (These are just arbitrary words given to different points on the sliding scale, and shouldn't really become the overriding guide in planning)

However, there are several other factors which TPAW takes account of, which may alter that idealised - savings portfolio only - 41% number...
i) If you have specified any essential expenses. This will lower the stock AA.
ii) whether you have any guaranteed income streams. This will raise the stock AA.
iii) other stuff I've probably forgotten/don't fully understand... The maths behind TPAW is complex and the results are sometimes counter-intuitive.

But, as Ben Mathew says, you don't really need to get hung-up on all the math, and the why's and wherefore's, although I get that it may be natural for people to try to understand it.

He and his brother have produced something game-changing, which frankly renders moot about 50% of the topics on sites such as this...

Your spending graph is the only thing that matters. The math and the sliders, etc. are just cogs and dials to create the best picture. The picture says it all...

I remember Ben dealing with an example where, in some cases, more bonds produced higher withdrawals, but haven't found the example yet. (It may produce higher withdrawals, not sure about higher "returns").

Enjoy your trip !

To explain more fully:

The Risk Tolerance you select is actually your risk tolerance at age 20.

If you set Decrease Risk Tolerance with Age to 0, that means you maintain the same risk tolerance as your 20 year-old self throughout life.

The default setting is 2, meaning that your risk tolerance decreases through life by a small amount. In other words, your RRA (relative risk aversion) increases.

It follows that your actual risk tolerance at the start of your plan will depend on your age at the start of the plan, and decreases throughout the plan. (increasing RRA)

I suppose you have to ask yourself "How risk tolerant was I when I was aged 20?" and that is the value to enter in the slider. A bit weird, but I guess Ben Mathew has sound reasons for this approach.

Another reason why descriptions "moderate", "aggressive", etc. are generalisations, and shouldn't be fixated upon.

The knobs and dials (whatever the complex maths behind them) just change the spending picture.

Your picture is your plan.