As I understand it, Merton's formula defaults to a rising schedule because:-
1) the future is cheaper than the present, assuming positive returns, so you should buy more of it.
2) the future is more uncertain than the present, so you should save more for the future, as a precaution.
https://tpawplanner.com/...rtons-portfolio-problem
[You would have to ask Ben Mathew Ph.D to explain it better than I can...]

Although, as Ben Mathew says, you can take the view that you want to consume more sooner rather than later, and specify a falling schedule. It's entirely up to you. There's no right or wrong.

You don't really have to understand these subtleties.

After entering your future fixed income, lump sums, and "essential expenses" if you wish, play with the knobs and sliders, and just create a graph that looks satisfying. [checking the 5th percentiles to be conservative].

You can then experiment with various forecast returns, down to the most conservative, if you wish. Tweak the graph as necessary.

The beauty of amortization is that if you over-estimate returns, you'll get a bit more sooner, and less later.
If you under-estimate returns, you'll get the opposite...

It's certainly an interesting idea (good thread). One of my concerns is that you might never stop tinkering with it, given how things change, and how effective would it be then. I like the 4% as a basic guide, perhaps some years taking a bit more and others a bit less. If you have a year or two with higher returns, having that extra holiday or upgrading your car etc. It was once said of me during an appraisal 'Keith prefers the simple approach', to this day I'm unsure if it was a criticism or a compliment!

I've reviewed my original SWR calculations. A withdrawal figure giving a 90% chance of success (ie not running out of money during the next 30 years) is only about 10% lower than the suggested TPAW figure, so a useful comparator.

Where I think the TPAW approach is particularly useful is the state pension triple lock. There is (obviously) no way SWR approach can take account of this, whereas TPAW is always up to date.

My first use of TPAW

TPAW has been referenced a lot in another thread in Investment Trusts https://moneyforums.city...r-attitude-to-risk.aspx
In order not to divert that thread I've returned here to offer my own first experience of using this simulator.

Background:
Self & spouse both 75, retired, mortgage paid, not aiming for target legacy, life expectancy 85-90??
State pensions
SIPP in drawdown - currently taking occasional withdrawals, not on a regular fixed-sum basis.
Some cash savings 3-4 yrs living expenses cover in case of crash
No other income

Our current SIPP & ISA allocation is around 38% bonds/62% equity. Bonds partly in VAGS and within CGT, PNL and some mixed asset funds; equity mainly in growth oriented ITs - BUT, JGGI, S&P500 tracker.

Accepting a Moderate risk level TPAW suggests a portfolio of 35% stocks/65%bonds as asset allocation, , very different to our current asset allocation.


It also suggests an annual withdrawal rate at 50th percentile of around 5.6%. This is a little more than I've been taking.

Overall, I'm inclined to keep our asset allocation where it is but might start withdrawing a little more to match the go go, go slow, no go probable decline in activity and spending.

Has anyone else found themselves getting unexpected asset allocation or withdrawal rate suggestions?

I had a play a few minutes ago. The more you add in 'retirement income' wise, the greater your equity allocation becomes.

It's definitely interesting. Possibly all comes down to a couple of idioms: making hay when the sun shines and cutting you cloth accordingly when times are tougher....