(07) Spending Capacity

In 1994, financial planner Bill Bengen analyzed historical U.S. market data going back to 1926
He found a retiree could withdraw 4% of their portfolio in the first year of retirement
Then adjust that dollar amount for inflation each subsequent year
The portfolio would survive for at least 30 years — even through the worst market periods in history

Monte Carlo simulation runs your retirement plan through hundreds of hypothetical market scenarios
Some scenarios reflect strong markets, others reflect crashes and prolonged downturns
The result is a probability — a 90% probability of success means your plan worked in 900 out of 1,000 scenarios

Rather than asking "What is your probability of success?" — Income Lab flips the question entirely
Income Lab answers the fundamental question: "How much can I spend?"

Spending Capacity