Forecast and Spending-Policy Model

This tool uses Monte Carlo simulations to explore how a portfolio's value and annual spending could change over time. It compares smoothed, inflation-adjusted, hybrid, and ceiling/floor spending policies using the same simulated market and inflation paths. Charts and tables show a range of possible outcomes to help assess the trade-offs between supporting spending and preserving purchasing power. These hypothetical projections depend on the assumptions entered and are not guarantees of future results.

Portfolio and Horizon
years
paths
% / year
Inflation
%
%
%

Inflation is simulated independently of returns, with a -5% to 25% annual bound.

Spending Policy
%
years
%
years
%
%
years
% of start
%

A blank first-year override uses the target rate times starting value. Later years follow each rule.

Investment Assumptions
Asset ClassWeight %Near-Term %Long-Run %Vol. %
US equity
Developed intl equity
Emerging markets
Core bonds
High yield credit
Real assets
Private equity / alts
Cash

Total weight: 100.00% (required: 100%)

Correlation Matrix
USINTLEMCOREHYRAPECASH
US
INTL
EM
CORE
HY
RA
PE
CASH
Yields and Forward Expectations

Illustrative inputs from the supplied model, not live market quotes. Confirm the yields and as-of date before use.

%
%
%
%
%
% / year
%
% / year
%
%

Treasury / TIPS breakeven: 2.65%

Equity Building Blocks (% / Year)

EquityDividendBuybackReal growthValuation
US equity
Developed intl
Emerging markets

Near-term equity return = dividend + buyback + real growth + long-run inflation + valuation change. Manually overridden returns remain unchanged until restored.

Import Settings

Methodology and Limitations

Cash-flow timing. Spending occurs at the beginning of each year, returns and costs apply to the remaining assets, and contributions arrive at year end. Spending cannot exceed available assets. Depletion includes an exhausted portfolio or any unfunded planned spending. Missing pre-start values in averaging windows use the starting value.

Policies. Smoothed spending is the target rate times average prior values. Inflation-adjusted spending indexes the prior year's actual spending. Hybrid spending blends indexed prior spending with the market-value rule. Ceiling / floor spending bounds the market-value rule relative to indexed prior spending. Every policy uses the same first-year planned amount.

Returns. Correlated lognormal asset returns are rebalanced annually. Near-term assumptions apply in year one and converge linearly to long-run assumptions over the recorded convergence period (immediately when it is zero). Input correlations describe log-return shocks, not exact simple-return correlations. Fees are subtracted from annual portfolio returns, with net losses capped at 100%.

Inflation. Inflation follows a mean-reverting annual process independent of market returns. Spending is deflated at the beginning of the year; ending value is deflated at year end. Each percentile is calculated across paths for that year, not a single investable path.

Oversight. These hypothetical projections are not guarantees, investment advice, or an IPS compliance certification. Normal log-return shocks do not capture all tail risks, regime changes, illiquidity, taxes, or spending constraints. Historical estimates may include back-tested index or portfolio data and are not forecasts. Review assumptions and policy definitions with the organization's investment committee and advisers.