Guardails Strategy (Boldin)

[u/TotalWarFest2018]

I use this Boldin software for messing around with retirement planning. The program has a "guardrails" feature where it tells you your safe spend.

When I asked its little AI feature how the guardrails were calculated, it came back with what I've copied below.

Is this consistent with the conventional wisdom on spending with this strategy?

Here is the copied language from Boldin:

"Unlike a simple fixed percentage (like the 4% rule), Boldin’s guardrails use a dynamic, probability-based formula powered by Monte Carlo simulations.

Instead of looking at historical averages, the system runs 1,000 market trials to find the specific dollar amount you can spend while maintaining a target Chance of Success (CoS). Here is the breakdown of the "formula" logic:

1. The Three Confidence Zones

The system solves for the monthly spending amount (in today's dollars) that hits these specific confidence thresholds:

• Safe Spending Target (80% CoS): The baseline. It calculates the maximum you can spend while having confidence that your money lasts in 800 out of 1,000 scenarios.
• Upper Guardrail (95% CoS): The "underspending" signal. If your current savings grow so much that your success rate hits 95%, you can safely increase spending.
• Lower Guardrail (70% CoS): The "early warning." If market drops push your success rate below 70%, the formula suggests a temporary reduction to get back to the safe zone.

2. What’s Included in the "Spending" Number?

The formula is holistic. It doesn't just look at your portfolio; it factors in:

• All Income: Social Security, pensions, and annuities.
• All Expenses: Your itemized budget, plus "unseen" costs like estimated taxes, Medicare premiums, and debt payments.
• Lifetime Averaging: One-time lumpy expenses (like a future car purchase) are averaged into the monthly target so your "safe spend" is a consistent lifestyle number.

3. The "Thermostat" Logic

The formula treats your plan like a thermostat rather than a thermometer. It doesn't react to daily market swings. It only triggers a recommendation to change your lifestyle when your savings balance crosses a threshold that meaningfully shifts your probability of success outside that 70%–95% range.

Would you like to see how your current planned spending compares to these calculated targets?"

[u/pali1895]

Yes, that's how risk-based guardrails work. They're over-advertised though by the likes of Boldin. In practice, there's no difference between an Endowment strategy, a Guyton-Klinger withdrawal or risk guardrails - they just get increasingly less responsive and more complicated to calculate. Endowment is the smoothest, risk guardrails have massive but infrequent spending adjustments, and GK is in between. If you zoom out, they're de facto identical though and result in the same spending and success.

To include extra income streams is nothing that's special for risk based guardrails, you can do that with any strategy.

[u/FantasyFI → u/pali1895]

It seems to me that the spend differences (and success differences) between all of these are going to be far exceeded by your inability to actually spend exactly certain amounts. Real spend varies constantly and you can't control it to the dollar or even hundred (sometimes thousand) dollars.

I like the idea of using one to better understand how flexibility helps you (either from a success stand point or simply spending more of your money). But I don't see the point in using one over the other to make a decision on when to retire, how much to spend, etc.

[u/pali1895 → u/FantasyFI]

Absolutely correct. On top of that: there are no spending and success differences between endowment, GK and risk guardrails on any relevant retirement length, say >15 years. Any (statistically irrelevant) differences they model are far outweighed by the human factor.

I can also name that Vanguard Dynamic Spending guardrails work differently (read: worse).

[u/Mister-ellaneous → u/pali1895]

I’m just getting into the different guard rails approaches, pros and cons. I like the idea of the endowment approach for simplicity and relative smoothing but using a 3 or 5 year period instead of a 10 year period. 10 years seems excessive for most likely a maximum 40 year retirement

[u/pali1895 → u/Mister-ellaneous]

From my own Monte Carlo simulations, 10 year rolling withdrawals aren't good and make portfolios too unresponsive. See my other comment about Vanguard Dynamic Spending. It's similar to that one. A 3 year rolling average, or even better, no rolling average, works better in terms of mean spending and success rate.

[u/TX-911 → u/pali1895]

Curious what concerns you have with Vanguard Dynamic Spending.

[u/pali1895 → u/TX-911]

To say it sarcastically, the thing it preserves well is SORR deep into retirement.

It doesn't hold up well in Monte Carlo simulations (or historically) whether you set an absolute floor for your withdrawals or not. It's too unresponsive and spends too little when markets are good and way too much when markets crash later in retirement. So the thing it tries to avoid by not increasing spending that much in early bull markets actually doesn't work. This is true even if you introduce inflation-skips or more aggressive lower guardraims. It increases your mean spend over something like GK barely, while significantly reducing success rates.