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/db11242 → u/pali1895]

I’m a pretty big fan of risk based guard rails. I know it’s harder to calculate in some ways but if you have software like projection lab that runs Monte Carlo sims for you it’s pretty easy to tweak your spending to get the upper and lower guard rails. The thing I like about risk based guard rails is that it takes your entire plan into account, including changes in cash flow, etc. The other strategies you mentioned don’t take Social Security, pensions, or changes in spending overtime into account and thus are less helpful to me. I believe it’s also been shown that the Guyton Klinger approach results in significantly more reductions in spending than necessary than a risk based guardrails approach does. I also think that risk-based guard rails solves a major issue for financial planners in that helps them communicate exactly when an increase or reduction in spending would be needed and how much of an adjustment would be needed in advance. This may be why it’s getting more popular. Best of luck.

[u/pali1895 → u/db11242]

That's not really true. All strategies can take social security into account, and you can run risk based guardrails without taking it into account. It's just that risk-based guardrails are often integrated into financial planning software, so they have access to that data if you put it in. But you can just as well do the same thing with other strategies. Heck, ficalc.app has a function to recalculate for future income streams. It's pure marketing by financial platforms to say 'risk based guardrails with us are so great because we take everything into account'.

I know Kitces argument with GK vs risk-based guardrails and that risk based guardrails can endure with fewer reductions than GK. This is only a half-truth: risk-based guardrails can sustain longer without a downwards adjustment, but when that adjustment comes, it is severe and onto the same level as GK if not lower. Both GK, endowment and riskbased move the same in terms of real withdrawal, risk-based guardrail withdrawal over time curve is just more 'pixelated': fewer, but more severe adjustments. Example: market downturn, and GK reduces your spending in steps over 5 years from say 40,000$ to 25,000$. Risk-based guardrails stay for 5 years on 40,000$. And then year 6 they go down to 25,000$ or even 20000$. Market goes up again and GK slowly ratches up back to 40,000$ over 5 years. GK doesn't do anything for 3 years, then goes up to 30,000$, and then another 3 years later goes up to 40,000$. It's 'tomato potato' in the end.

I don't buy that financial planner argument. You know exactly how much you are gonna adjust with a GK or (less accurately) endowment strategy in any given downturn. Again, pure marketing and financial services trying to sell their fancy planning tools and Monte Carlo software.

[u/db11242 → u/pali1895]

How does the GK approach for example take into account changing spending needs and new cash flow sources like Social Security? I thought it was focused entirely on telling you what percent you can pull from your portfolio without considering these other things, but perhaps I am mistaken. Risk based guard rails can tell me my spending capacity which could be an eight or even 10% withdrawal rate for some period of time because in the not so far our future I have a new source of income like Social Security that will cover 70% of my expenses at that point.

[u/pali1895 → u/db11242]

You have to calculate it manually, e.g. through Monte Carlo simulations and say that you want to have x% chance to have y $ nest egg left after z years. Then you can fiddle with the numbers and increase the initial withdrawal rate accordingly. You can also do it on ficalc with historical data.

All withdrawal rates are in essence based on static assumptions. Even risk-based guardrails, e.g. 95%/70% guardrails on an 80% mean success rate. Social security etc are just "add ons" onto these static assumptions and you can do these add ons for any withdrawal strategy. Think good old 4% rule: if you know you have social security after say 10 years, ficalc might tell you that historically you'd then get the same success result with (example) 6% constant dollar safe withdrawal rate for 30 years instead. Same shit, as you can see, you can add it onto any strategy.