95% Rule Calculator
A percentage of the portfolio, floored at 95% of last year’s nominal spending, so no single year cuts income by more than 5% in nominal terms.
Part of the FIRE simulator, a historical backtest calculator that replays your plan across every rolling window of market history since 1871.
How the 95% Rule strategy works
From Bob Clyatt’s "Work Less, Live More", this withdraws a percentage of the current portfolio but floors the result at 95% of the previous year’s nominal withdrawal, so a single down year cuts nominal spending by at most 5%. It pairs the sustainability of a percentage rule with a floor that no single year can breach in nominal terms.
What the 95% Rule strategy trades off
The 95% floor keeps the upside of a percentage rule and puts a hard limit on how fast nominal spending contracts: no year cuts it by more than 5% in nominal terms, however far the portfolio falls. In real (inflation-adjusted) terms the cut can be slightly larger. The floor also draws on a shrinking balance through a long bear market, and spending lags the rebound on the way back up.
Pros and cons
Pros
- Caps annual spending cuts at 5%
- Keeps the upside of a percentage rule
- Easy to explain and budget around
Cons
- The floor can slowly erode the portfolio in long bear markets
- Still allows meaningful income variation
- Recovery spending lags the market rebound
Parameters you can adjust
- Withdrawal percent: The share of the current portfolio targeted each year, before the floor below keeps spending from dropping too far.
- Spending floor (fraction of last year): The lowest nominal spending can fall relative to last year. 0.95 means a bad year can cut nominal spending by at most 5%; the real cut can be slightly larger after inflation.
Backtest 95% Rule against market history
Opens the simulator with 95% Rule already selected, so you only set your portfolio and horizon.