All spending strategies have their advantages and disadvantages, and the most appropriate approach will depend on your financial circumstances, risk tolerance, and personal preference.

• Fixed spending refers to spending a predetermined amount of money each year, whereas flexible spending options, such as Smile and Dynamic, adjust spending based on age or market volatility.
  IW Retirement Planner applies a 1% annual reduction to Fixed spending expenses, based on research from The Center for Retirement Research. You can modify this reduction amount under Assumptions.
• Smile spending withdraws more in the early and late stages of retirement, and less in the middle. According to research, retiree spending patterns are not constant, but follow a curve that resembles a smile. Retirees tend to spend more in the early years of retirement, when they are more active and enjoy traveling, eating out, and other discretionary expenses. This is the first part of the smile. Then, as they age, they tend to slow down and spend less on these activities. This is the bottom part of the smile. However, later in retirement, their spending increases again, mainly due to rising health care costs. This is the second part of the smile.
  Smile spending research: Estimating the True Cost of Retirement
• Dynamic spending withdraws 5% of your investment portfolio in the first year. In the following years, if the inflation-adjusted amount falls below 4% of the portfolio, the distribution rises to 4%. Conversely, if it exceeds 6% of the portfolio, spending is limited to 6% of the portfolio. Dynamic spending is a simplified version of the Guyton-Klinger guardrails spending strategy. Actual portfolio withdrawals may be offset by non-portfolio income sources such as Social Security, employment, and pension.
  Dynamic spending research: Decision Rules and Maximum Withdrawal Rates

All spending strategies are indexed to inflation.

The standard withdrawal sequence in retirement typically begins with taxable accounts, followed by tax-deferred accounts, and finally tax-free accounts. By delaying withdrawals from tax-deferred accounts, retirees can allow these accounts to continue growing tax-deferred for a longer period, maximizing their potential for compounding growth. By default, the IW Retirement Planner follows this conventional approach after first applying non-investment income sources such as employment earnings, Social Security, pension, and passive income.

Taxable Investments Tax-Deferred Investments Tax-Free Investments Cash & Equivalents

While this approach works well in many situations, it does not necessarily minimize taxes across your retirement timeline. The Withdrawal Strategy feature lets you switch the withdrawal order of Taxable Investments and Tax-Deferred Investments to experiment with the most effective way to lower taxes for your situation.

Reasons to withdraw from tax-deferred accounts before taxable accounts:

• Reduce potential tax consequences of Required Minimum Distributions in the later stages of retirement
• Minimize the tax impact of the 10-year rule for inherited tax-deferred funds. The 10-year Rule requires that beneficiaries receiving Traditional IRAs and 401(k)s, withdraw all funds within a 10 year period, which can have significant tax implications.
• Take advantage of the step-up in basis rule, which raises the cost basis for inheritors to the market value of investments on the date of the previous owner's death, reducing capital gains taxes.

Finally, Cash & Equivalents accounts are withdrawn from last to preserve liquidity, ensuring immediate access to funds for unforeseen expenses or emergencies without incurring penalties or tax consequences.

IW Retirement Planner assesses retirement plan risk using Monte Carlo stress testing and an AI deep learning model trained on 55 years of S&P 500 data to simulate more realistic market conditions. It also applies the Geometric Brownian Motion model, asset correlation, and other features to assess the risk of your straight-line plan across both positive and negative investment years, including potential declines of 30 percent or more. The analysis runs a thousand computer-generated scenarios, accounting for changes in investment returns, inflation, and other influences that reflect real-world dynamics, helping build confidence in your retirement plan.

IW Retirement Planner uses the below compounded annual growth rate (CAGR) return values as defaults for stocks, bonds, dividends, and interest rates.

Asset Type	Interest	Dividend	Capital Gain	Total Return	Index
Stocks	-	2%	8.2%	10.2%	S&P 500 (1971 - 2022)
Bonds	3.9%	-	-	3.9%	10 Year Treasury Bond (1999 - 2022)
Cash	1.6%	-	-	1.6%	3 Month Treasury Bill (1999 - 2022)

Forward-Looking Returns
Both Vanguard and JP Morgan provide forward-looking investment return assumptions. You can choose to refer to the reports below when determining your growth rates.

• Vanguard's Market Perspectives (2025)
• JP Morgan's Long-Term Capital Market Assumptions (2025)

Volatility
Volatility is built into stress testing to evaluate how your retirement plan might perform under uncertain conditions, such as market declines, inflation spikes, or changes in income.

Stocks	Bonds	Cash	Inflation	Employment
17.3%	5.6%	1.9%	1.5%	1.8%

Excess Income
Any income remaining after annual expenses is automatically deposited in the Cash & Equivalents bucket.

Excess Cash
Funds in the Cash & Equivalents bucket can be limited to an amount specified in the Invest Excess Cash field, with any overage automatically harvested and invested in Taxable Investments annually to maximize growth. Harvesting requires a Taxable Investments bucket and a minimum of $5,000 before a transfer is initiated from Cash & Equivalents to Taxable Investments.

Yes. IW Retirement Planner automatically project savings growth each year until your retirement month. You can further boost your pre-retirement savings by adding annual contributions to your buckets through Extra Savings.

Please note the amount entered must be the after-tax value.

In addition to your income buckets, you have the option to incorporate one-time or recurring income events in Other Income. Examples include pre and post-retirement income from inheritance and lump sum pension distributions.

Please note that the amount entered should reflect the after-tax value and is not adjusted for inflation.

IW Retirement Planner provides several default retirement plan assumptions that can be tailored to your preferences.

• Equity Growth Rate – Average equity (stock) growth rate without dividends you expect from your portfolio. Default 8.2%.
• Dividend Yield – The average dividend yield you expect from your investment portfolio. Default 2%.
• Bond Yield – The average bond yield you expect from your investment portfolio. Default 3.9%.
• Cash Interest Rate – Average interest rate for your cash accounts. Default 1.6%.
• General Inflation – The average inflation rate you expect during retirement. Default 2.5%.
• Healthcare Inflation – The average healthcare inflation rate you expect during retirement. Default 3.4%.
• Social Security COLA – The annual Cost of Living Adjustment (COLA) you expect for Social Security benefits. Default 2.5%.
• Pension COLA – The annual Cost of Living Adjustment (COLA) you expect for pension income. Default 0%.
• Passive Income Growth – The annual growth rate you expect for passive income. Default 0%.
• Investment Account Fees – The average annual fees associated with your investments and investment accounts. Default 0.5%.
• Annual Spending Reduction – The percentage by which you expect your retirement expenses to decrease each year (commonly around 1%). Only applicable to Fixed spending. Default 1%.
• Survivor Spending Reduction – The percentage by which you expect expenses to decrease after the death of a spouse. Not applicable when using Smile Spending. Default 30%.
• More Social Security Scenarios – Enabling this option allows you to model a Social Security start date before age 62 or beyond the longevity year.

Plan assumptions can be customized by clicking the Assumptions button.

Yes. You can include additional post-retirement expenses in Extra Expenses. Examples include debt, child's wedding or tuition, or taking your family on a memorable vacation. Extra Expenses are not adjusted for inflation. Do not include healthcare-related expenses in this section. Please use the Healthcare Costs estimator to account for medical expenses.

Yes. Both part-time or full-time annual employment can be included in your Employment income buckets. Full-time employment can be included for continued spousal employment, while part-time employment can help supplement retirement income.

Employment buckets are exclusively for post-retirement. Pre-retirement income can be included by adding annual pre-retirement savings in Extra Savings.

The Straight-Line Forecast dashboard shows the average withdrawal rate from your portfolio, while the Cash Flow Table chart displays your annual withdrawal rate throughout retirement, making it easy to compare your rates to general guidelines, such as the 4% rule.

Yes. IW Retirement Planner automatically reduces surviving spouse spending by 30% when Fixed spending and Smile spending strategies are being used. This value can be adjusted under the Survivor Spending Reduction setting in Assumptions.

IW Retirement Planner provides several validation errors for inputs entered into the form. Here are explanations for some of the most common validation errors:

• Date in the past:  Date entered is before today's date and must be current month/year or later.
• Age must be between 20 and 120:  Age, or corresponding age, is required to be between 20 and 120.
• Date after longevity age:  Retirement date is after the Longevity age. Retirement date must be the same as or before the Longevity age.
• Must be between $1 and $10 million:  Dollar amount must be between $1 and $10 million.
• Must be between 0% and 100%:  Percent rate must be between 0% and 100%.
• Start year after end year:  Starting year entered is after the ending year. It must be the same as or earlier than the end year.
• Start date after end date:  Starting date entered is after the ending date. It must be the same as or earlier than the end date.
• Overlaps Tax Minimizer years:  Years for ROTH conversions and Tax Minimizer cannot overlap. Only one action is allowed for a given year.
• Overlaps ROTH conversion years:  Years for ROTH conversions and Tax Minimizer cannot overlap. Only one action is allowed for a given year.
• Bucket required:  Income bucket is required and must contain funds.
• Date before age 62:  Social Security date must correspond to an age between 62 and 70.
• Date after age 70:  Social Security date must correspond to an age between 62 and 70.
• Date must be after retirement date (or Already Receiving if retired):  Date must be same as or after retirement date. Use Already Receiving if retired. Specific to Pensions and Passive Income.
• Date must be after retirement date (or Already Employed if retired):  Date must be same as or after retirement date. Use Already Employed if retired. Specific to Employment.
• Date must be after retirement date:  Date must be same as or after retirement date.
• Year must be after retirement date (or current year if retired):  Date must be same as or after retirement year.
• Date after max plan year:  Date entered is after the maximum allowable year in the retirement plan based on longevity age(s).
• No Social Security benefits to maximize:  There are no primary (or spousal) Social Security benefits available to maximize.
• Bucket not used in plan:  Other Income has deposits in a bucket that does not have starting funds in the plan and is not part of the plan.

IW Retirement Planner requires your monthly Full Retirement Age benefits amount from SSA.gov, which is estimated in today's dollars. You can find this estimate by logging into SSA.gov, where it will be displayed as:

   "Your estimated monthly benefit at Full Retirement Age (xx) is $x,xxx."

IW Retirement Planner uses this number, also known as Primary Insurance Amount (PIA), to calculate an estimate for the year and month you plan to start receiving Social Security benefits.

Retiring Before Starting Social Security Benefits
If you plan to retire before you begin your Social Security benefits, you may need to use additional resources, such as ssa.tools, to obtain a more accurate PIA estimate. SSA.gov typically assumes that you will continue working until your benefits start.

Full retirement age (FRA), also called "normal retirement age", is the age when you are entitled to 100% of your Social Security benefits, which are determined by your lifetime earnings. FRA has gradually increased as life expectancy has risen. It was 65 for many years, increased to 66 and 4 months for those born in 1956, 66 and 6 months for those born in 1957, and reaches 67 for anyone born in 1960 or later.

You can claim Social Security retirement benefits anytime from age 62 to 70. However, you're only eligible for your full benefit once you reach your FRA. If you delay benefits beyond your FRA, up to age 70, your monthly benefit will increase.

Yes. IW Retirement Planner automatically estimates Social Security spousal benefits and widow/widower benefits as they become available in your retirement plan.

Spousal Benefits
Starting at age 62, the spouse that earns less can get spousal benefits even without accruing Social Security credits through work. If the lower-earning spouse's benefit is less than half of the higher-earning spouse's, they can get up to 50% of the higher earner's benefit or their own, whichever is higher.

If the lower-earning spouse has their own benefit, IW Retirement Planner will use the benefit start date for the spousal benefit. If not, the start date of the higher-earning spouse's benefit is used. In both cases, the higher earner must have started taking benefits, and the lower-earning spouse must be 62 or older.

Spousal benefits are reduced if taken earlier than full retirement age, approximately 35% less at age 62, and do not receive delay credits after full retirement age.

Survivor Benefits
If the spouse who earns more passes away, the surviving spouse is eligible to receive a survivor benefit starting as early as age 60. At full retirement age or later, the surviving spouse typically receives 100% of the benefit that the higher earner was entitled to. The benefit is reduced if taken earlier, approximately 28.5% less at age 60.

The surviving spouse gets the higher of their own retirement benefit or the deceased spouse's benefit. No delay credits are available for survivor benefits after full retirement age.

Social Security Maximizer simplifies the complex decision of selecting an optimal filing strategy. It evaluates over 700 strategies to identify the one that maximizes lifetime benefits within your retirement plan—taking into account retirement, spousal, and survivor benefits, and incorporates key benefits rules:

Early benefit reductions Delayed retirement credits Earnings test adjustments RIB LIM Restricted application and deeming rules

Please note that incorporating an optimal Social Security filing strategy into your retirement plan may affect your stress test score in certain situations.

Yes. IW Retirement Planner automatically reduces Social Security benefits by 23% starting in 2035.

The Congressional Budget Office (CBO) believes the Social Security trust fund will be depleted by 2034. Unless changes are made before then to shore up the program, Social Security recipients would see their benefits cut by 23% starting in 2035.

Yes. IW Retirement Planner allows you to specify a Social Security starting date before age 62 (for Social Security Disability Insurance or early Survivor Benefits) or after the primary spouse's longevity year (for Survivor Benefits). To enable this feature, activate More Social Security Scenarios in Assumptions.

Yes. IW Retirement Planner applies the Social Security retirement earnings test for workers who are earning a salary and collecting benefits before full retirement age (FRA).

There are two different income limits for the earnings test: There's a lower limit for workers who are more than one year away from FRA and a higher limit for workers who are one year or less from FRA. The lower limit witholds $1 in benefits for every $2 in earnings above the exempt amount. The higher limit witholds $1 in benefits for every $3 in earnings above the exempt amount.

The retirement earnings test also affects spousal benefits. The salary of the higher-earning worker will impact both the worker's benefit and any spousal benefit passed on to a spouse.

Yes. The Roth Conversion feature allows you to convert funds from Tax-Deferred Investments to Tax-Free Investments by "filling up" your chosen federal income tax bracket for the years specified.

This can help reduce or eliminate future Required Minimum Distributions (RMDs), giving you more control over your retirement income and tax planning. The ideal timing for a Roth conversion is typically during periods of lower taxes, which often occur after retirement but before Social Security and RMDs begin.

Be aware that conversions may increase your income for the year and affect Medicare IRMAA surcharges. The IW Retirement Planner's Tax Analysis charts help identify lower-tax years and flag any potential IRMAA implications.

Converted funds are placed in your existing Tax-Free Investment bucket. If one doesn’t exist, a new virtual bucket will be created.

Currently, Roth conversions are only available after retirement.

Tax Treatment
Converted funds are taxed as ordinary income and paid from the Cash & Equivalents and Taxable Investment buckets within the same year. IW Retirement Planner does not use retirement accounts to pay taxes owed on Roth conversions. Doing so would reduce your retirement savings and potentially diminish long-term growth. Any remaining Roth conversion taxes are added to the following year's expenses and may trigger underpayment fees and penalties, which are not estimated by IW Retirement Planner. It is recommended that you have enough in your Cash & Equivalents bucket to cover your conversion taxes.

Yes. IW Retirement Planner will automatically withdraw from Tax-Deferred and Tax-Free buckets in an attempt to bridge income gaps before 59 1/2.

Withdrawals from Tax-Deferred and Tax-Free buckets before age 59 1/2 are assessed a 10% early withdrawal penalty. In addition, tax-deferred withdrawals are subject to applicable income taxes.

Required minimum distributions (RMDs) are the minimum amount you are required to withdraw from your retirement accounts each year. You’re generally required to begin taking RMDs from tax-deferred accounts (401K, Traditional IRA, SEP IRA, SIMPLE IRA), starting at the following ages:

• 72 if born before 1951
• 73 if born between 1950 and 1960
• 75 if born after 1959

If you have sizable tax-deferred accounts, RMDs can have a significant impact later in retirement by forcing annual income into higher tax brackets.

Yes, healthcare expenses for Medicare (age 65 and beyond), pre-Medicare (before age 65) and long-term care can be included in projections.

Medicare Estimates
Premiums for Medicare Part A (Hospital Insurance), Part B (Medical Insurance), and Part D (Prescription Drug Coverage) can automatically be estimated, including any applicable Income-Related Monthly Adjustment Amount (IRMAA) surcharges.

Out-of-pocket costs, such as deductibles, copays, and optional coverage including Medigap, dental, and vision, can be manually entered.

Pre-Medicare Estimates
Pre-Medicare healthcare expenses can also be manually entered.

Long-Term Care Expenses
Estimated long-term care costs can be added for the final two years before the longevity age.

Click the Healthcare button to include these expenses in your planning. All healthcare costs are applied per person and adjusted annually based on the Healthcare Inflation rate specified in Assumptions.

Yes, IW Retirement Planner calculates estimated Medicare IRMAA surcharges. You can view total surcharges on your dashboard and visualize their impact under the Tax Analysis tab.

Income-related monthly adjustment amount (IRMAA) is a surcharge added to Medicare Part B and Part D premiums for beneficiaries with higher incomes. It's based on your Modified Adjusted Gross Income (MAGI) from two years prior. For example, your 2025 IRMAA is determined by your 2023 MAGI. If MAGI from two years prior is unavailable, IRMAA surcharges are not calculated.

IRMAA thresholds and surcharges are automatically adjusted each year based on the Healthcare Inflation rate set in Assumptions.

You can add estimated long-term care costs for the final two years before longevity age by selecting the Healthcare button. Resources such as the Genworth Cost of Care Survey and Vanguard’s Health Care Cost Estimator can assist with forecasting these expenses.

Long-term care costs are automatically adjusted each year based on the Healthcare Inflation rate set in Assumptions.