You will run your drawdown map through three scenarios and record the results.
This is the exercise where the plan meets weather. You'll take the drawdown map from lesson 3.4, run it through the three scenarios you wrote in lesson 5.2, apply your rules from module 4, and record what happens in each. Most plans fail at least one test the first time. That is useful: it tells you which change to make while you still have years to make it.
Allow about forty minutes. Jasmine's figures, all made up, are the worked example.
Copy your drawdown map three times and name the tabs after your scenarios. In each copy, replace the central return and inflation cells with a year-by-year column, so each row can have its own figure.
Enter each scenario's figures from your notes. Jasmine's crash tab has her investment return at minus 30% at 60, minus 10% at 61, plus 20% at 62, plus 15% at 63 and 5% after. Her inflation tab has 5% inflation from 60 to 67, with healthcare 2.5 points higher, and 2.5% after. Her flat tab has a 2.5% return from 60 to 69 and 5% after.
Check that spending in the inflation tab picks up the new rates. In a well-linked sheet, every spending line should rise faster in those years without you touching it.
Before applying any rules, read the result of each tab with your spending unchanged. This shows you how exposed the plan is on its own.
Jasmine's results, with nothing changed:
Central case: reaches 95 with about S$710,000 Crash: savings about S$790,000 at 70 and S$601,000 at 80; money runs out at 90 Inflation: about S$1,099,000 at 70 and S$934,000 at 80; money runs out at 93 Flat decade: about S$912,000 at 70 and S$800,000 at 80; money runs out at 94
Every scenario fails before 95. Notice too that two of them still look healthy at 70 and 80. The damage builds slowly and shows up in her late eighties, when nothing can be done about it. Reading only the first fifteen years of a scenario gives false comfort.
Now put your withdrawal and refill rules from lesson 4.4, Write your withdrawal and refill rules, into each tab. A full guardrail calculation for every year is possible in a spreadsheet but fiddly. A fair first approximation is to cut flexible spending by a set share from the year the scenario starts, roughly what your guardrails would do in a long bad stretch, then try a deeper cut.
Jasmine tried 20% and then 30% cuts to her flexible spending, applied every year from 60.
With a 20% cut, the inflation scenario now reaches 95 with about S$152,000 left, and the flat decade reaches 95 with about S$208,000. The crash scenario still runs out, at 94.
With a 30% cut, the crash scenario reaches 95, but with only about S$51,000 left. That is a large and permanent cut for a thin result.
So the crash is her weakest scenario. It costs her most because it lands in the bridge years, when her portfolio pays for nearly everything, and the recovery is never quite complete.
Make one small table with a row per scenario and four columns: what it tests, the result with no changes, the result with your rules applied, and the change you will make.
Write the result as the age the money runs out, or the balance at your planning age if it lasts. Convert any balance to today's prices too. Jasmine's S$152,000 at 95 in the inflation case is only about S$57,000 at today's prices.
Look for a change that rescues the weakest scenario without wrecking your life in every other future.
Jasmine considered three. Cutting flexible spending by 30% for life works on paper, but means giving up much of what she is saving for, even if the crash never comes. Working longer is possible but uncertain. The third option was the backup she wrote into her rules in lesson 4.4: renting out her spare room.
She tested it. In the crash scenario, with a 20% flexible cut and rent of about S$1,000 a month before tax from 63 to 75, rising with inflation, she reaches 95 with about S$489,000. Rent alone, without the spending cut, from 63 to 80 gets her to 95 with about S$235,000. Either way, the weakest scenario now lasts.
The important part is the trigger. She won't take in a lodger unless she needs to. Her rule says that if her savings fall more than 20% below her central map at two January reviews in a row, she starts looking for a tenant. That ties a specific action to a specific number, decided now.
She also noted a question for module 6: whether she would rather move to a smaller flat, and what that would release.
A finished version has three scenario tabs, each with its own return and inflation columns, and a results table with one row per scenario showing the result before and after your rules and the change you'll make. Under it, one or two sentences explain the change and the trigger that sets it off.
Run your own three scenarios now. When you have the results, put the comparison table together and pick the one change that makes your weakest scenario last.
Run the three scenarios and write a comparison table with the result of each and the change you will make to the plan.
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