You will be able to run your drawdown map through three scenarios and record what happens in each.
Jasmine's drawdown map reaches 95 with about S$710,000 in her central case (an invented example, like all of her figures below). She wants to know if it still lasts when the next thirty years go badly, so she tests it against three bad-weather scenarios.
The exercise uses three things you already have. The first is your drawdown map from lesson 3.4, the spreadsheet that projects your savings and spending year by year. The second is the three scenarios you wrote in lesson 5.2, with the figures for each. The third is your rules from module 4. Allow about forty minutes. Most plans fail at least one test the first time. A failed test is useful because it shows you which change to make while you still have years left to make it.
Make three copies of your drawdown map and name each tab after one of your scenarios. In each copy, replace the single central return cell and the single inflation cell with a year-by-year column. Each row is one year, so each year can have its own figure. A copy set up like this is a scenario tab. Enter each scenario's figures from your lesson 5.2 notes.
Jasmine's three tabs use these figures:
Crash: minus 30% at 60, minus 10% at 61, plus 20% at 62, plus 15% at 63, and 5% after that. Inflation: 5% inflation from 60 to 67, healthcare inflation 2.5 points higher than that, and 2.5% inflation after 67. Flat decade: a 2.5% return from 60 to 69, and 5% after that.
Once the figures are in, check the inflation tab. In a well-linked sheet, every spending line rises faster in the high-inflation years without any manual edits. If a line stays level, its formula isn't linked to the new inflation column, and you need to fix it before you go on.
Run each scenario as it stands, with spending unchanged and no rules applied. This shows how exposed the plan is on its own. Read every result all the way to your planning age. Reading only the first fifteen years gives false comfort, because some scenarios look healthy at 70 and 80 and still fail later. The damage builds slowly and shows up in the late eighties, when nothing can be done about it.
Jasmine's planning age is 95. In the crash tab she has about S$790,000 at 70 and S$601,000 at 80, and the money runs out at 90. In the inflation tab she has about S$1,099,000 at 70 and S$934,000 at 80, and it runs out at 93. In the flat decade tab she has about S$912,000 at 70 and S$800,000 at 80, and it runs out at 94. All three scenarios fail before 95, and two of them look healthy at 70 and 80.
Next, apply your withdrawal and refill rules from lesson 4.4, "Write your withdrawal and refill rules". You can do a full guardrail calculation for every year in a spreadsheet, but it is fiddly. A fair first approximation is to cut flexible spending, the part of your spending that can be cut, by a set share from the year the scenario starts. Over a long bad stretch, that is roughly what guardrails would do. Then try a deeper cut.
Jasmine cuts her flexible spending by 20% every year from 60. The inflation scenario now reaches 95 with about S$152,000, and the flat decade reaches 95 with about S$208,000. The crash still runs out at 94. With a 30% cut, the crash reaches 95 with only about S$51,000 left. That is a large, permanent cut for a thin result.
Your weakest scenario is the one that does the most damage to your plan, and it is the one your change has to rescue. For Jasmine it is the crash, because it lands in her bridge years. These are the early retirement years when the portfolio pays for nearly everything. A crash in those years does the most damage because the recovery is never quite complete.
Put your results in a table with one row per scenario and four columns: what the scenario tests, the result with no changes, the result with your rules applied, and the change you will make. Write each result as the age the money runs out. If the money lasts, write the balance at your planning age.
Convert every balance to today's prices, which means what that future balance would buy at current prices. Jasmine's S$152,000 at 95 in the inflation case is only about S$57,000 at today's prices.
A good change rescues the weakest scenario without wrecking your life in every other future. Jasmine considers three. A 30% cut to flexible spending for life works on paper, but she would give up much of what she is saving for, even if the crash never happens. Working longer is possible, but she can't be sure of it. The third option is renting out her spare room for about S$1,000 a month before tax, rising with inflation. That is the backup already written into her lesson 4.4 rules.
She tests the rent option in the crash tab. With a 20% flexible cut plus rent from 63 to 75, she reaches 95 with about S$489,000. With rent alone from 63 to 80 and no spending cut, she reaches 95 with about S$235,000. Either way, the crash scenario now lasts.
The most important part of the change is its trigger, a specific action tied to a specific number and decided in advance. Jasmine would rather not take in a lodger unless she has to. She will start looking for a tenant only if her savings fall more than 20% below her central map at two January reviews in a row. She also notes a question for module 6: would she rather move to a smaller flat, and how much would that release?
When you finish, you will have three scenario tabs, each with its own return and inflation columns, and the results table. Test your chosen change in the spreadsheet. Then write one or two sentences under the table explaining 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 all three scenarios. Then make a table comparing the result of each one, and write the change you will make to your plan.
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