The Annual Checkup

One number, once a year

The annual checkup is the spending plan ELCI recommends and simulates by default. Once a year you compute one number and look it up on a table that sets your discretionary spending for the year. Between checkups there is nothing to track, apart from the exceptions covered below.

ELCI never asks for a retirement age. Retirement, as the model sees it, is the day the paychecks end, whether that day was planned or health chose it, and that is when the checkup takes over. The checkup can also begin early, while the paychecks are still coming, if essentials come up short or a lasting care need arrives. Until then you simply spend your plan, and the first checkup, whenever it comes, sets the dial for the coming year.

The number: your funded rate

Your funded rate is the share of your portfolio that a year of spending at your full targets would need, once your income is counted. A lower number means a better-funded plan. The rate is not necessarily what you will withdraw this year: the spending level it selects may trim the budget, and your actual withdrawal follows the budget.

The rate is measured where your plan settles, not in the middle of its transitions. The checkup plays your plan forward through the changes already on the calendar: a paycheck ending next year, health coverage to buy until Medicare, Social Security starting on schedule. The portfolio grows along the way at market assumptions conditioned on today. Once the last change is behind the plan, a year of full spending against the projected portfolio gives the rate. If the portfolio runs out before that point, the rate comes back at its highest.

The dial: a staircase of 10% steps

The table maps your funded rate to a spending level in steps of 10% of your normal discretionary budget. At 3% or below, you spend fully; each 0.75 percentage points above that moves you down one rung, nine rungs to 9.75%. Ordinary rungs trim discretionary targets only, and each category stops at the minimum you declared for it. Essentials are a separate pool, paid first. The dial never touches them.

The table shows the rung your funded rate indicates. At your first checkup, that is the rung you use. At later reviews the move rules apply: down at most one rung per review unless essentials actually fell short, and up without limit when the number improves. Once the dial reaches your declared minimum, it holds there across a wide band, so one bad year cannot drag it lower. The numbers below are an example couple's. Enter your own and the ladder shows where you land.

Five years, one bear market

The budget is the same as above: $110,000 of full spending and $44,000 of income, so the portfolio carries $66,000 a year. The table below follows the couple through a bear market and out the other side: what they computed at each checkup, what the table said, and the spending pace they set.

When not to wait

A sharp market fall is the one case that should act before the next checkup. The trigger follows your investments' cumulative return against its own peak, not your account balance, which withdrawals also lower. When that return is 30% or more off its peak, redo the arithmetic on a smoothed balance, and if the result is at least two rungs leaner, move there immediately. The couple above did exactly that in year two. Recovery runs slower on purpose: one rung at a time, judged against the same smoothed balance and the same two-rung margin, which makes a brief rebound much less likely to whipsaw you back into a cut.

Above a funded rate of 13%, the rungs go below your declared discretionary minimums, in three stages sized to your flexible range (a floor guarantees real brakes even in a plan that declared no flexibility). Spending under your minimum is a hard step, but at that point it beats running out. Essentials are still paid first throughout; even so, no spending rule can cover them when income and assets together fall short. The deepest stage therefore asks for more than a cut: sit down, with a planner or with the tool, and rework the plan.

If you grew up on the 4% rule

A funded rate of 3% will sound stingy next to the 4% you have heard for years, but the two numbers answer different questions. The classic rule sets an initial withdrawal as a share of the starting portfolio, then adjusts that dollar amount for inflation across a thirty-year horizon. ELCI's 3% marks where the checkup permits full discretionary targets: above it the plan may trim discretionary spending, below it you spend fully, and the withdrawal that results depends on your income, your expenses, and your minimums. The couple above reads a 5.5% funded rate; on the 60% rung, they withdraw about 4.3% of the portfolio.

The deeper difference is adjustment. A fixed schedule spends the same through good decades and bad, so its outcomes are full spending or ruin. In our comparisons, plans with trims built in preserved resources through the bad decades and reached fewer lives where essentials fail, at a modest cost in flexed years. The 3% threshold comes from the same comparisons, set to preserve comfortable spending while limiting severe shortfalls. It is a default, not a guarantee of safety, and not a claim that one threshold fits every household.

The other two dials

The checkup is ELCI's default, but the plan picker offers two others. Behavioral is a modeled continuous dial that eases spending with markets and health month by month instead of on a schedule. Spend the target pays your full targets every month and never trims for funding, drawing the portfolio down as far as that takes (health still reshapes what the targets are). Your plan is scored under whichever policy you pick, and switching is one click and a re-run.

In our comparisons, plans with real constraints score better under the checkup: the trims are what keep a lean stretch from turning into a life where essentials fail. The exception is the extremely well-funded plan, which never needs the caution and pays for it in flexed years; there, Spend the target can edge a point or two ahead. If you are not sure which kind of plan you have, run it under both and compare.