Have read about various studies that set the safe withdrawal rate from investments at 4% to 5% depending on various assumptions - meaning (as I understand it) that if I have $1M in investments I should only draw down the principle by $40,000 to $50,000 a year.
I suspect that this is old school and not at all compatible with the economic model used in esplanner.
Any help would be appreciated.
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Yes, it's not a very "economic" view of things. Others more expert than me might weigh in, but what ESPlanner helps you to see is how to preserve the bottom line--LIVING STANDARD--as opposed to a pot of money. There are all kinds of things to consider that the simplistic rule of thumb does not take into account. You might have fixed asset income such as social security or a pension. You might be expecting an inheritance. You may have some expense such as a child or grand child's education. You might have a vacation home to sell or a primary home to sell that will impact things a lot. There's so much that interferes with this rule of thumb that it's probably just another rule of dumb.
Finally, the Monte Carlo feature in ESPlanner will show the variation of living standard, which is unlike any other MC out there. So a person more reliant on fixed assets might be able to take more risk and a person more reliant on investments may be able to take less risk.
The cases I recall, holding steady at 4% leaves lots of money on the table. More common, I believe as per ESPlanner, is a percentage that gradually goes up through life until the last withdrawal (at 100 or whatever) is 100%.
There's a lot more to be said about this, and you might look at the press articles on this site or the research and see if that issue is addressed there. Look in case studies. If there is not a case study to illustrate this, there will be one there soon.
Dan