For many people, retirement spending has two parts. One is a minimum you want covered no matter what. The other is an amount on top that can flex with the portfolio. FinZot supports both. FinZot pays your entered expenses in full each year. Variable Spending computes the total spending your portfolio can sustain, and anything above those expenses is spent as extra discretionary spending. When the budget falls short, only the expenses you marked flexible get cut.

The budget amortizes your invested assets over the years you have left at an assumed growth rate, then adds any Social Security or pension income already being paid. FinZot recomputes the budget every year from whatever balance actually resulted. A bad decade lowers spending instead of exhausting the plan. The full mechanics are in the variable spending reference.

What the success rate misses

Many planning tools grade a plan with a success rate, also called the chance of success. It measures whether a fixed budget survives every simulated market. Three flaws in that measure motivated FinZot’s Variable Spending.

• The success rate is binary. A plan that runs dry at 94 and one that collapses at 72 both count as failures.
• The success rate ignores overshooting. A 99% plan usually means you underspent for thirty years and left a large unspent balance.
• The success rate assumes you never adjust. The simulation holds spending on a fixed path while the portfolio drains, but real retirees cut back.

Marking your essential expenses and letting the rest flex answers all three. Turning Variable Spending off gives you the classic fixed-budget analysis, with the success rate measuring every entered expense.

The lifecycle model

FinZot’s Variable Spending is built on the lifecycle model. Samuelson and Merton showed in 1969 that saving, spending, and allocation are one problem. For spending, the answer is to amortize and re-plan every year. The theory uses a broader definition of wealth than FinZot does. It counts financial assets plus the present value of all your future income. In the Bogleheads community, VPW turned portfolio amortization into a table anyone could follow. TPAW is the most faithful implementation available. It amortizes total wealth, and it derives both the discount rate and the slope of the spending path from a single risk-aversion setting, as the theory prescribes.

FinZot deviates from that theory in five ways.

• The growth assumption is a plain historical return. The theory says to plan as if returns will come in below average, and to mark the assumption down further the more risk bothers you. FinZot skips that markdown. Expected future return is a stock/bond blend, and the budget uses its long-run historical average above inflation. FinZot’s budget therefore starts higher than a risk-adjusted tool like TPAW shows on the same inputs. If you want a more careful schedule, assume a lower return yourself.

• Level spending is the default. The theory usually says to spend less now and more later, letting the portfolio compound. FinZot’s default is the same real spending every year. You can set the tilt to spend more in the early years or more in the later ones.

• Future income is not counted until it arrives. The theory counts everything you will ever receive, including paychecks, a pension you have not started, and Social Security you have not claimed. FinZot counts your invested accounts, and adds Social Security and pensions only from the year payments arrive. Retire at 62 and claim at 70 and the budget runs low until the checks start. This is why FinZot starts variable spending at retirement by default.

• The return assumption and your actual portfolio are independent. In the full theory, one risk setting drives everything together, and the tool sets your stock share to match. FinZot leaves your accounts at the allocations you gave them, so Expected future return can say 50/50 while your accounts hold 90/10. In a plan with many accounts, Roth conversions, and a withdrawal order, your future overall allocation depends on how all of that plays out. There is no single honest number to enforce against.

• The budget’s tax assumptions are fixed. FinZot taxes every actual withdrawal in every trial in full. That includes RMDs, Social Security taxation, capital gains stacking, Medicare premium tiers, and state tax. But when FinZot computes the budget, it values your wealth at fixed assumed tax rates. The valuation table is in the variable spending reference. When an assumed rate does not match the rate FinZot actually charges, this year or in a future year, the spending line can tilt or develop kinks instead of holding level. The assumed rates only size the budget. A bad assumption spreads spending across the years a little unevenly. It never changes the taxes you actually pay in the projection.

The deviations change the size and slope of the budget. The deviations do not change what Variable Spending fixes. Spending still adjusts every year, surplus still gets spent instead of left behind, and a bad decade still lowers spending by degrees instead of counting as a failure.