The model usually indicates you can reset the withdrawal to the *new* 4%, but if one wanted to be more conservative and bulletproof, stick to increases pegged to inflation. I don't think the model really indicates this. To see why, we have to look at what are sometimes called second-order effects. A 4% withdrawal rate has a 95% chance of success. If you reset once, you are taking more than the original 4%, and you are starting over with another 95% chance of success. To me, that gives you a probablility of success of 0.95 x 0.95, which is just under 90%. Every time you reset the withdrawal rate you decrease the probability of success. Sooner or later, you get to the point where failure is a pretty high probability.
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