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From what I understand, you have been taking 4% of the 2000 year value all this time?

This is the correct interpretation of the SWR studies.

I adjust the 4% withdrawals every year to the end of year (12/31) statement. Actually, I don't withdraw 4% for income, but leave some for emergencies and large purchases. When I buy a car, I pay cash, hope for no interest loan and keep the car for at least 7 years before thinking about replacing it. I don't think you can take 4% of an amount you no longer have, so you are right in thinking to adjust withdrawals. And I would do that again 12/31/08, because there might be even less available. That said, I am trying to withdraw a little as possible at this time.

All of the correctly performed studies state that you take withdrawals in the manner the OP described -- you take 4% (or whatever your specific situation allows) of the initial amount and then increase your withdrawals with inflation. You do not adjust the 4% based on the new balance each year. The former keeps the standard of living constant from one year to the next; the latter means your standard of living can change dramatically.

The whole point of a SWR study is to give a limit that will survive the market ups and downs. The fact that the market has declined does not mean you have to drop the SWR; it simply means the risk that you are in one of the "danger-zone" cases has been increased.

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