8-Bit Retirement Cistern

Understanding the 8-Bit Retirement Cistern Simulation

This interactive tool uses a simple 8-bit water cistern analogy to help visualize how a retirement portfolio might have fared if you had started saving with today's purchasing power in a historical year and followed a specific withdrawal strategy.

Here's what the different elements represent:

The Cistern: This is your retirement portfolio, holding your savings.
The Water Level: This represents the current value of your portfolio. A higher water level means a larger portfolio.
Rain (from the Windmill): This symbolizes annual market returns (positive returns add to your portfolio, like rain filling the cistern). The speed of the windmill blades can give a visual cue to the magnitude of the annual return.
The Spigot: This represents your annual withdrawals from the portfolio.
Inflation (CPI Data): The historical Consumer Price Index (CPI) data is used to adjust the size of your annual withdrawal. As inflation increases, the amount you need to withdraw (the flow from the spigot) also increases to maintain the same purchasing power.

How the Inputs Work:

Present Savings 2025: You enter the amount of savings you have in today's (2025) dollars. The simulation then calculates what the equivalent purchasing power of that amount would have been in the Start Year you select, using historical CPI data. This calculated historical equivalent is the actual starting value of the portfolio in the simulation.
Withdrawal Rate (%): This is the percentage of your initial portfolio value (the calculated historical equivalent) that you withdraw in the first year. In subsequent years, this withdrawal amount is adjusted upwards based on historical inflation.
Start Year: You select a historical year to begin the simulation. The simulation will then run for 30 years using the actual S&P 500 returns and CPI inflation from that starting point.

Potential Use Case:

The primary use case for this simulation is to explore the impact of "sequence of return risk." By starting the simulation in different historical years (especially those preceding market downturns like the early 1970s or the early 2000s), you can visually see how a poor sequence of returns early in retirement, combined with inflation-adjusted withdrawals, can significantly impact the longevity of a portfolio that starts with a specific level of purchasing power. It helps illustrate why simply having a large sum might not be enough if the market performance and inflation are unfavorable during your withdrawal phase.

It allows you to ask: "If I had [Present Savings 2025] today, and retired in [Start Year] with the equivalent purchasing power, how would my savings have held up over the next 30 years?"