# CAPE-Based Withdrawals ¶

The CAPE-based withdrawal strategy is a modified version of the Percent of Portfolio withdrawal strategy. It avoids extreme year-to-year fluctuations in withdrawal rates by incorporating the CAPE into the yearly withdrawal. The CAPE is a value that is correlated with expected future earnings.

The equation for the CAPE-based withdrawal method is as follows:

```
(a + b * CAEY) * P
```

Where `a`

is the base withdrawal base, `b`

is a weight of how much to factor in the CAPE, `CAEY`

is equal to `1/CAPE`

, and `P`

is the current-year portfolio value.

### Strengths ¶

- It responds to market conditions, increasing risk of success by reducing spending when the market is performing poorly and increasing spending when the market does well.
- It responds smoothly to market conditions, so that year-after-year changes to your withdrawal are small, unlike the Percentage of Portfolio strategy
- It has a low likelihood of exhausting your portfolio, even over long retirement lengths.
- It's algorithm is straightforward enough to calculate annual withdrawals by hand

### Weaknesses ¶

- Like all withdrawal strategies that vary based on market conditions, annual withdrawals can become too low without a minimum withdrawal in place.