FIRE
Capital depletion means the portfolio is gradually consumed in retirement, as opposed to capital preservation, where the substance is kept intact.
Capital depletion describes a withdrawal strategy in which the portfolio is deliberately consumed step by step during retirement. Unlike capital preservation, where ideally only the returns are withdrawn and the substance is kept intact, here the invested capital itself is gradually used up as well.
The approach can make sense when the portfolio only needs to last for a limited period, for instance to the end of life, and leaving an inheritance is not a priority. Because the substance is available in addition to returns, higher ongoing withdrawals are possible than with pure capital preservation.
The flip side is planning risk: living longer than assumed or facing weaker returns can exhaust the capital prematurely. A careful balance between withdrawal size, expected duration and buffer is therefore important.
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