The hybrid
The Yale spending rule is 80% of last year’s inflation-indexed spend plus 20% of a target rate times the endowment’s market value. Yale publishes the target rate as 5.25% and then holds the answer between 4.0% and 6.5% of fair value, so a long bull market cannot let spending drift up forever and a long bear cannot starve the budget. Universities cannot change an operating budget 20% because the endowment had one bad year; the blend is how they stop that. Spending follows markets, slowly. This is not a scholarship or fundraising calculator.
Two details people get wrong. The weights are 80/20, not the 70/30 that circulates in summaries of endowment smoothing generally. And Yale applies the target rate to the market value from an earlier year rather than today’s, which smooths the result a second time; the calculator here uses the current value, because that is the number a household can look up. Yale’s own description is on the Office of the Provost site.
A household is not a university. There is no board, no tuition, no 50-year mission. What you are buying is smoothness. What you are selling is the ability to spend a windfall now, and the ability to cut hard after a crash. That trade is legitimate. It is not free.
Run it
The Yale endowment spending calculator is labelled on the page as a Yale / endowment spending calculator because that is the query. It blends last year’s inflation-indexed spend with a target percentage of assets. Compare it with Vanguard dynamic spending, which clamps a percent-of-balance target instead of averaging with last year, and with the Guyton-Klinger calculator, which leaves spending alone most years and then makes a discrete 10% cut. A rule that reads market valuations instead of last year’s spend is covered in the CAPE-based withdrawal guide. The distribution of endings is the Monte Carlo retirement calculator; the first-year cheque is the safe withdrawal rate calculator.
When a household wants this
When a lumpy 10% Guyton cut would be a fight, and a pure percent-of-balance cheque would bounce too much to plan a year. When you can accept that a long bear will still grind spending down — just not in one step.