I plan to use a variable withdrawal rate versus a fixed one because it seems to fit my situation best, and that's what I'd like to see some discussion on because I expect my situation is not uncommon.
All of this discussion on WD methodology ignores other income sources (pensions, SS or even annuities), which will make a substantial difference. While not everyone has a pension, most (maybe all) will receive SS. When these other income streams kick in, the required WD, whether fixed or variable, will/can go down. I know we can model this with FC, Fido RIP or other tools, and I do. But, the 4% fixed SWR and G-K WD rules don't take into account those other income sources, which will ameliorate the drops in any variable WD approach. This is one of the key factors in my decision to use a variable WD methodology because, the planned timing of my retirement and these other income sources make 'the worst case' not so bad for us.
I'd like to hear how other are accounting for this in their plans.
I asked myself plenty of questions in this respect, and I ended settling on a simple principle in my Excel sheets. Any extra cash (small job, lump sum, pension, SS), recurring or not, goes in my portfolio balance when received. Any dividend is automatically re-invested (DRIP). And the withdrawal method has to be an adaptive one, which accounts for variations of the portfolio, whether it comes from market upticks or new income.
Of course, I don't mean it literally, you don't want to add $25K of SS to your portfolio, and withdraw $60k the day after. You would of course just keep the $25k and withdraw $35k. But your model (Excel, whatever) will be set up as I explained, to figure out that $60k is the withdrawal of the year, and take in account the portfolio value change.
With a 4% fixed WR, modified to account for 4% of each new cash deposit, the outcome isn't quite satisfying, as you get more and more incremental money as you get older (that is, when the SS/Pension start), which is usually not a goal. But you could plan around it by taking more than 4% for your early retirement, then change your WR in a much more conservative manner when SS kicks in. Anyhoo, this fixed approach is just a really bad model...
With a modified version of G-K (accounting for the portfolio increments), this works fine. Other adaptive methods (notably the VPW recently discussed at length in the Bogleheads forum) play beautifully well with such approach.
The beauty of doing so is three-fold:
1. it eliminates the discontinuities of lump sums & SS/Pension kicking in, as the adaptive algorithms typically adjust in a more progressive manner than a big bundle of cash suddenly showing up
2. it unifies everything, lump sums, recurring income, occasional jobs, etc
3. if your portfolio balance is at real low point, a good adaptive algorithm will NOT increase your withdrawal, while your additional income will help the portfolio recover. This saves many methods from failing in real bad years like 1965/66.