Thanks for mentioning this spreadsheet. I had not heard of it before now, and I'm really enjoying it.
It's a method that makes a lot of sense. The author, when developing VPW, created math that is equivalent to what the PMT function in excel already does, but has chosen not to use the function. No matter.
Though VPW is a specific implementation, at its highest level, it was a rediscovery. If you google, you'll find the same general idea elsewhere. One term used is the "actuarial method" with a specific version called "ARVA" or "annually recalculated virtual annuity" and another one is called "planner's method". I have links below for those interested.
The primary difference in all of these approaches is the choice of expected returns in the PMT calculation that generates the % to withdraw from your portfolio, though the VPW spreadsheet adds some pretty cool features as a practical implementation.
VPW: This uses extremely long term real returns for worldwide stocks and bonds from Credit Suisse's website. During any retirement duration, returns may be higher or lower than this. The returns used are weighted between stocks and bonds according to your AA
ARVA: ARVA is pretty conservative and uses current TIPs real rates of return as the expected returns.
"planners's method" as described by Bud Hebeler in the link below back in 2015 used a fixed 5% interest rate and 3.5% inflation rate.
Regardless of the choice of expected returns, by definition, they are always "wrong". And the degree of wrong-ness of the expected returns for any sequence of returns that occur over a retirement will determine what the trajectory of the withdrawals over the years will look like. If the actual sequence of returns that occur are better than the expected returns, then the trajectory usually is such that withdrawals are low in the early years and can become extremely high in the later years. Vice versa if the returns are less than the expected returns. The reality, however, is that over a 30 or 40 year retirement, there can be periods of both over and underperforming relative to the expected returns used, so the trajectories can take on all sorts of different shapes.
One idea that came up on BH was an alternative to using a fixed expected return in the calculation. And that is to use the latest expected real returns available each year.
For stocks, that calculation can be something as simple as 1/CAPE (with CAPE oftentimes referred to as PE10). Or you can look on any number of websites and get 5 or 10 year expected returns. Just remember, you need expected "real" returns, not nominal. I know of one BH'er that averages 1/CAPE with an real stock estimate from elsewhere, for example.
Bonds, at least nominal bonds like total bond market or intermediate treasuries, pay nominal rates. And the nominal returns over the duration of a bond fund are highly correlated with the current yield. There are a number of methods used to estimate future real returns of bonds including just taking the nominal SEC yield as reported by Morningstar and geometrically subtracting the expected inflation rate. The expected inflation rate might be estimated by using last year's inflation rate, averaging several years inflation rates, or using the current breakeven rate between treasuries and TIPs or general knowledge from the web-gods that the Fed wants to target between 2.25 and 2.5% long term inflation. Some of the site mentioned above for stocks also have inflation estimates.
Once you have those two numbers, then calculate the expected returns by weighting the two numbers according to your AA. Simplest thing is to do this once per year when calculating this year's withdrawal. Historically, such a method helps to smooth withdrawals over the years and helps to prevent withdrawals from becoming extremely high or extremely low. Not perfect by any means, but it does seem to help quite a bit. And most importantly, extreme accuracy in the expected return calculation is not required in order to see some improvement in the trajectories. To use this method, though, you'll either need to modify the VPW spreadsheet or roll your own.
Side note: If your AA contains international stocks, EM, Small Caps, etc. there are some websites that give expected future returns for them as well. There are some users that just ignore that and use the calculation for US stocks only and consider any upside that occurs by holding these other assets as a pure bonus that may, from time to time, give them a larger withdrawal.
VPW:
https://www.bogleheads.org/wiki/Variable_percentage_withdrawal
ARVA:
https://larrysiegeldotorg.files.wor...nly-spending-rule-article-youll-ever-need.pdf
Planner's Method:
How Much Can I Afford to Spend in Retirement?: Bud Hebeler's Autopilot Withdrawal Rule
Cheers,
Big-Papa