I haven't thought hard about a % of portfolio withdrawal method, but it seems to me a similar concept would apply.
All I'm doing, after all, is calibrating my initial withdrawal rate to the median market valuation. I'd want to do the same thing with my initial withdrawal rate for a percentage of portfolio approach too.
Say you want $40K in living expenses and have a portfolio currently valued at $1MM. If you started drawing 4% today and the market is really over valued you'll face long periods where you're withdrawal amounts are well below what you originally wanted to spend.
One way to guard against that is to mark down your current portfolio to a level reflecting "normal" valuations. If I use my
previous calculation to arrive at a "fair value" for my $1MM portfolio of $773,000, then I might want to start with a 5.2% withdrawal rate rather than a 4% rate to make sure I'm still getting my $40K in income if markets mean revert.
Maybe I'm comfortable drawing 5.2% or maybe I'm not. Either way it seems to me this is a reasonable way to calibrate one's initial withdrawal amounts in an over valued market.