youbet
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
How many are using VPW here?
Used it for what?
How many are using VPW here?
there's too much "sell" that's worked its way into this thread.
+1. Heavy reliance on a tool makes one a tool himself.Awareness of what's going on around you, a reasonable knowledge of finance, investing and economics and enough moxie to fend for yourself during all kinds of circumstances is what leads to FIRE success.
I'm doing the best I can and have been reasonably successful so far. I think many of the other long time posters can say that too. And I doubt any of them have been fooled into thinking that any tool can be followed blindly over the long run, including VPW.
So, do I understand right that you think that a CPI-adjusted withdrawal path would be more informative to you than the current separate nominal withdrawal and inflation (blue and red) lines in the chart? Even if it hides the significant volatility of CPI in a period like 1916+ ?
(Thanks for noticing that I have no vested interest in all this. I initially developed it for myself and asked the Bogleheads for comments. They helped me improve it and add it to their Wiki. I make no money with it. I do not even sell a book or something. But I do believe that it is a good antidote to fear mongers that use historical SWR failures to sell services and products to misinformed investors).
+1. Heavy reliance on a tool makes one a tool himself.
There really is no magic. Enough money, basic good sense and some luck rule. I could be wrong, but as best I remember, 20+ year retirees have a few things in common, and they rarely post about the latest greatest technique for slicing a watermelon. Flexibility and common sense seem to be the usual traits.
Ha
I suppose leaving the money in equities as share prices rise is what exposes it to being decimated later. Maybe we're asking a withdrawal method to perform a function it can't do alone--maybe we should be looking at dynamic reallocation strategies that put aside stock market gains when the market is up--even more than a simple rebalancing to a fixed allocation accomplishes (Who dares say "market timing!?" Who dares say "h***s"?!")What the data showed me was an obvious fact that my mind was refusing to see: Any money not spent (and thus left in the portfolio) at market peak will be decimated by the upcoming bear market, making little difference on withdrawals during the bear market.
Our mind tricks us into thinking that if we deprive ourselves a little, during good times, we'll be able to save the portfolio from later bear markets, as we'll have more money. The data does not show this.
Just to pick a nit: I think we are using the term "spending" and "withdrawals from the equity portion of the portfolio" interchangeably.What the data shows, instead, is that reducing spending during bear markets is what actually makes a huge difference on the future.
When we were into the awful bear market of late 2008, my wife mentioned that we should have bought that new car in early 2008 instead of holding off. So I've been wondering about this idea of spend it or maybe loose it. But I never really analyzed the data....(snip)...
What the data showed me was an obvious fact that my mind was refusing to see: Any money not spent (and thus left in the portfolio) at market peak will be decimated by the upcoming bear market, making little difference on withdrawals during the bear market.
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I'm not sure what other members will have to say, but in my case I'm not tricked a bit by this. I think its pretty intuitive. If you were struggling with this, as apparently you were, your work with the data has indeed been useful to you!Our mind tricks us into thinking that if we deprive ourselves a little, during good times, we'll be able to save the portfolio from later bear markets, as we'll have more money.
Yes! My only surprise is that you were surprised!The data does not show this.
Evaluation of the risk/reward possibilities of the situation is still critical. For example, I FIRE'd into the 2008 recession. VPW would have told me to reduce spending I assume. But I had very important and meaningful personal plans for that timeframe that would have to be executed then or permanently canceled. I chose to spend as planned, despite the huge down market, and had the experiences (some travel, family events, etc.) and my portfolio has recovered nicely despite that. It might not have worked out that way, but had I not gone ahead with the activities, I'd certainly be deeply regretting it today. You have to set tools and their algorithms aside and look at your personal situation sometimes.What the data shows, instead, is that reducing spending during bear markets is what actually makes a huge difference on the future.
Yes indeed. Doing a deep dive into various tools and calculators is a fabulous mental exercise for learning how to live off passive income during FIRE. No one tool or calculator really gets it right for everyone all the time, but digging into them is a great exercise to help prepare for personal decision making.So, even if one has no intention to use VPW, it can still be very instructive to play with it to try to gather objective facts about how withdrawals, portfolio balance, and sequence of returns affect each other.
Here's how I analyzed it.Check me out on this one please as I did this kind of quickly. I purposely did not choose a market peak year as we are unlikely to choose a peak to reduce our spending. Even in if taken at a peak the numbers would be similar. If this analysis is roughly right then yes we might loose some of the money saved but nowhere near all of it. And that money is free to grow again later on.
Note I'm not saying to avoid spending and to play it safe. I'm just trying to get the analysis right.
I totally agree that one has find the proper balance between saving (or withdrawing less during retirement) and living, even during downturns. It seems to me that you were clearly aware of the trade-offs implied by your choice when you made it, and that you tried to make the best choice for you. Isn't this what any of us should strive to do?Evaluation of the risk/reward possibilities of the situation is still critical. For example, I FIRE'd into the 2008 recession. VPW would have told me to reduce spending I assume. But I had very important and meaningful personal plans for that timeframe that would have to be executed then or permanently canceled. I chose to spend as planned, despite the huge down market, and had the experiences (some travel, family events, etc.) and my portfolio has recovered nicely despite that. It might not have worked out that way, but had I not gone ahead with the activities, I'd certainly be deeply regretting it today. You have to set tools and their algorithms aside and look at your personal situation sometimes.
One option is to follow the VPW suggested withdrawals and just stick what you don't spend in cash or CDs for a rainy day. Call it the bucket approach if you like. Dynamic asset allocation* might be another phrase.
You might want to put in 1968. That will probably give a lower inflation adjusted withdrawal by 1975. The percentage WR's do not change. As I understand it, the percentage withdrawals are set by the assumptions in the "Table" tab.....
I started at 1972. For a 46 year run, the lowest WR is 4.5%.
Sounds too good to be true ...
I started at 1972. For a 46 year run, the lowest WR is 4.5%.
Sounds too good to be true ...
But the withdrawal percentage moves up too so the spending decline is not linear.That's 4.5% of the balance of your portfolio, not of the initial balance. If your portfolio drops by 50% then so will your withdrawal.