Check over on Bogleheads. I think Dropbox broke a bunch of links due to a security issue. B/H will have the current one.
VPW - Best Withdrawal Calculator I've seen to date.....
- Thread starter Cut-Throat
- Start date
Found it on Bogleheads here.
Variable percentage withdrawal - Bogleheads
I'm happy to see this thread resurrected as I start the transition process.
Variable percentage withdrawal - Bogleheads
I'm happy to see this thread resurrected as I start the transition process.
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I have started to play with VPW for next year's withdrawal rate/amount. Let's see what it comes up with.
OP
OP
Cut-Throat
Thinks s/he gets paid by the post
And.....what did it come up with?
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Well.....
To be conservative, very conservative, I assumed I would live to 102! In that event, I can withdraw about $6,000 more than using 4% plus inflation.
Will I? I'm not sure. I am having a hard time spending this year's withdrawal.
But, it's nice to know I am not headed to the poor house for quite some time.
OP
OP
Cut-Throat
Thinks s/he gets paid by the post
Well.....
To be conservative, very conservative, I assumed I would live to 102! In that event, I can withdraw about $6,000 more than using 4% plus inflation.
Will I? I'm not sure. I am having a hard time spending this year's withdrawal.
So, what success rate does Firecalc give you with your 4% plus inflation to age 102?
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
85%.
No doubt taking a bit less in down markets, helps one survive them better.
Now if you could load the SS with the inflation rates and market performance for the next 30 to 40 years, we would all appreciate the effort.
Looking4Ward
Full time employment: Posting here.
I may be wrong or I may be right, but I've concluded that FireCalc's results are much more conservative than any other model when it comes to predicting how much one can withdraw from their portfolio each year.
REWahoo
Give me a museum and I'll fill it. (Picasso) Give
What else would you expect from a calculator that tells you how much you can withdraw safely if the worst market conditions in the past 142 years happen again.
I can't find the breakdown of the numbers right now but didn't someone maybe a couple years ago showing that the 1999/2000 retirees portfolios using a 4% draw in a 60/40 AA are looking scarily thin now?
I used those results to conclude that, if the 4% rule were to retain its confidence standing, we must be getting ready to turn a corner pretty soon with a helluvan upside in the years ahead despite any other factors.
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OP
OP
Cut-Throat
Thinks s/he gets paid by the post
85%.
No doubt taking a bit less in down markets, helps one survive them better.
Now if you could load the SS with the inflation rates and market performance for the next 30 to 40 years, we would all appreciate the effort.
You are doing something wrong! VPW will let you take an initial 4.5% for a Period of 40 years with a 50/50 Stock/Bond Portfolio. 4.3% for a Period of 45 years and even 4.1% for a 50 year period. How long are you projecting in Firecalc? There is just no way that you are getting $6K more with a 4% WR than VPW! I don't think you understand VPW at all!
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Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
I may have been unclear. Using VPW I am getting $6K more than using 4% plus an inflation increase.
Or, maybe you are right and I don't understand it at all.
OP
OP
Cut-Throat
Thinks s/he gets paid by the post
OK that makes sense!
Live And Learn
Thinks s/he gets paid by the post
This is a cool tool. Makes me feel better about ER. If I set the rate of return to 1/2 of the default, and then look at retirement in 1929 the first 6 years are scary and have WR below my fixed expenses. So I took the amount of the annual shortfall for those 6 years and reduced my portfolio by that amt. By year 7 I was back on track.
I hope what I did makes sense. It does make me feel more confident in my decision to ER in March 2015.
Thanks for bringing this thread back to life ! Another tool in the arsenal is never a bad thing !
I hope what I did makes sense. It does make me feel more confident in my decision to ER in March 2015.
Thanks for bringing this thread back to life ! Another tool in the arsenal is never a bad thing !
OP
OP
Cut-Throat
Thinks s/he gets paid by the post
You can fool around with the returns, but it really doesn't matter too much. VPW is a 'Self Correcting' tool. The default returns are based on history and really don't have much to do with selecting withdrawal amounts. Mostly withdrawal amounts come from portfolio balances.
The main idea behind VPW is that it does not try to "anticipate" a bad market like a Lowering your fixed SWR. VPW will put the Brakes on spending when and only if you need to. The problem with "Anticipating" a bad market like a 2% SWR does, is that it leaves money in the Market during good years, only to have a lot of it disappear anyway during a market downturn.
I am taking the defaults and am actually withdrawing what VPW tells me to. It goes into a Cash "Spending Account", never to be invested again. You can also use this account to "Buffer" shortfalls in Withdrawals.
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It certainly is a very nice tool to add to the toolbox.
I made a version back in june with a maximum withdrawal (ceiling) too, thinking that withdrawing above a certain amount simply won't happen and the excess can be used to raise the withdrawals in down periods in each scenario. It doesn't do much actually. Useful insight for me.
In addition I added a median statistic as output number within the worst case and median scenario to understand fluctuations better.
And then of course the drama unfolds: The minimum withdrawal in any given year is about half the median withdrawal rate in any scenario. That's a pretty big discrepancy (factor 2x). You can only do that if you have much luxury already built-in, and is of course a consequence of long retirement periods and stock market drops of 50%.
Interesting tool though.
Main point it drives home for me is that once your life expectancy drops below 35 years or so you can starting eating into your principal. Which is very relevant for my mother and grandmother.
Live And Learn
Thinks s/he gets paid by the post
As all tools do, this one also shows how a bad sequence of returns in the initial years of retirement can wreck your plans. My messing around was to (a) see how "good" my 3.2% WR would have done even if markets only return 50% of current long term averages and (b) to look at the backtesting table to see how much my shortfall (what I need vs what I could withdraw). If I pick the worst years for retirement I do ok except for when I select 1929 as the start year, in which case the withdrawal is well below what I need during retirement.
This model works better when you have higher discretionary expenses. (Definition of what is a discretionary expense is in the eye of the beholder - to me staying in my home is non-discretionary - I do not want to have to move to less expensive housing or live without pets ... I'd rather just keep working !).
The other thing I've noticed about this model is that it has me able to spend crazy amounts of money when I'm well into my 80's and 90's. Reminds me of that movie where the protagonist needed to spend $1mm in 30 days (or whatever the amount / timeframe was).
OP
OP
Cut-Throat
Thinks s/he gets paid by the post
If the market drops 50%, you would have to be 100% in stocks to suffer an equivalent portfolio drop. You can tamp down the volatility with the proper asset allocation. Personally I am only 30% in stocks.
Other ways to damp down volatility is to delay S.S. to age 70. I have set aside cash that is not included in my VPW Portfolio to cover the Shortfall of S.S. --- So, when S.S. kicks in at age 70, it will contribute to a Steady portion of income that is not affected by the VPW withdrawal amount.
And yes, I would not have even considered retirement if my discretionary expenses were not much larger than my non-discretionary ones. I think every retiree should be able to easily cut their expenses in half. If they can't, they are asking for trouble.
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+1
Those last 3 years or so working were especially tough knowing we had enough to RE, but waiting to hang on for retiree HI allowed us to really pad out the savings available for discretionary spending
The sequence of returns have been fantastic since retiring so we have been able to have 5 high withdrawal years to do lots of international travel, so if/when the finances go badly we have had a great adventure and can easily cut back to a much less expensive lifestyle.
photoguy
Thinks s/he gets paid by the post
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If you're going to buffer shortfalls in a reserve account, this doesn't sound that different in practice from planning with a conservative SWR (that meets basic expenses) and then simply spending more when the portfolio does well.
Of course VPW specifies age related mortality adjustments but I suspect many traditional SWR users also adjust their withdrawals as they age depending on how their portfolio fares.
OP
OP
Cut-Throat
Thinks s/he gets paid by the post
No, there is a Big Difference! ---- The VPW withdrawal amount is removed from the market entirely and put into a Cash account. A Conservative SWR leaves money in the Markets, which could possibly get 'pummeled' in a down market. Personally, I try to spend it all. I only mentioned leaving it for shortfall, for those folks that can't handle the volatility. The main idea is to 'Get the money out of the Market' when VPW tells you to. Plans work! Execute the Plan!
VPW is a disciplined approach to removing more money from the Markets (Stock/Bond) during up market years and removing less from down market years.
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I like VPW. Autopilot is an easy to use formula too.
0.5 x (Last year's withdrawal amount x (1 + Inflation %)) + (Last year's ending balance / RMD)
Put retirement savings withdrawals on autopilot - MarketWatch
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