Is anyone using Boglehead's Variable Withdrawal Percentage?

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Is anyone using Boglehead's Variable Withdrawal Percentage? I'm curious what your experiences are for longer term users. I found that this approach to determining annual withdrawals increases my spending by 32.5% (@ age 69) this year and increase every year going forward. It makes so much sense to not only consider my age in making withdrawals but also actual market performance which the 4% rule does not do. I'm guessing (as I don't have an advisor myself), that advisors hate this because they don't want to see you spend down your money, as this slowly erodes your value to them. I am using the extra money, all of that above my initial retirement plan of- 4% of initial portfolio annually adjusted for inflation, to fund some special things. First my kinds and grandkids are quite dispersed and travel is expensive so I put aside about $50K for an annual family get together. During that time every year we have a family planning meeting. Where among other things, we look at the portfolio performance and award a family dividend. Each of my kids gets up to $38K each year. We use $38K because that is what my wife and I can give each child each year ($19K*2). Our thoughts on this developed out of reading Bill Perkin's "Die with Zero, how to get all you can from your money and your life". It really makes you realize that your kids and you will get more out of their inheritance if you give it to them when they are young enough to still use it and you are around to enjoy it. If you hold for a big inheritance they will probably be too old (60-70) to really need it and you'll get no sense of their delight at having it . Of course it's a little unsettling to see the money curve pointing to zero. But there are plenty of years left to change our mind. We also made a modification to the VPW strategy in that we don't allow the withdrawals to go over 20%, like the withdrawals do in your final years with VWP, this just to adds a little flexibility in life expectancy. But once nice unexpected benefit of using VPW is that your portfolio will never run out before you die, like the 4% rule can have failures, instead your annual payments can get pretty small in a terrible SOR scenario. By the time you're 70 though you're pretty much past that potential challenge. Anyway, what have other's who use this withdrawal strategy found as little learnings along the way? BTW, I have also found that Pralana Online also does a good job at modeling the VWP strategy. I also built my own spreadsheet to do Monty Carlo simulations of VPW, as well as trying out the shared BackTest spreadsheet on Boglehead's. All of these things gave me the confidence that this was a superior strategy in my case, wanting to spend down (just to be clear spend down is another way to pass money on to your heirs) rather than pass on a portfolio at death. Let me know your experiences? I'd like to learn from them.
 
I know we aren’t supposed to mention another tool, but if you use FICalc, not FireCalc, it gives you the ability to explore several withdrawal strategies including the Vanguard variable method. Here is a list of all the strategies that you can explore in the tool. It’s free.
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I've been using a modified VPW method since retirement 10 years ago with a 60:40 portfolio. Modified, because I have set aside funds equal to the amount of SS I would have received between 62 and 70, rather than the age 70 I will actually claim (in 2 years). Those sequestered funds are not included total dollars used in the VPW calculation. I then add back in my "owed" SS funds to the predicted VPW suggestion.

It's worked very well for me but these last 10 years have generally been very good to investors. I have also set a 6.0% max withdrawal rate in my spreadsheets (despite VPW going much higher). That limit won't apply until I am 75 and can always be revisited but I suspect I'll have more tan enough income at that withdrawal rate unless there's a massive stock crash (50% or more).
 
Just curious how setting aside this amount of money then adding back your "owed" SS funds changed your monthly income? I assume this means you can take out a little more now, knowing that SS will boost your income later so you will take less out of your portfolio? Since I am already taking SS I didn't even include it in my calculations. It's just extra money on top of my portfolio payout.
 
That's correct. I get the benefit of age 70 "SS payments" from 62 onward with no financial risk. There have been a number of threads discussing the math behind this idea and showing it means you can spend more each year than claiming SS at 62.
 
There is a forward test of the VPW that is updated monthly at bogleheads. They started in 2019 or so and have been tracking the results. In spite of COVID and the 2022 swoon, markets have been very kind during this period, so it's not a real stress test. Here is the thread:

In practice, it's similar to consumption smoothing and actuarial methods, where you try to deplete your assets over your modeled lifespan. You can study those using historical and Monte Carlo to get a feel for the possible variability in spending you may face by withdrawing more early on. In bad sequence cases, the spending cuts can be significant and long lived.

For a tool to make the analysis, I like Pralana (pralanaretirementcalculator.com) for its excellent tax calculations and its power and flexibility. Under Analysis- Spending Strategy, select Consumption Smoothing or Actuarial. Then go to Analysis and run Historical or Monte Carlo. You can even select a given starting year and get a year by year detailed accounting of what would have happened.
 
Yes, I use Pralana and when I mentioned they were able to model VWP it's the "Actuarial" method I was thinking of, as they are basically the same thing. Although the percentages are slightly, a tenth here or there, different. I have also seen the Forward Test of VWP on Bogleheads. Of course that's a fixed 60:40 portfolio with the equities in 2 Vanguard funds (VTSMX & VTBIX) and two bond funds (VGTSX & VTIBX). But really I was looking for peoples experiences and learnings from using a VWP (Actuarial) withdrawal scheme. How's it working? How much more money are you taking annually now? How are you spending the money? Do you have concerns? Is anyone up there in age taking the very large percentages that occur? What has your money manager said to you about this? And so on?
 
I started using VPW at age 53, 4 years into ER. I went with it because it makes immediate adjustments to market conditions, but they are gentle because they are spread out over my remaining years. I wasn't comfortable sticking to a fixed rate plan with no guidelines when to cut back in an extended downturn that might threaten my plan, and require bigger cuts to stay on course.

I modified the Bogleheads plan to be more conservative with the withdrawal %. It's been 10 years so I don't remember the exact reason but I think I wanted a little more buffer, and it seemed like around 90 it might start getting too risky.

I handle future SS and pension benefits by including their NPV in my net worth calculation. Once I start those, I'll no longer include them in my NW which will reduce my withdrawal but I won't need as much since I'll additionally have the income from those benefits.

One thing to be aware of in any withdrawal plan is accounting for large irregular expenses, like a new car, roof replacement, etc. One way to handle would be to have a side fund for those, so you allocate a certain $ amount each year for them, and withdraw that money but put it in a separate account which you use when you incur the expense. For VPW you wouldn't use that account in your NW calculations because it has been "spent". I don't go to this effort. I have enough buffer that I've underspent every year, even in years where I've bought a new car or replaced the roof. I have window replacement and painting on the near horizon so I'll definitely be over my number when I do that, but I'll be ok.

With my buffer any plan would have worked well over these last 10 years as long as I didn't spend like a drunken sailor. But even if I didn't have a buffer I'd be using VPW, with a closer eye on those irregular expenses. If I had to put on a new roof sooner than anticipated VPW woud smooth that out over time. What you want to avoid is budgeting for a new car every 10 years but buying one every 5. Unless the market is good or other expenses are lower, that will catch up to you in any withdrawal method.

I'm my own money manager so my money manager is fine with this plan, especially since I don't incur the cost of hiring a money manager.

I don't like giving my raw numbers here, but between underspending, the increasing VPW % factor, and generally strong returns over the last 10 years, my allowable spending number for this year is 90% higher than it was 10 years ago.
 
Just using the simpler %remaining portfolio method (fixed % of annual end of year portfolio value), but I do evaluate the withdrawal % every many years based on our ages.
 
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Not us.

We use a back of the envelope method and a common sense approach based on performance, growth, inflation, spend, cash flow, and tax strategy.

This non formula approach has worked well for us over the past 13 or so years of retirement. It is very intuitive.

During that time our equity balances have more the doubled without any spending restraint. The opposite in fact.

I am very wary of all of these so called one size fits all formulas. We view them only as potential guidelines to consider that may or may not relate to our personal financial situation. Our approach may even mirror some the Bogglehead recommendations. I really do not know.

Works for us.
 
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I used a variable withdrawal strategy for the first five years of retirement just in case I retired into a bad bear market where Seqeunce of Return Risk would raise its ugly head. It turns out I retired into a nice bull market. Toss in SS at 70, and I no longer fear a bear market going on for several years that will cripple my future years in retirement.

So no need for the variable withdrawal strategy.

I now use common sense. That along with a growing desire to simplify my life makes excessive spending a non issue for me. When I do spend more it’s usually to pay people to do things I would have done myself five years ago. That gives me more time for family and friends.
 
I use VPW. Last year, cashed equities monthly. This year, I did the year's worth, Jan 3-4.
 
After 20 years of all the ups and downs in the markets and ups and downs in spending, I've finally concluded "I've got this!" I don't really "plan" or budget or even, particularly "monitor" my portfolio except to run a yearly Net Worth statement which continues to go up.

Question for OP: Are you looking to increase spending and also looking for a way to insure that increasing spending is safe? My impression is that you want to reduce your portfolio value toward zero (die with zero??). If so, why? Unless you desire higher spending, what is the advantage of reducing toward zero? By the way, I am not implying any criticism. I just don't understand exactly what you wish to accomplish. Sorry if I'm being dense (heh, heh, the gray light of morning is not conducive to my understanding).

I don't worry too much about having money left over (even after DW is gone). We're trying to get set up for where the money eventually goes. In the mean time, we basically spend what we want to spend and don't pay a lot of attention to the details. We've "won the game" barring any Black Swans.
 
ShokWaveRider said:
We use are own withdraw when we need it strategy. :)
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That’s our strategy. We aren’t trying to spend right up to where all these different calculators and thumb rules say we are good. We have been at about 2 to 2.5% and will go down near or at zero now with SS. It covers all our bills with some left over. So, going forward we will take out extra for trips, home repairs or such things. Years of living beneath our means and saving has not really changed.
 
It sounds like a lot of work to me. It is already giving me a headache just thinking about it!
 
Golden Mean said:
I use VPW. Last year, cashed equities monthly. This year, I did the year's worth, Jan 3-4.
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Like Golden Mean, we use VPW, selling from our portfolio on a monthly basis. Giving thought to changing to annual selling instead.

We've only been at it since October, 2024 and we're finding we barely spend half of what VPW shows we can spend. I wish Robbie was still around - I need BTD ideas.
 
I have spent my entire life with no budget and so far so good. We have just maintained our standard of living in our 2 years of retirement. At the 5 year mark, I'll adjust accordingly. Even though I think VPW is a good method, I am just not that structured. I can always run firecalc and see what it says about how much we can spend.
 
I guess in practice most people are doing Variable Percentage Withdrawal unconsciously. If the market goes up, people loosen up their purse. That’s called wealth effect. The VPW spreadsheet just gives you a ceiling how far you can go. But often times people’s life events dictate more on how much they would spend and when to spend.
 
CalBird said:
I guess in practice most people are doing Variable Percentage Withdrawal unconsciously. If the market goes up, people loosen up their purse. That’s called wealth effect. The VPW spreadsheet just gives you a ceiling how far you can go. But often times people’s life events dictate more on how much they would spend and when to spend.
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VPW helps with that too. If you have to spend more one year due to life events, and it's not covered by a portfolio increase, VPW will notch your spending back a bit.

I treat the VPW number as a suggestion. If I was going over it most years, I'd be taking a hard look at my financial situation. But as I wrote before, I'm under every year so I don't worry about it. I do sleep better knowing this, rather than just going on a gut feel that all is well.
 
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