Excellent discussion. Interestingly, the originator of TPAW had a long online discussion with the originator of VPW. As with any tool, one needs to know the best scenario for that tool and its limitations. I spent a *lot* of time looking at retirement spending models before I retired. I decided to use VPW when I do withdraw from my portfolio merely because it provided some guardrails, allowed for easy input of my situation with regard to pensions and investments and is built with enabling adaptation to market conditions while advocating for a 'floor' for lifestyle costs by purchasing an annuity at 80 (which is not necessary if one has a pension which can cover that). I also like that the tool is being forward tested with actual market conditions. I'm also more of a 'hatchet' versus scalpel person with regard to managing my money, ie, I've probably over-saved for my lifestyle requirements, so can afford some 'slop' in the measurements. VPW allows me to have some rigor, gives me a range to withdraw and lets me get on with living my life. As one commenter stated, one can use a smoothing process in conjunction. KlangFool, who is quite risk averse, has a much more conservative smoothing mechanism that is based on two years and 'safe' investments while using VPW. One can slice and dice how they like. BL: I appreciate the work in developing the model and spreadsheet and find it is a tool that meets my needs.
Yep, I remember that thread very well. Challenging anything about VPW usually gets you a response (sometimes pre-canned) from the author, and I think that's one of the things that started the entire conversation the two of them had.
I probably spent an entire decade looking at various withdrawal methods before I retired. Like most, I started with SWR (and many of what I call "hacks" to SWR which attempt to improve it). Some of them can be algorithmically intense.
Ultimately, I ended up with amortization. I really like TPAW but by the time it was in a decent state I was too far along with my plan to incorporate it. Instead, I'm living vicariously through my daughter who is following something very similar to it after she graduated university a couple of years ago.
I started retirement with amortization using duration matched/targeted TIPS funds and stocks funds and withdrawing from both using amortization, making quarterly withdrawals. For TIPS I calculated the aggregate real yield and updated the average duration of the two to match my investment horizon each quarter. For stocks I used 1/CAPE as a crude estimate for future real returns. I stopped rebalancing between stocks and bonds. I also used Time Value of Money concepts to withdraw "extra" from my bond funds for future SS streams by calculating their net present value and adding that to the value of my bond funds. Putting together the spreadsheet was not difficult, nor was deriving a few of the formulas. Once that was figured out, the process each quarter was looking up the data and just plugging it into my spreadsheet. That took all of about 10 minutes and then I made the withdrawals and got on with things.
The net result was that we were withdrawing a lot more than we were able to spend. This year I took our TIPS bond funds, sold them, and purchased ladders. coupons + maturing bonds in the ladder along with dividends thrown off by our stock funds now easily pay for all of nondiscretionary spending, without a lot of excess. I now use amortization to calculate a max withdrawal we could make by selling shares of our stock funds each year. The only regular withdrawals we're making from that so far, is extra to pay tax on the Roth conversions we make each December and for the next few years until that's done. That, by itself, doesn't put much of a dent in the value of our stock funds, fortunately.
For a very good 2 part series on amortization, including time value of money concepts, along with a sample spreadsheet, I highly recommend this two part series on the bogleheads blog by user siamond.
(If you're not into spreadsheets, feel free to ignore all of it)
Cheers.