# VPW - Best Withdrawal Calculator I've seen to date.....

Okay, I'm saying that Cut-throat likes the idea of making percent-of-current-portfolio withdrawals, and spending the amount withdrawn, because he thinks that maximizes his withdrawals without developing unacceptable risks. He understands that this makes his spending quite variable because it will fluctuate with market values.

I think you're making percent-of-current-portfolio withdrawals, and sometimes using part of the withdrawal to buy short term fixed income assets, because you want to stabilize your income. You feel that this approach helps you get money "off the table" when market prices are high, so you don't feel that you need to cut your spending sharply when the market goes down.

What you do with the funds after you withdraw them from your long term assets has no bearing on the asset allocation within your long term assets. However, I specified your "total" asset allocation. I intended the word "total" to mean all of your assets, not just the assets in your long term fund.

Unless I'm really confused, you expect to sell stocks most years. But, when stocks are up sharply, some of the proceeds will be used to buy short term assets.

Again, this is just wording. You want to use "asset allocation" to refer only to the assets in your long term fund. I am using "total asset allocation" to refer to all of your assets. If you like, I could have said:

"Looking at everything you own, you shift to a more conservative ratio when market values get up above X% of your initial value. You plan to move back to a less conservative ratio when market values get below Y%."
I don't manage my total assets as a single allocation. I don't understand why you keep emphasizing "total assets" since I don't use them to calculate my withdrawal either. Where is this requirement that ALL (investable, I assume) assets I own be managed and rebalanced as a single AA coming from?

I don't sell only stocks most years in my retirement portfolio. I sell whatever is needed to rebalance to the target AA (which is ~53% equities) after withdrawal. Some years bonds perform well too. It's just the normal process.

Cutthroat stated clearly that he also lets his unspent cash build in a cash buffer, and for much the same reason - income smoothing. His spending is independent of his withdrawal, just like mine. His spending doesn't have to be variable just because his withdrawal is.

Last edited:
Personally, I think that it can be perfectly normal to put some of the excess withdrawal money (during a bull market) temporarily aside in a savings account (or short-term CD). For example, I might plan to use that money next year on a vacation, instead of this year. I already do that when I plan to make a big purchase (like a car), during my accumulation years.

But, I do not see that as a way to stabilize withdrawals. For that to work, I would need to know when and how long the next bear market will be.

In other words: It's not a few thousands of dollars put aside in a savings account that would have protected a 1966 retiree against inflation in the 1970s. I'm pretty sure that the cash reserve would have been depleted long before 1982.

Personally, I think that it can be perfectly normal to put some of the excess withdrawal money (during a bull market) temporarily aside in a savings account (or short-term CD). For example, I might plan to use that money next year on a vacation, instead of this year. I already do that when I plan to make a big purchase (like a car), during my accumulation years.

But, I do not see that as a way to stabilize withdrawals. For that to work, I would need to know when and how long the next bear market will be.

In other words: It's not a few thousands of dollars put aside in a savings account that would have protected a 1966 retiree against inflation in the 1970s. I'm pretty sure that the cash reserve would have been depleted long before 1982.

Yes, I agree on that! --- I have a cash buffer mostly because my spending is not smooth from year to year.

I think anyone that employs VPW should be prepared to Live on 50% of the Initial Withdrawal Amount (Inflation Adjusted), if the times get 'rough'.

To enjoy the Extra Safety and higher Withdrawal Amounts that VPW provides over a Fixed SWR + Inflation amount, you have to willing to accept variable withdrawals. Otherwise you are probably better off to take your 2.5-4% Fixed Withdrawal + Inflation amount. Even though, when times get rough, I'll bet you cut back anyway!

Personally, I think that it can be perfectly normal to put some of the excess withdrawal money (during a bull market) temporarily aside in a savings account (or short-term CD). For example, I might plan to use that money next year on a vacation, instead of this year. I already do that when I plan to make a big purchase (like a car), during my accumulation years.

But, I do not see that as a way to stabilize withdrawals. For that to work, I would need to know when and how long the next bear market will be.

In other words: It's not a few thousands of dollars put aside in a savings account that would have protected a 1966 retiree against inflation in the 1970s. I'm pretty sure that the cash reserve would have been depleted long before 1982.
Depending on your spending versus what your retirement fund is providing as withdrawn income, this might not be just "a few thousand". It might be quite significant after a few years. Some people might jump up their spending to match immediately, but I choose to increase my spending more gradually, or not increase it at all if my expenses don't happen to rise in a given year. I don't feel compelled to spend every last \$ each year.

Some of the excess can be earmarked for a new car, or more travel at some point, and we do both of those. But if unspent, those funds are still available if you have a sudden reduction in the amount withdrawn from the retirement portfolio in a given year and you can choose to supplement it with the cash set aside for "splurges".

For a long bear market, you have to set your asset allocation and withdrawal rate such that your portfolio can survive even while withdrawing. That has nothing to do with what you do with your income after it is withdrawn.

I also have an extra year of expenses set aside in cash, and I have from the start when I adopted my % of remaining portfolio strategy. Assuming my portfolio income drops 20% and stays stuck for several years, that extra cash can help smooth things even if I have to gradually reduce spending over several years. I think that's way better than a sudden shock, and that's good enough "smoothing" for me.

Last edited:
Depending on your spending versus what your retirement fund is providing as withdrawn income, this might not be just "a few thousand". It might be quite significant after a few years. Some people might jump up their spending to match immediately, but I choose to increase my spending more gradually, or not increase it at all if my expenses don't happen to rise in a given year. I don't feel compelled to spend every last \$ each year.

Some of the excess can be earmarked for a new car, or more travel at some point, and we do both of those. But if unspent, those funds are still available if you have a sudden reduction in the amount withdrawn from the retirement portfolio in a given year and you can choose to supplement it with the cash set aside for "splurges".

For a long bear market, you have to set your asset allocation and withdrawal rate such that your portfolio can survive even while withdrawing. That has nothing to do with what you do with your income after it is withdrawn.

I also have an extra year of expenses set aside in cash, and I have from the start when I adopted my % of remaining portfolio strategy. Assuming my portfolio income drops 20% and stays stuck for several years, that extra cash can help smooth things even if I have to gradually reduce spending over several years. I think that's way better than a sudden shock, and that's good enough "smoothing" for me.

Not to ruin a perfectly good thread. But IF ONLY our government would follow a similar strategy in good and bad times. VPW for managing the federal budget!!!!

There will be a lot of ways to do this, just as there are a lot of ways of managing monthly spending when working.

Depending on your spending versus what your retirement fund is providing as withdrawn income, this might not be just "a few thousand". It might be quite significant after a few years. . . .

Some of the excess can be earmarked for a new car, or more travel at some point, and we do both of those. But if unspent, those funds are still available if you have a sudden reduction in the amount withdrawn from the retirement portfolio in a given year and you can choose to supplement it with the cash set aside for "splurges".
This suits me. Take some off the table when the portfolio is doing well (an generating more "pay" than needed to meet requirements),and it is available for discretionary expenses (buy the new car or just fix the old one? Take a big trip or a little one? Hey, Suzy is in a tough spot--is it a good time for us to help her out?). If the market tanks, then the fund is used to smooth things out.

Taking the funds out undoubtedly reduces the ultimate growth of the portfolio (compared to leaving it in, and invested in equities). But taking it out and putting it aside for later spending seems likely to result in better "utility" for each dollar than just withdrawing it and spending every dollar in that calendar year whether you've got a great use for it or not.

I don't manage my total assets as a single allocation. I don't understand why you keep emphasizing "total assets" since I don't use them to calculate my withdrawal either. Where is this requirement that ALL (investable, I assume) assets I own be managed and rebalanced as a single AA coming from?

Audrey-First, let me be clear that I am not criticizing your PF management methodology; that would be presumptuous of me.

What's causing the comments on AA, PF drag, etc. (and I think Independent is struggling with the same thing I am) is that the segregation you describe seems to be artificial. Because,...

What you do with the funds after you withdraw them from your long term assets has no bearing on the asset allocation within your long term assets. However, I specified your "total" asset allocation. I intended the word "total" to mean all of your assets, not just the assets in your long term fund...

Again, this is just wording. You want to use "asset allocation" to refer only to the assets in your long term fund. I am using "total asset allocation" to refer to all of your assets. If you like, I could have said:

"Looking at everything you own, you shift to a more conservative ratio when market values get up above X% of your initial value. You plan to move back to a less conservative ratio when market values get below Y%."

no matter whether you consider it long term or short term, 'Mr. Market' is acting on it based on the asset in which it's invested. And,...

Allowing extra cash, particularly after "good years" to accumulate in a spending buffer, is a perfectly natural reaction to a variable income stream. So you'll probably see it used with any method where some years have higher \$\$ coming in than others. This kind of "income smoothing" is just common sense and offers one solution to folks squeamish about living with a variable income. There is no requirement to spend all you withdraw in a single year. If you get a sudden 15-20% rise in income after a spectacular year like 2013, why do you have to spend it all immediately?

although you segregate the funds, you use the excess funds which you invest in short term cash for the same long term goal---income.

Another way to think about it is to use me as an example. I stated in a post above that I like a 'cash buffer' because of the peace of mind; similar to you. My cash buffer is different than yours in that I start out with it as part of my AA. My current AA is 60/25/15 so, I have 15% in cash. If I'm analyzing my AA against historical performance or running it through a MC calculator, I use 60/25/15. I don't set the 15% cash aside and proclaim that I have 70/30 AA. Because, that doesn't reflect what my AA really is or, how it will perform.

So, that's why I'm struggling with the assertion that it makes no difference where you put the extra cash and, at the risk of speaking for Independent, I think that's why he's made the same distinction.

I don't set the 15% cash aside and proclaim that I have 70/30 AA. Because, that doesn't reflect what my AA really is or, how it will perform.

So, that's why I'm struggling with the assertion that it makes no difference where you put the extra cash and, at the risk of speaking for Independent, I think that's why he's made the same distinction.

So, why stop at Cash? Why not include Real Estate - Your House, Used Cars, and the #2 Pencils in the Drawer?

I certainly don't include the cash in my left pocket in my A.A. - I include my Investible portfolio which is what remains after my January Withdrawal.

You can do anything you want, and so will Audrey and myself.

So, why stop at Cash? Why not include Real Estate - Your House, Used Cars, and the #2 Pencils in the Drawer?

I certainly don't include the cash in my left pocket in my A.A. - I include my Investible portfolio which is what remains after my January Withdrawal.

You can do anything you want, and so will Audrey and myself.

Because those things are not investible assets, with the possible exception of real estate depending on what form it's in.

There is a discussion to be had about whether one's pension(s) and SS should be included in calculating true AA but, that's a different conversation.

Audrey-First, let me be clear that I am not criticizing your PF management methodology; that would be presumptuous of me.

What's causing the comments on AA, PF drag, etc. (and I think Independent is struggling with the same thing I am) is that the segregation you describe seems to be artificial. Because,...

no matter whether you consider it long term or short term, 'Mr. Market' is acting on it based on the asset in which it's invested. And,...

although you segregate the funds, you use the excess funds which you invest in short term cash for the same long term goal---income.

Another way to think about it is to use me as an example. I stated in a post above that I like a 'cash buffer' because of the peace of mind; similar to you. My cash buffer is different than yours in that I start out with it as part of my AA. My current AA is 60/25/15 so, I have 15% in cash. If I'm analyzing my AA against historical performance or running it through a MC calculator, I use 60/25/15. I don't set the 15% cash aside and proclaim that I have 70/30 AA. Because, that doesn't reflect what my AA really is or, how it will perform.

So, that's why I'm struggling with the assertion that it makes no difference where you put the extra cash and, at the risk of speaking for Independent, I think that's why he's made the same distinction.
I just think there are some extra constraints being placed that don't matter. There is no one way to do this. It may seem artificial to you. It seems cut and dried to me. I organize my various investments by their goals, timelines, risks I am willing to take, and manage them independently each with their own strategy. One of them is my retirement portfolio from which I withdraw funds annually.

It makes sense to you all to include your leftover spending money or your cash buffer when you rebalance your portfolio and calculate how much you can withdraw each year. It doesn't make sense to me as my spending money is completely independent of my retirement portfolio and its performance and risks. It has a separate goal and timeline - very short-term. My spending money is income I have already realized and withdrawn. It does not somehow magically become retirement income again later.

I also have cash as an asset class in my AA. 5%. This completely separate from the cash I have already withdrawn to spend eventually. This cash is an asset class that is rebalanced along with the bond funds and equity funds in my retirement portfolio. It's there because it was part of the AA I originally chose to meet a certain volatility/risk/long-term survival profile.

When I analyze my AA against historical performance and risks, I only care what the AA of the retirement fund is going to do as I only withdraw from what is in my retirement portfolio and then rebalance. That is the part I am taking long-term risks with "Mr. Market". I don't care about the historical performance of my near term cash as it doesn't need to "survive" long term.

I think this comes down to the concept of whether unspent money should be reinvested in a retirement portfolio or not risked in the market anymore once it's withdrawn. Are you going to buy more equities in your retirement portfolio because your unspent cash is building up? Some people do. I choose not to do this as I do not need to take on that additional risk to reach my goals.

Personally, I want to see the "buffer" included in any analysis of a withdrawal method because I may be comparing it to other methods which may not have a buffer, or implement it in a different way.

Because those things are not investible assets, with the possible exception of real estate depending on what form it's in.

There is a discussion to be had about whether one's pension(s) and SS should be included in calculating true AA but, that's a different conversation.
I don't understand the concept that assets (excluding real estate) are a single pot and should be managed as a single AA. It's as if they all had the same goal/risk strategy and the same timeline.

I guess some people really do have only one pot, with one goal/risk strategy and one timeline.

Some people have multiple investment pots, each with different timelines, and different goals/risk strategies, and they can be managed independently.

Last edited:
Personally, I want to see the "buffer" included in any analysis of a withdrawal method because I may be comparing it to other methods which may not have a buffer, or implement it in a different way.

VPW Does NOT have a buffer. It's part of personal budgeting. I have a Budget for Fly Fishing Travel. It is also not part of VPW.

There is no one way to do this. It may seem artificial to you. It seems cut and dried to me.

Agreed. And if it works for you, that's what's important.

I don't manage my total assets as a single allocation. I don't understand why you keep emphasizing "total assets" since I don't use them to calculate my withdrawal either. Where is this requirement that ALL (investable, I assume) assets I own be managed and rebalanced as a single AA coming from?

I don't sell only stocks most years in my retirement portfolio. I sell whatever is needed to rebalance to the target AA (which is ~53% equities) after withdrawal. Some years bonds perform well too. It's just the normal process.

Cutthroat stated clearly that he also lets his unspent cash build in a cash buffer, and for much the same reason - income smoothing. His spending is independent of his withdrawal, just like mine. His spending doesn't have to be variable just because his withdrawal is.
Sorry for the slow response, I've been away for a couple days. I see that Huston has said some of the things I might have.

I'm not suggesting that you "should" manage all of your invested assets to a single, fixed asset allocation. Your approach seems to result in buying more assets for your short term bucket following increases in your long term bucket market value. Then, you may sell asset from your short term bucket following decreases in your long term bucket market value. I don't want to get hung up on any specific phrase to describe that dynamic, but I see some connection between them.

If I wanted to backtest this, I'd add a column to the VPW worksheet to show what's happening in the short term bucket. I'd want to know things like whether the short term bucket gets exhausted when the market goes down and stays down for a while, when I'd want to cut spending, etc.