Variable Percentage Withdrawal (VPW)

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longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

Dear StillGoing,

Annuity prices are (in part) affected by interest rates. Interest rates were significantly higher in 1981 than in 2021. It would be illogical to use 2021 annuity prices within a backtest to represent annuity prices in 1981.

Best regards,

longinvest
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
StillGoing
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Re: Variable Percentage Withdrawal (VPW)

Post by StillGoing »

longinvest wrote: Wed Jul 21, 2021 6:30 am Dear StillGoing,

Annuity prices are (in part) affected by interest rates. Interest rates were significantly higher in 1981 than in 2021. It would be illogical to use 2021 annuity prices within a backtest to represent annuity prices in 1981.

Best regards,

longinvest
Do you (or anyone else for that matter) know of any historical annuity data series for the US? There are rates for level annuities for 65 year old males in the UK in http://people.exeter.ac.uk/ipt201/resea ... ersion.pdf and for 1981 the rate was 16.2% (compared to ~5% now) - there's a plot of annuity rate alongside interest rate (well, actually consols) in that paper too that shows, as you say, a fairly strong dependence of annuity rate on interest rate (any other result would have been fairly surprising).

edit: I should have read all the text and footnotes (footnote 9) in the paper I cited above since https://www.jstor.org/stable/253260 has the relevant data for US annuity markets from 1919-1984.

cheers
StillGoing
Last edited by StillGoing on Thu Jul 22, 2021 1:48 am, edited 1 time in total.
smectym
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Re: Variable Percentage Withdrawal (VPW)

Post by smectym »

SnowBog wrote: Tue Jun 01, 2021 1:58 pm
Marseille07 wrote: Mon May 31, 2021 12:06 pm
JasonFIRE wrote: Mon May 31, 2021 12:01 pm
Marseille07 wrote: Mon May 31, 2021 11:48 am
JasonFIRE wrote: Mon May 31, 2021 11:42 am The whole VPW thing really does seem like the best way to manage all of these variables and the related uncertainty. As longinvest often reminds us, nothing is certain; we have to be flexible.
Be sure to understand the characteristics of "1/N" withdrawal methods. I'm not saying VPW is bad or anything, but there's a cost of withdrawing 4%+ early on and going higher.
Yes, it is important to consider that; however, it seems like the main way to address that is via purchasing an annuity at age 80, and the reasons for that are conspicuously documented the VPW materials.

Is there something else I am missing?
I don't think so. It's just a difference of opinions where I prefer a methodology that perhaps requires a lot of money up front and not much withdrawals, but very unlikely to require an annuity later.
For clarity, VPW - especially longinvest's calculator (which caps at 10%) - are not 1/N based. Perhaps you are thinking of the APW method (which is 1/N based).

And again, nothing about VPW is "forcing" you to spend more. VPW simply says that - if you have the required flexibility to cut spending in bad markets - you have the ability (not requirement) to spend more in normal years.

I expect our spending to be below what VPW says we can spend. I don't see any conflict there... And we likely will never need to buy an annuity (social security with small pension are expected to cover the majority of our essential expenses, especially if our expenses show down as we age [wild cars being medical obviously]). Again, no conflict...
Agree with Snowbog that “nothing about VPW is ‘forcing’ you to spend more.” Indeed, we are using VPW but found that the stated withdrawal amount on the grid, based upon asset allocation, age, and corpus, is too high for us and caused unnecessary 2020 tax. We scaled back to fit our actual expenses and minimize our tax bill. Of course, eventually RMD will limit our flexibility, and it will be interesting to see what sort of mismatch pertains between mandated RMD and the VPW withdrawal number.
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Re: Variable Percentage Withdrawal (VPW)

Post by SnowBog »

:beer

:oops: dang auto correct... I hate seeing typos I missed getting quoted...

For context, the above was taken from a different thread which - I think at one point (thread was hard to follow) - was attempting to say that VPW wasn't "frugal" because it likely [depending on age] has a higher initial withdrawal rate. Which I still think is nonsense... Just like I don't understand how a withdrawal method which doesn't guarantee a minimum withdrawal is a somehow a failure... Nothing in life is guaranteed (except I guess death - as some people seem to avoid taxes under the right circumstances)...
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Re: Variable Percentage Withdrawal (VPW)

Post by smectym »

SnowBog wrote: Wed Jul 21, 2021 8:35 pm :beer

:oops: dang auto correct... I hate seeing typos I missed getting quoted...

For context, the above was taken from a different thread which - I think at one point (thread was hard to follow) - was attempting to say that VPW wasn't "frugal" because it likely [depending on age] has a higher initial withdrawal rate. Which I still think is nonsense... Just like I don't understand how a withdrawal method which doesn't guarantee a minimum withdrawal is a somehow a failure... Nothing in life is guaranteed (except I guess death - as some people seem to avoid taxes under the right circumstances)...
Never would have spotted that typo.

On “VPW not frugal,” in fact one of VPW’s merits is to decisively unshackle the retiree from the Procrustean bed of the 4% rule. Moreover, agree with longinvest’s often-repeated point:
under-withdrawal too is a significant danger that should be mitigated. VPW reliably does that, while of course imposing no mandate to withdraw the applicable grid number.
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek »

I moved a long interchange on withdrawal methods into a new thread. It was derailing the discussions here. See: (broken link removed)

Update: The thread was subsequently merged with an earlier one. See: Is VPW/ABW a frugal retirement strategy?
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek »

There appears to be some confusion on the purpose of this thread. Requested by a member, I have retitled the thread to clarify that the intent is for spreadsheet support.

Update: Upon further review, the thread's new title did not solve the issue. I put the title back to what it was (Variable Percentage Withdrawal (VPW)).
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longratio
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Re: Variable Percentage Withdrawal (VPW)

Post by longratio »

Dear VPW enthousiast,

I recently stumbled upon the great VPW retirement spreadsheet and have read many of the explanatory post of longinvest and others.
I get the split between a. lifelong non-portfolio stable inflation-indexed income and b. the variable portfolio withdrawals.

In The Netherlands (where I live) there is the concept of 'lijfrente sparen'. This is a tax exempt savings account that you can use to buy either a time based annuity (between 5 and 20 years) or a lifelong annuity upon retirement date (both are usually not inflation indexed over here).

As you have to make the decision around age 67 the lifelong annuity is usually less attractive compared to the 20 year one.

Unfortunately I do not see a way to model a time based annuity in the spreadsheet. It almost looks like a reverse pension bridge deficit.
Any suggestion anybody?

Thanks,
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longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

longratio wrote: Wed Aug 11, 2021 2:01 pm In The Netherlands (where I live) there is the concept of 'lijfrente sparen'. This is a tax exempt savings account that you can use to buy either a time based annuity (between 5 and 20 years) or a lifelong annuity upon retirement date (both are usually not inflation indexed over here).

As you have to make the decision around age 67 the lifelong annuity is usually less attractive compared to the 20 year one.

Unfortunately I do not see a way to model a time based annuity in the spreadsheet. It almost looks like a reverse pension bridge deficit.
Any suggestion anybody?
Longratio, here's a quote to look differently at the problem:

“The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.”
— William J. Bernstein

I don't know about others. But, personally, I couldn't care less about dying as the richest person in the graveyard. But, I do care a lot about not living my oldest days in poverty due to a depleted portfolio and insufficient pension income, regardless of how long I'll live. As a consequence, it wouldn't be difficult for me to select the lifelong annuity (unless there was a way to buy a cheaper and better one using the payments of the time-certain annuity, which is quite unlikely).

For your information, there's a planned feature to support temporary retirement income in the worksheet, but it will be limited to temporary retirement income that stops before age 80. VPW assumes that at age 80 the retiree will make sure to have (and buy, when necessary) sufficient lifelong non-portfolio income to live comfortably (independently from portfolio withdrawals) until death.
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Re: Variable Percentage Withdrawal (VPW)

Post by nigel_ht »

longinvest wrote: Wed Aug 11, 2021 7:17 pm VPW assumes that at age 80 the retiree will make sure to have (and buy, when necessary) sufficient lifelong non-portfolio income to live comfortably (independently from portfolio withdrawals) until death.
That’s a really odd assumption to make.

By that time my portfolio should be throwing off enough income that I wouldn’t need anything else…
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Re: Variable Percentage Withdrawal (VPW)

Post by longratio »

longinvest wrote: Wed Aug 11, 2021 7:17 pm
<snip>

“The purpose of investing is not to simply optimise returns and make yourself rich. The purpose is not to die poor.”
— William J. Bernstein

<snip>

For your information, there's a planned feature to support temporary retirement income in the worksheet, but it will be limited to temporary retirement income that stops before age 80. VPW assumes that at age 80 the retiree will make sure to have (and buy, when necessary) sufficient lifelong non-portfolio income to live comfortably (independently from portfolio withdrawals) until death.
Yes, Bernstein is right. But I do think rich and poor are relative terms and that is why I use the worksheet to study the options. Looking forward to the new feature to support temporary retirement income, thanks.
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Re: Variable Percentage Withdrawal (VPW)

Post by loukycpa »

Apologies if this has been asked before. In calculating the social security/pension bridge funding required, it appears the spreadsheet calculates present value using the expected returns for stocks and bonds based on the chosen asset allocation. The disconnect I was wondering about is the following from the Wiki page:

"Missing payments between retirement and the start of a pension such as Social Security (possibly delayed to age 70) can be provided by using a simple CD ladder or short-term bond fund. For the purposes of VPW calculations, the money set aside in this CD ladder or short-term bond fund should not be considered as part of the portfolio."

Why use present value based on expected returns if this money is going to be invested kept in very conservative investments? Seems like this has the impact of understating the required bridge funding, overstating the remaining risk side of the portfolio and perhaps pushes up the initial annual withdraws higher than one might be comfortable.

I find much to love VPW and anticipate using it as my drawdown plan. Thanks for the work on this and for sharing. Just trying to understand it better. Being conservative by nature, I like the idea of social security/pension bridge side of the portfolio to provide a floor of income.
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Re: Variable Percentage Withdrawal (VPW)

Post by Big Mig »

loukycpa wrote: Wed Oct 06, 2021 1:48 pm Apologies if this has been asked before. In calculating the social security/pension bridge funding required, it appears the spreadsheet calculates present value using the expected returns for stocks and bonds based on the chosen asset allocation. The disconnect I was wondering about is the following from the Wiki page:

"Missing payments between retirement and the start of a pension such as Social Security (possibly delayed to age 70) can be provided by using a simple CD ladder or short-term bond fund. For the purposes of VPW calculations, the money set aside in this CD ladder or short-term bond fund should not be considered as part of the portfolio."

Why use present value based on expected returns if this money is going to be invested kept in very conservative investments?
I think you may be confusing two similar but different approaches. The language you quote from the wiki is the first generation of VPW, where the SS bridge is held in conservative investments apart from the VPW portfolio. I think of the retirement withdrawals spreadsheet as a 2nd generation; it shows how the bridge funds can be held in the same portfolio and the same principles can be applied to them. I’m not sure it’s certain which is the better approach, which is why we’re following along the “forward-test” thread.
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Re: Variable Percentage Withdrawal (VPW)

Post by loukycpa »

Thanks Big Mig that would make sense.

I suppose if one wanted to be a bit more conservative, you could leave out the expected SS and pension benefits in the calculation and just use the spreadsheet for the risk side of the portfolio (the excess of the portfolio over the bridge amount). Annually draw your inflation adjusted SS and pension benefit from the bridge and remainder from the risk side and you're done.

No reason really to have two separate portfolios in reality. Decide how much in equities you want in each side of the barbell (presumably very little on the bridge side versus mostly equities on the risk side), a little simple math to determine your overall equity percentage and choose funds accordingly (three fund, life strategy or target fund). Re-retire each year.

Seems like this could be the equivalent of a bond tent in the early years for an early retiree, in order to minimize sequence of return risk. You always have something of a floor of income where you have some confidence it will always be something above your expected SS and pension benefit (presuming you start with a large enough portfolio to fund the bridge and sufficient risk side). This is appealing to me.
"The safe assumption for an investor is that over the next hundred years, the currency is going to zero." - Charlie Munger
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

Loukycpa, your suggestion would keep the pension bridge out of the Required Flexibility calculation and lead to an erroneous estimate of the impact of a -50% stock loss on the plan. I wouldn't do that.

I suggest to use the VPW Accumulation And Retirement Worksheet as illustrated in the forward test thread. It's simple and effective.
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Re: Variable Percentage Withdrawal (VPW)

Post by loukycpa »

longinvest wrote: Wed Oct 06, 2021 10:44 pm Loukycpa, your suggestion would keep the pension bridge out of the Required Flexibility calculation and lead to an erroneous estimate of the impact of a -50% stock loss on the plan. I wouldn't do that.
If the pension bridge was fully funded 100% with TIPS and/or I bonds, wouldn't this prevent an "erroneous estimate"?

If you are taking equity risk or have inflation risk with your pension bridge I would agree.
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Re: Variable Percentage Withdrawal (VPW)

Post by Pacinotti »

Hi everyone. I confess to not have read every single post so hopefully this is not a bonehead question...

First. Graphs on the backtest sheet do not display correctly with a virgin, freshly downloaded sheet on 2 different computers and excel versions. They look as below. What's wrong?

Second. How do I account on the VPW retirement worksheet tab for a substantial cash position that is part of the portfolio. If I am 50% equities (40 US/10 Intl.), 25% bonds and 25% cash? Thanks in advance for your insights and advice.
Image
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longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

Pacinotti wrote: Mon Oct 11, 2021 8:14 am Graphs on the backtest sheet do not display correctly with a virgin, freshly downloaded sheet on 2 different computers and excel versions. They look as below. What's wrong?
Dear Pacinotti,

You probably downloaded the wrong version of the spreadsheet. There is a version of the VPW backtesting spreadsheet available specifically for Microsoft Excel. I've circled the appropriate link in this screen capture of our wiki:

Image
Pacinotti wrote: Mon Oct 11, 2021 8:14 am How do I account on the VPW retirement worksheet tab for a substantial cash position that is part of the portfolio. If I am 50% equities (40 US/10 Intl.), 25% bonds and 25% cash?
This isn't a thread for discussing asset allocation, so I'll be brief. VPW was designed to be used with a globally-diversified Bogleheads investment portfolio composed of broad-market stock and bond capitalization-weighted index funds or ETFs, like Taylor Larimore's Three-Fund Portfolio or a similar all-in-one portfolio like a Vanguard LifeStrategy fund. Unlike stocks and bonds, cash isn't marketable; its value doesn't fluctuate according to supply and demand. It's an awesome tool for short-term savings, but, generally, it isn't considered an investment.

If someone insists to use cash (high-interest savings account) as part of an investment portfolio, with periodic rebalancing to a fixed target cash allocation, then maybe 0.8% would be an appropriate growth trend for cash* (see earlier discussions about the growth trend in this thread). I calculate that the growth trend for a 50/25/25 stock/bond/cash portfolio would be ((.5 X 5.0%) + (.25 X 1.9%) + (.25 X 0.8%)) = 3.175%, which is similar to the growth trend of a 40/60 stock/bond portfolio**.

* Based on the long-term returns of world bills from 1900 to 2018 according the Summary Edition of the Credit Suisse Global Investment Returns Yearbook 2019.
** The investor could consider simplifying the portfolio to a One-Fund Portfolio using Vanguard's LifeStrategy Conservative Growth Fund (VSCGX) which has a 40/60 stock/bond target allocation, eliminating the need for rebalancing and helping to avoid behavioral pitfalls.

Best regards,

longinvest
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Pacinotti
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Re: Variable Percentage Withdrawal (VPW)

Post by Pacinotti »

Longinvest, thank you for the thorough explanation on how to incorporate cash.

I was downloading the sheet from Google thinking it was all the same. It is now a clean display of the graphs downloading from Dropbox. Thanks again.
RJ Lakers
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Re: Variable Percentage Withdrawal (VPW)

Post by RJ Lakers »

loukycpa wrote: Wed Oct 06, 2021 1:48 pm Apologies if this has been asked before. In calculating the social security/pension bridge funding required, it appears the spreadsheet calculates present value using the expected returns for stocks and bonds based on the chosen asset allocation. The disconnect I was wondering about is the following from the Wiki page:

"Missing payments between retirement and the start of a pension such as Social Security (possibly delayed to age 70) can be provided by using a simple CD ladder or short-term bond fund. For the purposes of VPW calculations, the money set aside in this CD ladder or short-term bond fund should not be considered as part of the portfolio."

Why use present value based on expected returns if this money is going to be invested kept in very conservative investments? Seems like this has the impact of understating the required bridge funding, overstating the remaining risk side of the portfolio and perhaps pushes up the initial annual withdraws higher than one might be comfortable.

I find much to love VPW and anticipate using it as my drawdown plan. Thanks for the work on this and for sharing. Just trying to understand it better. Being conservative by nature, I like the idea of social security/pension bridge side of the portfolio to provide a floor of income.
Hello, I am still confused about the SS bridge as it relates to how we treat it in the newest VPW worksheet.

The post above sums up my questions pretty well, but to be clear, if a 60 y/o retiree wants to bridge 10 years of a SS Benefit at age 70, a) Is this calculation done within the current VPW spreadsheet and therefore no need to remove/set-aside from the inputs (ie, there should be no set-aside) and b), the resulting Annual Portfolio Withdrawal would include both the bridge + the portfolio withdrawal. If this is the case, we would adjust the allocation downward to account for holding the bridge in conservative/safer investments?

Thank you.

RJ
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Re: Variable Percentage Withdrawal (VPW)

Post by lostdog »

I am a new to this spreadsheet and I apologize if this has been asked already.

If I change the portfolio frequency to monthly, does that mean I also have to input the portfolio balance monthly to get the updated portfolio withdrawal amount?
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longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

lostdog wrote: Thu Oct 14, 2021 1:16 pm If I change the portfolio frequency to monthly, does that mean I also have to input the portfolio balance monthly to get the updated portfolio withdrawal amount?
Lostdog, of course. For a detailed illustration of how to use the retirement worksheet with monthly withdrawals, I suggest to read my posts in the ongoing forward test thread.
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longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

RJ Lakers wrote: Thu Oct 14, 2021 11:19 am a) Is this calculation done within the current VPW spreadsheet and therefore no need to remove/set-aside from the inputs (ie, there should be no set-aside)
RJ Lakers, the retirement worksheet works with a single undivided balanced portfolio. There's no need to set money aside for bridging the payment gap between retirement and the start of a pension.
RJ Lakers wrote: Thu Oct 14, 2021 11:19 am b), the resulting Annual Portfolio Withdrawal would include both the bridge + the portfolio withdrawal. If this is the case, we would adjust the allocation downward to account for holding the bridge in conservative/safer investments?
The retirement worksheet estimates the impact of an immediate -50% stock loss on the plan. If necessary, the allocation to bonds can be increased (I wouldn't go outside the 70/30 to 30/70 stock/bond range) or an inflation-indexed SPIA* can be bought with a small part of the portfolio to further dampen the impact of stock fluctuations on total retirement income.

* Single Premium Immediate Annuity.
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lostdog
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Re: Variable Percentage Withdrawal (VPW)

Post by lostdog »

longinvest wrote: Thu Oct 14, 2021 4:31 pm
lostdog wrote: Thu Oct 14, 2021 1:16 pm If I change the portfolio frequency to monthly, does that mean I also have to input the portfolio balance monthly to get the updated portfolio withdrawal amount?
Lostdog, of course. For a detailed illustration of how to use the retirement worksheet with monthly withdrawals, I suggest to read my posts in the ongoing forward test thread.
Thank you.
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RJ Lakers
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Re: Variable Percentage Withdrawal (VPW)

Post by RJ Lakers »

longinvest wrote: Thu Oct 14, 2021 4:52 pm
RJ Lakers wrote: Thu Oct 14, 2021 11:19 am a) Is this calculation done within the current VPW spreadsheet and therefore no need to remove/set-aside from the inputs (ie, there should be no set-aside)
RJ Lakers, the retirement worksheet works with a single undivided balanced portfolio. There's no need to set money aside for bridging the payment gap between retirement and the start of a pension.
RJ Lakers wrote: Thu Oct 14, 2021 11:19 am b), the resulting Annual Portfolio Withdrawal would include both the bridge + the portfolio withdrawal. If this is the case, we would adjust the allocation downward to account for holding the bridge in conservative/safer investments?
The retirement worksheet estimates the impact of an immediate -50% stock loss on the plan. If necessary, the allocation to bonds can be increased (I wouldn't go outside the 70/30 to 30/70 stock/bond range) or an inflation-indexed SPIA* can be bought with a small part of the portfolio to further dampen the impact of stock fluctuations on total retirement income.

* Single Premium Immediate Annuity.
Thank you!
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Re: Variable Percentage Withdrawal (VPW)

Post by jaj2276 »

jaj2276 wrote: Mon Jul 01, 2019 7:56 am At the request of OP in another thread, I've been using VPW for 3 years (this year being the 4th) to make some of our yearly charitable giving from a DAF I started in 2016. At that time I was 40 and wanted this lump sum to cover 20 years of charitable contributions.

The portfolio started with $107,213. It's invested in the Moderate Growth portfolio which is 45% Balanced Index, 45% Wellington, and 10% Total Intl Stock. From that I put in 56% Domestic Stocks, 10% Intl Stocks, and 34% Domestic Bonds to the VPW spreadsheet. I haven't changed this allocation so if Wellington has shifted any, I haven't picked it up (I assume Balanced will remain 60/40 and Intl will be 100% intl stock).

Here are the portfolio values along with distributions:

Year, %WD, Port $Bal, WD $Amt
2016,7.0%,$107213,$7504
2017,7.3%,$110874,$8094
2018,7.6%,$106469,$8092


This year will be a 7.9% distribution and portfolio balance is currently at $105,165. The next withdrawal amount will take place in October so still plenty of time to make/lose money.
Not that it matters much, but I failed to update this post with the results of the last three years.

The original DAF was supposed to fund 20 years of contributions with the last contribution coming in 2035. In Sept of 2019 I added $64,891 to the DAF due to some tax bunching that occurred. With this new contribution I decided to extend the desired lifetime of the DAF as opposed to increasing the amounts I gave each year to charity (outside of portfolio growth). I started a new VPW beginning in year 2019 that was going to last for 28 years with the last distribution expected to occur in 2046.

I chose 28 years for the new VPW because that lifespan gave me a first-year percentage that when multiplied by the new portfolio balance (2018 balance after the 2018 contributions + growth in portfolio through most of 2019 + new 2019 contribution) gave me the same yearly withdrawal amount in 2019 as the original 20-year DAF / VPW worksheet gave me for 2019.

With all that out of the way, here are the results for the last three years:

2019: 5.7% withdrawal rate on a portfolio balance of $170,363 provided $9,708 of charitable contributions.

2020: 5.9% withdrawal rate on a portfolio balance of $178,711 provided $10,544 of charitable contributions. For this year and for reasons too absurd to go into, I only withdrew $7,288.

2021: 6.0% withdrawal rate on a portfolio balance of $201,778 provided $12,107 of charitable contributions.

Clearly the market results of the last 3 years, heck of the last 6 years, has provided me the ability increase my yearly donation amounts. I feel like the DAF vehicle along with the VPW worksheet has given me a powerful set of tools to make sure I maximize my charitable contributions. Without the DAF I would have a hard time of "letting my money go" as I would have mentally considered it part of my retirement stash. Once moved to the DAF, the VPW worksheet has allowed me to maximize the amount of money I give each year without worrying that I'm either giving away too much or too little each year.

Thanks longinvest!
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longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

jaj2276 wrote: Sun Oct 24, 2021 1:05 pm Clearly the market results of the last 3 years, heck of the last 6 years, has provided me the ability increase my yearly donation amounts. I feel like the DAF vehicle along with the VPW worksheet has given me a powerful set of tools to make sure I maximize my charitable contributions. Without the DAF I would have a hard time of "letting my money go" as I would have mentally considered it part of my retirement stash. Once moved to the DAF, the VPW worksheet has allowed me to maximize the amount of money I give each year without worrying that I'm either giving away too much or too little each year.
Jaj2276, I enjoy reading your reports. Thanks!
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4nursebee
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Re: Variable Percentage Withdrawal (VPW)

Post by 4nursebee »

Longinvest, are you responsible for the wiki on VPW? If not, do you know who is? Thanks.

OK, I see that you are the driver of that, found the history or whatever thing.

I tried to send you a private message but that seems to be disabled. Thank you for the work you have done on this. The VPW method just inherently made the most sense for us in retirement. In order to suffer through down years we built up at least two years of expenses in an emergency fund. A healthy growing market certainly helps. Prior to FIRE, I spent some time looking at various withdrawal methods along with pros and cons of each, and the message of what I read with VPW was clearly the best option for our circumstances. SO FIREd two years ago, myself just over a year ago. The simplicity of this is amazing and we love the higher withdrawals it allows.

Again, thank you.
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

4nursebee wrote: Sun Oct 24, 2021 2:15 pm SO FIREd two years ago, myself just over a year ago. The simplicity of this is amazing
4nursebee, congratulations to both of you! And, thanks for your comments.
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Re: Variable Percentage Withdrawal (VPW)

Post by maloflora »

Hi longinvest. You're amazing - thanks so much for all the work on this.

I'm really attracted to this way of thinking about retirement spending, for reasons outlined in this thread: viewtopic.php?f=10&t=360739&p=6289993#p6289993

I wonder if I could please check that I'm ok to apply the VPW logic in the way I outline there as a UK investor? I can't see any reasons why if the inflation assumptions are very similar you couldn't just update portfolio performance annually as you recommend without having to make forecasts about UK rates of return separate from US ones.

I appreciate that logic doesn't work for SWR-based retirement strategies but I think I'm flexible enough (and have the base pension income) to avoid the need to follow that route.

Thanks in advance for any help!
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek »

maloflora - longinvest is Canadian and first developed this strategy in our sister Canadian forum, Financial Wisdom Forum. It's listed in the Canadian wiki as: Variable percentage withdrawal - finiki, the Canadian financial wiki

I would assume the strategy works in the UK as well, but I'm not an expert.

I moved your thread Withdrawal strategy comparisons (adapting US to UK) to the non-US investing forum which will attract the attention of our non-US experts.

Disclaimer: I'm a member of both forums.
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

LadyGeek wrote: Wed Oct 27, 2021 3:42 pm maloflora - longinvest is Canadian and first developed this strategy in our sister Canadian forum
LadyGeek, just to clarify, the public development of VPW was initiated here in the Bogleheads forum in this very thread starting in July 2013 borrowing ideas from the Canadian RRIF minimum withdrawal rules (see the first post). I started a thread in our Canadian sister forum later, in May 2014.
LadyGeek wrote: Wed Oct 27, 2021 3:42 pm I moved your thread Withdrawal strategy comparisons (adapting US to UK) to the non-US investing forum which will attract the attention of our non-US experts.
I'll soon reply to Maloflora's post in his (newly-located) thread.
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek »

longinvest wrote: Wed Oct 27, 2021 3:48 pm LadyGeek, just to clarify, the public development of VPW was initiated here in the Bogleheads forum in this very thread starting in July 2013 borrowing ideas from the Canadian RRIF minimum withdrawal rules (see the first post). I started a thread in our Canadian sister forum later, in May 2014.
My mistake, sorry about that.
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Re: Variable Percentage Withdrawal (VPW)

Post by JaneyLH »

smectym wrote: Wed Jul 21, 2021 8:20 pm
SnowBog wrote: Tue Jun 01, 2021 1:58 pm
Marseille07 wrote: Mon May 31, 2021 12:06 pm
JasonFIRE wrote: Mon May 31, 2021 12:01 pm
Marseille07 wrote: Mon May 31, 2021 11:48 am

Be sure to understand the characteristics of "1/N" withdrawal methods. I'm not saying VPW is bad or anything, but there's a cost of withdrawing 4%+ early on and going higher.
Yes, it is important to consider that; however, it seems like the main way to address that is via purchasing an annuity at age 80, and the reasons for that are conspicuously documented the VPW materials.

Is there something else I am missing?
I don't think so. It's just a difference of opinions where I prefer a methodology that perhaps requires a lot of money up front and not much withdrawals, but very unlikely to require an annuity later.
For clarity, VPW - especially longinvest's calculator (which caps at 10%) - are not 1/N based. Perhaps you are thinking of the APW method (which is 1/N based).

And again, nothing about VPW is "forcing" you to spend more. VPW simply says that - if you have the required flexibility to cut spending in bad markets - you have the ability (not requirement) to spend more in normal years.

I expect our spending to be below what VPW says we can spend. I don't see any conflict there... And we likely will never need to buy an annuity (social security with small pension are expected to cover the majority of our essential expenses, especially if our expenses show down as we age [wild cars being medical obviously]). Again, no conflict...
Agree with Snowbog that “nothing about VPW is ‘forcing’ you to spend more.” Indeed, we are using VPW but found that the stated withdrawal amount on the grid, based upon asset allocation, age, and corpus, is too high for us and caused unnecessary 2020 tax. We scaled back to fit our actual expenses and minimize our tax bill. Of course, eventually RMD will limit our flexibility, and it will be interesting to see what sort of mismatch pertains between mandated RMD and the VPW withdrawal number.
I started using the original Variable Percentage Withdrawal spreadsheet (or whichever version was current) in 2015 when I became a Boglehead. I set the amount to withdraw from the portfolio on an annual basis but did not do withdrawals on any particular schedule. My practice has been to withdraw dividends from the taxable portfolio since we'll have to pay tax on them eventually, then make other stock sales from the "leftover" individual stocks I had left after moving all my investments to Vanguard and using tax loss harvesting to get as close to a 3-fund portfolio as I could.

Over the years, I've sold those individual stocks as needed for expenses. I'm now down to just 2 individual stocks and close to being a true Boglehead! I've tracked the amounts I should have withdrawn for spending along with our actual spending for each year. I've also done some Roth conversions and some modest IRA withdrawals along the way. Now, with 7 years of spending data, I calculate we have failed to spend nearly a half million dollars that we "could have spent"! (Of course, that would include paying more tax as well.) Our thrift has certainly helped pump up our portfolio over the past good years. At 67, though, I am challenging myself to spend more -- and convince my husband to join me! I've been investing since I was 23 and now is the time to reap the rewards. We have no children so no interest in leaving a big estate.

Thank you longinvvest and all the other forum members who helped develop this great tool. It has been a valuable tool in the big step my husband and I took to becoming DIY investors!
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Re: Variable Percentage Withdrawal (VPW)

Post by cflannagan »

Just started playing with VPW spreadsheet, great job! Quick background, I feel like I'm on the cusp of early retirement, so that's why I've been running my numbers on anything I come across: FireCalc, CFireSim, ERN's SWR Toolbox, etc, and more recently, this spreadsheet.

Based on the withdrawal table, it appears the goal is to spend down the entire portfolio balance by age of 100? In this table, I'm seeing 100% withdrawal for someone at age of 100.

The goal I'm aiming for with our portfolio through our latter years of retirement is capital preservation, not capital depletion. Does that mean the VPW spreadsheet might not be for me, if I want to leave legacy for my kids?
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Re: Variable Percentage Withdrawal (VPW)

Post by Lastrun »

cflannagan wrote: Thu Nov 04, 2021 6:50 pm Does that mean the VPW spreadsheet might not be for me, if I want to leave legacy for my kids?
Take a look at this post below, but Longinvest's thinking may have changed.

viewtopic.php?f=10&t=120430&p=5521823&h ... y#p5521823

You could also look at the ABW spreadsheet and approach which allows a terminal value.

https://www.bogleheads.org/wiki/Amortiz ... calculator

https://drive.google.com/file/d/1XOnBaU ... m6yxV/view
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Re: Variable Percentage Withdrawal (VPW)

Post by cflannagan »

Lastrun wrote: Thu Nov 04, 2021 7:08 pm
cflannagan wrote: Thu Nov 04, 2021 6:50 pm Does that mean the VPW spreadsheet might not be for me, if I want to leave legacy for my kids?
Take a look at this post below, but Longinvest's thinking may have changed.

viewtopic.php?f=10&t=120430&p=5521823&h ... y#p5521823

You could also look at the ABW spreadsheet and approach which allows a terminal value.

https://www.bogleheads.org/wiki/Amortiz ... calculator

https://drive.google.com/file/d/1XOnBaU ... m6yxV/view
Thanks, makes sense how longinvest presented his thoughts. And thanks also for providing alternatives - yeah, ABW was on my radar as well, might check into that next and add that spreadsheet in my growing collection of things to use to scruntize my own numbers.

Until longinvest mentioned it, I didn't really think long enough how old my children would be by the time I hit 80's. Neither of my kids are adults yet, and I feel like we had our kids late, but for some reason I felt like age 80 is right around the corner only to realize it's not. My kids would (hopefully!) literally grow up, get married, have kids of their own, have houses, have established careers, by the time I hit 80! And additionally, longinvest had great points too, if we felt like we have too much of a surplus from our portfolios, just give it to the kids.

In any case, I'm going to check out the other methodologies (ABW, and others) but I'm also considering longinvest's approach here. Off to crunch numbers some more!
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Re: Variable Percentage Withdrawal (VPW)

Post by SnowBog »

cflannagan wrote: Thu Nov 04, 2021 7:26 pm
Lastrun wrote: Thu Nov 04, 2021 7:08 pm
cflannagan wrote: Thu Nov 04, 2021 6:50 pm Does that mean the VPW spreadsheet might not be for me, if I want to leave legacy for my kids?
Take a look at this post below, but Longinvest's thinking may have changed.

viewtopic.php?f=10&t=120430&p=5521823&h ... y#p5521823

You could also look at the ABW spreadsheet and approach which allows a terminal value.

https://www.bogleheads.org/wiki/Amortiz ... calculator

https://drive.google.com/file/d/1XOnBaU ... m6yxV/view
Thanks, makes sense how longinvest presented his thoughts. And thanks also for providing alternatives - yeah, ABW was on my radar as well, might check into that next and add that spreadsheet in my growing collection of things to use to scruntize my own numbers.

Until longinvest mentioned it, I didn't really think long enough how old my children would be by the time I hit 80's. Neither of my kids are adults yet, and I feel like we had our kids late, but for some reason I felt like age 80 is right around the corner only to realize it's not. My kids would (hopefully!) literally grow up, get married, have kids of their own, have houses, have established careers, by the time I hit 80! And additionally, longinvest had great points too, if we felt like we have too much of a surplus from our portfolios, just give it to the kids.

In any case, I'm going to check out the other methodologies (ABW, and others) but I'm also considering longinvest's approach here. Off to crunch numbers some more!
As a reminder, VPW is not requiring you to spend the recommended withdrawal amount. But it does require you to have the required flexibility to cut back spending when required.

That means people who use VPW likely have lots of discretionary spending (as they need to be able to dial it back). Some of that discretionary spending might be gifts to your children/hiers while still alive. They'll probably appreciate this more, and you'll likely enjoy it more.

And likely many who use VPW rarely, if ever, spend 100% of what's "recommended". Which will effectively mean there will be money left over for heirs. How much, depends - probably more then anything else - on when we die.
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Re: Variable Percentage Withdrawal (VPW)

Post by RetiredCSProf »

Thank you to all who worked on creating VPW. I have seen it referenced often on the BH forum and just used it for the 1st time. I never quite understood the 4% SWR and I like the simplicity of VPW. I am 73 and retired eight years ago, but it looks like I can still use VPW, at least up to age 80. I am happy to report that the result from my first run looks reasonable to me, so I don't need to feel guilty about spending some of my heir's future inheritance. :greedy

I started reading through this very long thread, and still have a couple questions on how I can best apply VPW:

1) Savings Bonds: I have a stash of EE savings bonds that will mature over the next 20 years -- should I add their current value to my Portfolio Balance and include cashing a savings bond as part of the withdrawal from my portfolio?

2) Roth conversions: I applied VPW only to my tax-deferred portfolio, as I plan to leave Roth IRAs for legacy (and gift-giving); I am continuing to convert to Roth; I am excluding the Roth conversions from the portfolio withdrawal; that is, I do not subtract the Roth conversion amount from the VPW suggested withdrawal amount -- does that make sense?

3) "Emergency Fund": I excluded cash savings for big-ticket items in calculating my Portfolio Balance. I am assuming that withdrawals from this "EF" would be separate from the VPW calculated withdrawal.

4) Date of Portfolio Balance: I am assuming that the Portfolio Balance should be at the beginning of the calendar year if using VPW to calculate an annual withdrawal. Should the Balance be updated quarterly if using it to project a quarterly withdrawal?
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Re: Variable Percentage Withdrawal (VPW)

Post by SnowBog »

I'll defer to longinvest and others more familiar with VPW to correct anything I get wrong, but here's my understanding.

First, I'll offer that one if the benefits of VPW is it's self correcting. If you decide to make changes, such as count your assets differently (include or exclude different things), it will adjust.

Second, I don't think there is an "age limit" for VPW. I believe the recommendation is to consider if an annuity would make sense to provide lifetime guaranteed income when you near 80. But if you have adequate coverage via pensions and/or social security, that may not be necessary.

Third, you might be interested in checking out this related thread. viewtopic.php?t=284519 Longinvest shows a hypothetical scenario using VPW with monthly updates/withdrawals.

Now, to your questions.
RetiredCSProf wrote: Sun Nov 07, 2021 4:19 pm 1) Savings Bonds: I have a stash of EE savings bonds that will mature over the next 20 years -- should I add their current value to my Portfolio Balance and include cashing a savings bond as part of the withdrawal from my portfolio?
I believe longinvest is working on a new version that would allow a non-lifetime annuity, which is how I think of EE Bonds. Until that's done, I'd say yes to both counts. Including the EE Bonds, and counting them as part of your withdrawal.
RetiredCSProf wrote: Sun Nov 07, 2021 4:19 pm 2) Roth conversions: I applied VPW only to my tax-deferred portfolio, as I plan to leave Roth IRAs for legacy (and gift-giving); I am continuing to convert to Roth; I am excluding the Roth conversions from the portfolio withdrawal; that is, I do not subtract the Roth conversion amount from the VPW suggested withdrawal amount -- does that make sense?
I'm less sure on this... But since it will self-correct, and you seemingly have "enough", it probably works.

That said, this may skew your use - as you are lowering your balance every year due to Roth conversions (but excluding the Roth balance). This will show up as a shrinking portfolio balance (or one growing more slowly).

But again, I think it likely works out in the end.
RetiredCSProf wrote: Sun Nov 07, 2021 4:19 pm 3) "Emergency Fund": I excluded cash savings for big-ticket items in calculating my Portfolio Balance. I am assuming that withdrawals from this "EF" would be separate from the VPW calculated withdrawal.
Enter in the "should I include my EF as part of my portfolio" debate!

I've long come to the conclusion there isn't a consensus. So I'd continue to handle your EF however you do now...

That said, if you include your EF - I don't think you need to make any adjustments - it's simply an "internal" matter where you place those funds. But if you exclude your EF, I'd argue that you should consider any funds transferred from your portfolio to refill your EF as part of your "withdrawal". (If you don't, you'll arguably have over spent, but it will get settled corrected the following withdrawal based on your then current balance.)
RetiredCSProf wrote: Sun Nov 07, 2021 4:19 pm 4) Date of Portfolio Balance: I am assuming that the Portfolio Balance should be at the beginning of the calendar year if using VPW to calculate an annual withdrawal. Should the Balance be updated quarterly if using it to project a quarterly withdrawal?
You would update the balance as frequently as you plan to do your withdrawal (aka quarterly if you are doing quarterly withdrawals).

As to "when", such as when your update/make your withdrawal (such as your annual withdrawal) - I don't think it matters... Or more specifically, do it when it makes sense to you. That might be early in the year, on a date you remember such as birthday/anniversary/etc., might be around tax time, or maybe year end (withdrawing funds for the coming year).
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Re: Variable Percentage Withdrawal (VPW)

Post by Running Bum »

SnowBog wrote: Sun Nov 07, 2021 5:00 pm
RetiredCSProf wrote: Sun Nov 07, 2021 4:19 pm 2) Roth conversions: I applied VPW only to my tax-deferred portfolio, as I plan to leave Roth IRAs for legacy (and gift-giving); I am continuing to convert to Roth; I am excluding the Roth conversions from the portfolio withdrawal; that is, I do not subtract the Roth conversion amount from the VPW suggested withdrawal amount -- does that make sense?
I'm less sure on this... But since it will self-correct, and you seemingly have "enough", it probably works.

That said, this may skew your use - as you are lowering your balance every year due to Roth conversions (but excluding the Roth balance). This will show up as a shrinking portfolio balance (or one growing more slowly).

But again, I think it likely works out in the end.
My way of handling Roth conversions is to adjust my tIRA balance to be net of estimated taxes due to withdrawal or conversion. If I have a $1M tIRA and expect to pay 20% in fed+state taxes on it, I treat it as an $800,000 asset as part of my total assets that I apply the yearly VPW WR% on. I also don't treat the tax itself on the conversion as part of the allowed withdrawal for the year. This way a Roth conversion has no effect on my VPW plan, other than a possible and hopefully small tax estimation error. And there is no disincentive to Roth conversion. If I convert $50K, I don't lose $10K of my allowed withdrawal for the year to the conversion tax.
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Re: Variable Percentage Withdrawal (VPW)

Post by SnowBog »

Running Bum wrote: Sun Nov 07, 2021 5:27 pm
SnowBog wrote: Sun Nov 07, 2021 5:00 pm
RetiredCSProf wrote: Sun Nov 07, 2021 4:19 pm 2) Roth conversions: I applied VPW only to my tax-deferred portfolio, as I plan to leave Roth IRAs for legacy (and gift-giving); I am continuing to convert to Roth; I am excluding the Roth conversions from the portfolio withdrawal; that is, I do not subtract the Roth conversion amount from the VPW suggested withdrawal amount -- does that make sense?
I'm less sure on this... But since it will self-correct, and you seemingly have "enough", it probably works.

That said, this may skew your use - as you are lowering your balance every year due to Roth conversions (but excluding the Roth balance). This will show up as a shrinking portfolio balance (or one growing more slowly).

But again, I think it likely works out in the end.
My way of handling Roth conversions is to adjust my tIRA balance to be net of estimated taxes due to withdrawal or conversion. If I have a $1M tIRA and expect to pay 20% in fed+state taxes on it, I treat it as an $800,000 asset as part of my total assets that I apply the yearly VPW WR% on. I also don't treat the tax itself on the conversion as part of the allowed withdrawal for the year. This way a Roth conversion has no effect on my VPW plan, other than a possible and hopefully small tax estimation error. And there is no disincentive to Roth conversion. If I convert $50K, I don't lose $10K of my allowed withdrawal for the year to the conversion tax.
I assume in your case, you include both pre-tax and Roth amounts, so your tax adjustment attempts to minimize any adjustments related to shifting funds between the two accounts (which would be the taxes paid to convert to Roth).

If I'm following the original question though... They include their traditional retirement balances, lower those balances with a Roth conversion, but exclude the Roth balance (as it's being left for legacy/gift-giving). So they only "see" the conversion (plus taxes) as it lowers (or grows less) their portfolio balance.

Since VPW adjusts to the then current balance, and they don't seem likely to run out of money (since they are excluding Roths and maybe EF), I think it works itself out fine... (In theory, they would be "overspending" if they spend the entire "recommended" amount excluding the Roth conversion + taxes. But since the money ends sitting in their Roth account, while it may impact their giving plans, they seemingly still have access to those funds if needed to make ends meet.)
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Re: Variable Percentage Withdrawal (VPW)

Post by Running Bum »

SnowBog wrote: Sun Nov 07, 2021 5:59 pm

I assume in your case, you include both pre-tax and Roth amounts, so your tax adjustment attempts to minimize any adjustments related to shifting funds between the two accounts (which would be the taxes paid to convert to Roth).

If I'm following the original question though... They include their traditional retirement balances, lower those balances with a Roth conversion, but exclude the Roth balance (as it's being left for legacy/gift-giving). So they only "see" the conversion (plus taxes) as it lowers (or grows less) their portfolio balance.
You're right, I missed that they were leaving their Roth to heirs. Their method would work.
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Re: Variable Percentage Withdrawal (VPW)

Post by RetiredCSProf »

SnowBog:
Age limit on VPW -- I have income from SS and pension. So it sounds like VPW may be useful for me beyond age 80, without a SPIA.

1. EE savings bonds -- I tried modeling these as a "pension," but adding it to the Portfolio Balance seems to be more appropriate
2. EF: I think I was "double-counting" the EF withdrawal; I will do as you suggest: omit the EF balance from the Portfolio, not count EF withdrawals, but count portfolio withdrawals for replenishing the EF balance
4. OK on the date of the portfolio balance

Running Bum: I will try a run with your suggestion. Are you saying that you include both Roth and 80% of tIRA in your Portfolio Balance? And then count 80% of the Roth conversion toward the VPW calculated withdrawal? My taxes are 33.3%, so that would make a big difference.

One more question:
5. Gross vs net income: I'm entering gross income for SS and pension -- is it supposed to be net (post-tax) income?
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

RetiredCSProf, I like to keep things simple. I would draw a clear line between my "VPW portfolio" and other money (emergency fund, bank accounts, portfolio for heirs). Any money taken out of the "VPW portfolio" would be counted as a withdrawal. This includes money transferred to the "heirs portfolio" or used to pay taxes. I'd count the savings bonds within the "VPW portfolio" balance and consider them as part of the bond allocation. I would do all VPW calculations on a pre-tax basis and use part of the portfolio withdrawal (and Social Security payment) to pay taxes. For Social Security, I'd put the gross amount in the retirement worksheet. Other approaches work, too, but I suggest not to withdraw from the "VPW portfolio" in excess of the worksheet's suggested amount.
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

Running Bum wrote: Sun Nov 07, 2021 5:27 pm My way of handling Roth conversions is to adjust my tIRA balance to be net of estimated taxes due to withdrawal or conversion. If I have a $1M tIRA and expect to pay 20% in fed+state taxes on it, I treat it as an $800,000 asset as part of my total assets that I apply the yearly VPW WR% on. I also don't treat the tax itself on the conversion as part of the allowed withdrawal for the year. This way a Roth conversion has no effect on my VPW plan, other than a possible and hopefully small tax estimation error. And there is no disincentive to Roth conversion. If I convert $50K, I don't lose $10K of my allowed withdrawal for the year to the conversion tax.
Running Bum, this seems sensible to me. I think that it would be equivalent to consider taxes for transferring money from a traditional account to a Roth account (within the portfolio) as an internal portfolio "fee" (not part of portfolio withdrawals).
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Re: Variable Percentage Withdrawal (VPW)

Post by RetiredCSProf »

longinvest wrote: Sun Nov 07, 2021 6:49 pm RetiredCSProf, I like to keep things simple. I would draw a clear line between my "VPW portfolio" and other money (emergency fund, bank accounts, portfolio for heirs). Any money taken out of the "VPW portfolio" would be counted as a withdrawal. This includes money transferred to the "heirs portfolio" or used to pay taxes. I'd count the savings bonds within the "VPW portfolio" balance and consider them as part of the bond allocation. I would do all VPW calculations on a pre-tax basis and use part of the portfolio withdrawal (and Social Security payment) to pay taxes. For Social Security, I'd put the gross amount in the retirement worksheet. Other approaches work, too, but I suggest not to withdraw from the "VPW portfolio" in excess of the worksheet's suggested amount.
longinvest: I like simplicity. Theoretically, placing a withdrawal from my tax-deferred portfolio into my EF is no different than converting it to Roth. OTOH, in practice, the EF is likely to be spent sooner than the Roth and will grow more slowly until it is spent.

Each year, to calculate how much to convert to Roth, I have been using a spreadsheet with taxable income, deductions, taxes, and IRMAA tiers as drivers (filing HoH). This year, I was planning to split my withdrawal between Roth conversion and EF replenishment. I was looking for a calculator to help me decide on the split. Instead of helping with that, VPW is telling me that I have already converted too much. My calculated VPW for 2021 allows me only about 1/3 of the amount I calculated to withdraw for Roth / EF for 2021, based on my tax estimation.

Worst case: I can live nicely on Roth withdrawals in my centenarian years.
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Re: Variable Percentage Withdrawal (VPW)

Post by rcmoormt »

Is there a stock to bond allocation that is slightly optimal for VPW? Just like 60/40 is slightly the optimal allocation for the 4% rule (so I've read at least)
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest »

rcmoormt wrote: Sun Nov 07, 2021 9:39 pm Is there a stock to bond allocation that is slightly optimal for VPW? Just like 60/40 is slightly the optimal allocation for the 4% rule (so I've read at least)
Rcmoormt, the VPW Table adapts withdrawals to the portfolio's allocation. It's up to the retiree to decide how much in stocks, how much in bonds, and how much in lifelong guaranteed income based on personal circumstances and preferences.
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Re: Variable Percentage Withdrawal (VPW)

Post by canadianbacon »

rcmoormt wrote: Sun Nov 07, 2021 9:39 pm Is there a stock to bond allocation that is slightly optimal for VPW? Just like 60/40 is slightly the optimal allocation for the 4% rule (so I've read at least)
One consideration might be how much volatility you can tolerate in your withdrawal amounts.
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