margaritaville wrote: ↑Thu Jul 29, 2021 5:00 pm
nigel_ht wrote: ↑Thu Jul 29, 2021 4:14 pm
VPW CAN deplete if you are forced to withdraw more than it say you can. Knowing how common depletion is under those circumstances should interest any VPW user.
Of course VPW will potentially fail if you "withdraw more than it say you can". Isn't this true of any withdrawal strategy? If you violate the tenets of the strategy, you are no longer operating within the rails of the strategy. Just like with SWR, If you increase your withdrawal rate above the safe withdrawal rate, it too has the potential to fail. VPW is "safe" and allows people to spend a larger portion of their savings earlier in retirement so long as they have spending flexibility and follow the approach.
With SWR there are many tables that give you an idea of how often SWR will fail if you bump up the spending amount. 4% isn't actually historically "safe" but has a 5% failure rate.
This table for example.
75/25 AA and a 5% WR gives you a 83% historical success rate over 30 years. You can make an informed decision to go 5% and take the risk of depletion.
No corresponding table exists for VPW. Instead you're told that VPW can't deplete.
So if you are using VPW and you have unexpected expenses and must exceed your VPW withdrawal rate you don't have the information to make an informed assessment of how much risk of portfolio depletion you're adding.
I personally don't see the value in an "apples to apples" comparison. Once you've set the four corners of the test equally, you've given advantages to one method while handicapping the other.
If you've given unfair advantages to one method then it isn't "apples to apples". If you don't believe that methods should be compared on a realistic level playing field then you're pretty much picking based on the sales pitch of the inventor.
It's not like I'm making up esoteric criteria. People in retirement have minimum expenses. We go through some level of effort to make estimates of what these expenses will be. Any withdrawal method should be able to tell you whether it reliably provided for those expenses in the past and if not how often it failed to do so. It should also tell you, based on your expenses, how often it would have historically depleted.
Whatever those answers are you should know them before you pick the method.
For SWR the data is there.
My expenses require withdrawing 3% of the original portfolio. Historically that has a 100% success rate with a 75/25 portfolio over 30, 40, 50 and 60 years.
Oh no...10 years later I need to start withdrawing 5% of the original portfolio! But hey, for a 20 year period 5% still has a 90% success rate. Okay, that's not as good as 100% but I can still sleep well at night.
It seems like you're making the argument that VPW isn't a good fit for people without a moderate amount of flexibility in their spending. Or people without pensions or SS. If so, I think Longinvest very clearly addressed these caveats in his explanation of the strategy. But maybe I'm missing the point . . .
So what does a VPW user do if circumstances force them "violate the tenets of the strategy" and 10 years in they become "people without a moderate amount of flexibility in their spending"? Don't you want to know
before you pick that strategy?
Yeah, I think you're missing the point and for whatever reason it seems VPW proponents don't want to know and claim it doesn't matter because "VPW is flexible".