A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Can't tell if it's been asked, but is there a way to figure in the possibility of a future SS reduction after one starts collecting?
Regards |
Bob
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Here's how the VPW Accumulation And Retirement Worksheet calculated its suggested $6,299 portfolio withdrawal at the end of August 2021.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,140,121 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,140,121 - $71,410) X 5.1%) = $54,504 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $54,504 VPW withdrawal. This sums up to ($24,708 - $4,116 + $54,504) = $75,096 and results into a ($75,096 / 12) = $6,258 portfolio withdrawal. The -$41 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($75,096 + (12 X $1,000)) = $87,096/year ($7,258/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,140,121) = -$342,036 portfolio loss, reducing the portfolio to ($1,140,121 - $342,036) = $798,085 after the loss. This implies a (($24,708 - $4,116 + (($798,085 - $71,410) X 5.1%)) / 12) = $4,804 monthly portfolio withdrawal which represents a ($4,804 - $6,258) = -$1,454 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,454/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,454 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,140,121 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,140,121 - $71,410) X 5.1%) = $54,504 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $54,504 VPW withdrawal. This sums up to ($24,708 - $4,116 + $54,504) = $75,096 and results into a ($75,096 / 12) = $6,258 portfolio withdrawal. The -$41 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($75,096 + (12 X $1,000)) = $87,096/year ($7,258/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,140,121) = -$342,036 portfolio loss, reducing the portfolio to ($1,140,121 - $342,036) = $798,085 after the loss. This implies a (($24,708 - $4,116 + (($798,085 - $71,410) X 5.1%)) / 12) = $4,804 monthly portfolio withdrawal which represents a ($4,804 - $6,258) = -$1,454 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,454/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,454 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
I don't think you can easily model in a change part way through...
But you could adjust for the change when it happens (or model with your projected reduction from the beginning).
Let's say your projected social security is $1000 a month, and you expect a 22% reduction. You could use $780 (22% reduction).
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The retiree's portfolio is entirely invested into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX), an automatically-rebalanced low-cost global balanced index One-Fund Portfolio with a 60/40 stocks/bonds target allocation which, as of August 31, 2021, was spread across 3,980 U.S. stocks, 7,621 international stocks, 10,106 U.S. bonds, and 6,373 international bonds for a total of 28,080 global securities, approximating the (free float) Global Stock-and-Bond Portfolio with a moderate home bias.
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until August 31, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until August 31, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Just wanted to say thank you, Longinvest, for all of your hard work and incredibly informative posts! I've learned a ton from you over the years.
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The Bureau of Labor Statistics has published the consumer price index for all urban consumers (CPI-U) for August 2021.
We're interested to calculate an average CPI-U to associate with our forward test at the end of August 2021. Here are the last 12 CPI-U values:
We take note that the average CPI-U for the last 12 months at the end of August 2021 was 265.447.
Last year, we calculated that the average CPI-U for the last 12 months at the end of August 2020 was 257.721.
The trailing 1-year average inflation at the end of August 2021 was ((265.447 / 257.721) - 1) = 3.00%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -2.50% below trailing average inflation.
We're interested to calculate an average CPI-U to associate with our forward test at the end of August 2021. Here are the last 12 CPI-U values:
Code: Select all
Month CPI-U
09/2020 260.280
10/2020 260.388
11/2020 260.229
12/2020 260.474
01/2021 261.582
02/2021 263.014
03/2021 264.877
04/2021 267.054
05/2021 269.195
06/2021 271.696
07/2021 273.003
08/2021 273.567
Last year, we calculated that the average CPI-U for the last 12 months at the end of August 2020 was 257.721.
The trailing 1-year average inflation at the end of August 2021 was ((265.447 / 257.721) - 1) = 3.00%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -2.50% below trailing average inflation.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Using average CPI-U calculated in this and previous posts, here's an inflation-adjusted chart of this forward test expressed in August 2021 dollars:
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Portfolio balance as of September 30, 2021
The September 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was -2.82% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of August 31, 2021 and apply September 2021 growth on investments and interest on savings.
The September 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was -2.82% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of August 31, 2021 and apply September 2021 growth on investments and interest on savings.
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): ($1,103,979.41 X (1 + -2.82%)) = $1,072,847.19
- Withdrawal cushion (at Ally Bank): ($30,117.99 X ((1 + 0.50%)^(1 / 12))) = $30,130.51
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Forward test as of September 30, 2021
We continue our forward test. Here's a link to the previous entry.
As of September 30, 2021, the retiree's portfolio is composed of:
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,059 per month (in 2021 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,140 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
After withdrawal and transfer, ($1,072,847.19 - $6,140) = $1,066,707.19 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,130.51 + $95) = $30,225.51 is left into the withdrawal cushion for a total portfolio balance of $1,096,932.70 at the end of September 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
October 2021 total retirement income is $7,045 and on the morning of October 1, 2021, the total portfolio balance is $1,096,932.70.
Historical Annual Retirement Income
We continue our forward test. Here's a link to the previous entry.
As of September 30, 2021, the retiree's portfolio is composed of:
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): $1,072,847.19
- Withdrawal cushion (at Ally Bank): $30,130.51
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,059 per month (in 2021 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,140 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
- Adjusted withdrawal amount: (($6,140 + $30,130.51) / 6) = $6,045
- Adjustment: ($6,045 - $6,140) = -$95
After withdrawal and transfer, ($1,072,847.19 - $6,140) = $1,066,707.19 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,130.51 + $95) = $30,225.51 is left into the withdrawal cushion for a total portfolio balance of $1,096,932.70 at the end of September 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
October 2021 total retirement income is $7,045 and on the morning of October 1, 2021, the total portfolio balance is $1,096,932.70.
Historical Annual Retirement Income
- 2019: $76,406 (annualized) -- $38,203 in 6 months, starting retirement in July
- 2020: $76,743
- 2021: $81,853 (annualized) -- $68,211 in 10 months
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Here's how the VPW Accumulation And Retirement Worksheet calculated its suggested $6,140 portfolio withdrawal at the end of September 2021.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,102,978 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,102,978 - $71,410) X 5.1%) = $52,610 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $52,610 VPW withdrawal. This sums up to ($24,708 - $4,116 + $52,610) = $73,202 and results into a ($73,202 / 12) = $6,100 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($73,202 + (12 X $1,000)) = $85,202/year ($7,100/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,102,978) = -$330,893 portfolio loss, reducing the portfolio to ($1,102,978 - $330,893) = $772,085 after the loss. This implies a (($24,708 - $4,116 + (($772,085 - $71,410) X 5.1%)) / 12) = $4,694 monthly portfolio withdrawal which represents a ($4,694 - $6,100) = -$1,406 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,406/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,406 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,102,978 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,102,978 - $71,410) X 5.1%) = $52,610 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $52,610 VPW withdrawal. This sums up to ($24,708 - $4,116 + $52,610) = $73,202 and results into a ($73,202 / 12) = $6,100 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($73,202 + (12 X $1,000)) = $85,202/year ($7,100/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,102,978) = -$330,893 portfolio loss, reducing the portfolio to ($1,102,978 - $330,893) = $772,085 after the loss. This implies a (($24,708 - $4,116 + (($772,085 - $71,410) X 5.1%)) / 12) = $4,694 monthly portfolio withdrawal which represents a ($4,694 - $6,100) = -$1,406 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,406/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,406 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The retiree's portfolio is entirely invested into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX), an automatically-rebalanced low-cost global balanced index One-Fund Portfolio with a 60/40 stocks/bonds target allocation which, as of September 30, 2021, was spread across 4,025 U.S. stocks, 7,765 international stocks, 10,153 U.S. bonds, and 6,404 international bonds for a total of 28,347 global securities, approximating the (free float) Global Stock-and-Bond Portfolio with a moderate home bias.
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until September 30, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until September 30, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The Bureau of Labor Statistics has published the consumer price index for all urban consumers (CPI-U) for September 2021.
We're interested to calculate an average CPI-U to associate with our forward test at the end of September 2021. Here are the last 12 CPI-U values:
We take note that the average CPI-U for the last 12 months at the end of September 2021 was 266.616.
Last year, we calculated that the average CPI-U for the last 12 months at the end of September 2020 was 258.014.
The trailing 1-year average inflation at the end of September 2021 was ((266.616 / 258.014) - 1) = 3.33%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -2.83% below trailing average inflation.
We're interested to calculate an average CPI-U to associate with our forward test at the end of September 2021. Here are the last 12 CPI-U values:
Code: Select all
Month CPI-U
10/2020 260.388
11/2020 260.229
12/2020 260.474
01/2021 261.582
02/2021 263.014
03/2021 264.877
04/2021 267.054
05/2021 269.195
06/2021 271.696
07/2021 273.003
08/2021 273.567
09/2021 274.310
Last year, we calculated that the average CPI-U for the last 12 months at the end of September 2020 was 258.014.
The trailing 1-year average inflation at the end of September 2021 was ((266.616 / 258.014) - 1) = 3.33%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -2.83% below trailing average inflation.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Using average CPI-U calculated in this and previous posts, here's an inflation-adjusted chart of this forward test expressed in September 2021 dollars:
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Portfolio balance as of October 31, 2021
The October 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was 2.94% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of September 30, 2021 and apply October 2021 growth on investments and interest on savings.
The October 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was 2.94% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of September 30, 2021 and apply October 2021 growth on investments and interest on savings.
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): ($1,066,707.19 X (1 + 2.94%)) = $1,098,068.38
- Withdrawal cushion (at Ally Bank): ($30,225.51 X ((1 + 0.50%)^(1 / 12))) = $30,238.08
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Forward test as of October 31, 2021
We continue our forward test. Here's a link to the previous entry.
As of October 31, 2021, the retiree's portfolio is composed of:
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,059 per month (in 2021 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,248 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
After withdrawal and transfer, ($1,098,068.38 - $6,248) = $1,091,820.38 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,238.08 + $167) = $30,405.08 is left into the withdrawal cushion for a total portfolio balance of $1,122,225.46 at the end of October 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
November 2021 total retirement income is $7,081 and on the morning of November 1, 2021, the total portfolio balance is $1,122,225.46.
Historical Annual Retirement Income
We continue our forward test. Here's a link to the previous entry.
As of October 31, 2021, the retiree's portfolio is composed of:
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): $1,098,068.38
- Withdrawal cushion (at Ally Bank): $30,238.08
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,059 per month (in 2021 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,248 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
- Adjusted withdrawal amount: (($6,248 + $30,238.08) / 6) = $6,081
- Adjustment: ($6,081 - $6,248) = -$167
After withdrawal and transfer, ($1,098,068.38 - $6,248) = $1,091,820.38 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,238.08 + $167) = $30,405.08 is left into the withdrawal cushion for a total portfolio balance of $1,122,225.46 at the end of October 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
November 2021 total retirement income is $7,081 and on the morning of November 1, 2021, the total portfolio balance is $1,122,225.46.
Historical Annual Retirement Income
- 2019: $76,406 (annualized) -- $38,203 in 6 months, starting retirement in July
- 2020: $76,743
- 2021: $82,137 (annualized) -- $75,292 in 11 months
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Here's how the VPW Accumulation And Retirement Worksheet calculated its suggested $6,248 portfolio withdrawal at the end of October 2021.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,128,306 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,128,306 - $71,410) X 5.1%) = $53,902 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $53,902 VPW withdrawal. This sums up to ($24,708 - $4,116 + $53,902) = $74,494 and results into a ($74,494 / 12) = $6,208 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($74,494 + (12 X $1,000)) = $86,494/year ($7,208/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,128,306) = -$338,492 portfolio loss, reducing the portfolio to ($1,128,306 - $338,492) = $789,814 after the loss. This implies a (($24,708 - $4,116 + (($789,814 - $71,410) X 5.1%)) / 12) = $4,769 monthly portfolio withdrawal which represents a ($4,769 - $6,208) = -$1,439 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,439/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,439 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,128,306 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,128,306 - $71,410) X 5.1%) = $53,902 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $53,902 VPW withdrawal. This sums up to ($24,708 - $4,116 + $53,902) = $74,494 and results into a ($74,494 / 12) = $6,208 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($74,494 + (12 X $1,000)) = $86,494/year ($7,208/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,128,306) = -$338,492 portfolio loss, reducing the portfolio to ($1,128,306 - $338,492) = $789,814 after the loss. This implies a (($24,708 - $4,116 + (($789,814 - $71,410) X 5.1%)) / 12) = $4,769 monthly portfolio withdrawal which represents a ($4,769 - $6,208) = -$1,439 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,439/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,439 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Longinvest, thank you again for your excellent contribution to retirement planning. I'm closing in on retirement and have done a fair bit of research at this point--this "Simple Bogleheads Retirement" stands in the very top rank of decumulation ideas I have found, and it is by far the simplest to execute. I think your work deserves wide exposure.
On to my topic: when mocking up a retirement scenario on the VPW worksheet, the difference in my annual income is substantial ($20,000 or so in the first year) depending whether I answer yes or no to the question about the pension having a COLA. The true answer is neither yes nor no.
This question may be too specific to merit an answer in this forum (in which case, no problem), though it would apply to anyone with a pension from CalSTRS, the huge California pension fund that covers teachers and school administrators, so I'm surely not the only person here who would be interested.
The CalSTRS pension has an odd, no-COLA-but-some-increase set-up.
Here's the deal, no doubt the result of knotty union negotiations over many years: After the first year, the pension will receive an annual increase of 2% of the first year's pension amount. This increase does not compound or otherwise change over time. For example, if the first year's pension is $50,000, 2% is $1,000. $1,000 dollars will be added to the total pension amount each year. Even if one were to draw the pension for 50 years--it would get an annual boost of exactly $1,000, so it is virtually guaranteed to lose purchasing power over time.
But there's more: in some black box, the pension fund calculates purchasing power at the time of the original pension payments, and if the pension's value is deemed to fall below a threshold, supplemental payments begin, with the stated purpose of never allowing the pension value to fall below 85% of the original purchasing power. I have no idea how accurate the valuations are, but I do know this is something CalSTRS actually does--my mother is a longtime CalSTRS pensioner, and she gets substantial quarterly supplements.
So my question: is there a Simple Bogleheads way to think about this peculiar pension arrangement in relation to the VPW calculations?
On to my topic: when mocking up a retirement scenario on the VPW worksheet, the difference in my annual income is substantial ($20,000 or so in the first year) depending whether I answer yes or no to the question about the pension having a COLA. The true answer is neither yes nor no.
This question may be too specific to merit an answer in this forum (in which case, no problem), though it would apply to anyone with a pension from CalSTRS, the huge California pension fund that covers teachers and school administrators, so I'm surely not the only person here who would be interested.
The CalSTRS pension has an odd, no-COLA-but-some-increase set-up.
Here's the deal, no doubt the result of knotty union negotiations over many years: After the first year, the pension will receive an annual increase of 2% of the first year's pension amount. This increase does not compound or otherwise change over time. For example, if the first year's pension is $50,000, 2% is $1,000. $1,000 dollars will be added to the total pension amount each year. Even if one were to draw the pension for 50 years--it would get an annual boost of exactly $1,000, so it is virtually guaranteed to lose purchasing power over time.
But there's more: in some black box, the pension fund calculates purchasing power at the time of the original pension payments, and if the pension's value is deemed to fall below a threshold, supplemental payments begin, with the stated purpose of never allowing the pension value to fall below 85% of the original purchasing power. I have no idea how accurate the valuations are, but I do know this is something CalSTRS actually does--my mother is a longtime CalSTRS pensioner, and she gets substantial quarterly supplements.
So my question: is there a Simple Bogleheads way to think about this peculiar pension arrangement in relation to the VPW calculations?
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Thanks Whyme.whyme wrote: ↑Sun Nov 14, 2021 1:56 pm Longinvest, thank you again for your excellent contribution to retirement planning. I'm closing in on retirement and have done a fair bit of research at this point--this "Simple Bogleheads Retirement" stands in the very top rank of decumulation ideas I have found, and it is by far the simplest to execute. I think your work deserves wide exposure.
This thread is about the forward test. I've answered your question in this post of the main VPW thread.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The retiree's portfolio is entirely invested into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX), an automatically-rebalanced low-cost global balanced index One-Fund Portfolio with a 60/40 stocks/bonds target allocation which, as of October 31, 2021, was spread across 4,124 U.S. stocks, 7,760 international stocks, 10,157 U.S. bonds, and 6,427 international bonds for a total of 28,468 global securities, approximating the (free float) Global Stock-and-Bond Portfolio with a moderate home bias.
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until October 31, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until October 31, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The Bureau of Labor Statistics has published the consumer price index for all urban consumers (CPI-U) for October 2021.
We're interested to calculate an average CPI-U to associate with our forward test at the end of October 2021. Here are the last 12 CPI-U values:
We take note that the average CPI-U for the last 12 months at the end of October 2021 was 267.966.
Last year, we calculated that the average CPI-U for the last 12 months at the end of October 2020 was 258.268.
The trailing 1-year average inflation at the end of October 2021 was ((267.966 / 258.268) - 1) = 3.76%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -3.26% below trailing average inflation.
We're interested to calculate an average CPI-U to associate with our forward test at the end of October 2021. Here are the last 12 CPI-U values:
Code: Select all
Month CPI-U
11/2020 260.229
12/2020 260.474
01/2021 261.582
02/2021 263.014
03/2021 264.877
04/2021 267.054
05/2021 269.195
06/2021 271.696
07/2021 273.003
08/2021 273.567
09/2021 274.310
10/2021 276.589
Last year, we calculated that the average CPI-U for the last 12 months at the end of October 2020 was 258.268.
The trailing 1-year average inflation at the end of October 2021 was ((267.966 / 258.268) - 1) = 3.76%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -3.26% below trailing average inflation.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Using average CPI-U calculated in this and previous posts, here's an inflation-adjusted chart of this forward test expressed in October 2021 dollars:
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Portfolio balance as of November 30, 2021
The November 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was -1.37% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of October 31, 2021 and apply November 2021 growth on investments and interest on savings.
The November 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was -1.37% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of October 31, 2021 and apply November 2021 growth on investments and interest on savings.
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): ($1,091,820.38 X (1 + -1.37%)) = $1,076,862.44
- Withdrawal cushion (at Ally Bank): ($30,405.08 X ((1 + 0.50%)^(1 / 12))) = $30,417.72
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Forward test as of November 30, 2021
We continue our forward test. Here's a link to the previous entry.
As of November 30, 2021, the retiree's portfolio is composed of:
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,059 per month (in 2021 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,158 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
After withdrawal and transfer, ($1,076,862.44 - $6,158) = $1,070,704.44 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,417.72 + $62) = $30,479.72 is left into the withdrawal cushion for a total portfolio balance of $1,101,184.16 at the end of November 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
December 2021 total retirement income is $7,096 and on the morning of December 1, 2021, the total portfolio balance is $1,101,184.16.
Historical Annual Retirement Income
We continue our forward test. Here's a link to the previous entry.
As of November 30, 2021, the retiree's portfolio is composed of:
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): $1,076,862.44
- Withdrawal cushion (at Ally Bank): $30,417.72
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,059 per month (in 2021 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,158 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
- Adjusted withdrawal amount: (($6,158 + $30,417.72) / 6) = $6,096
- Adjustment: ($6,096 - $6,158) = -$62
After withdrawal and transfer, ($1,076,862.44 - $6,158) = $1,070,704.44 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,417.72 + $62) = $30,479.72 is left into the withdrawal cushion for a total portfolio balance of $1,101,184.16 at the end of November 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
December 2021 total retirement income is $7,096 and on the morning of December 1, 2021, the total portfolio balance is $1,101,184.16.
Historical Annual Retirement Income
- 2019: $76,406 (annualized) -- $38,203 in 6 months, starting retirement in July
- 2020: $76,743
- 2021: $82,388
Last edited by longinvest on Wed Dec 08, 2021 8:59 am, edited 1 time in total.
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
FiveK, it would be nice if you could provide the age 70 Social Security estimate in 2022 dollars using latest COLA announcement. I'll need it for next month's entry. Thanks.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
$2,180longinvest wrote: ↑Sat Dec 04, 2021 5:03 pmFiveK, it would be nice if you could provide the age 70 Social Security estimate in 2022 dollars using latest COLA announcement. I'll need it for next month's entry. Thanks.
You're welcome!
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Here's how the VPW Accumulation And Retirement Worksheet calculated its suggested $6,158 portfolio withdrawal at the end of November 2021.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,107,280 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,107,280 - $71,410) X 5.1%) = $52,829 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $52,829 VPW withdrawal. This sums up to ($24,708 - $4,116 + $52,829) = $73,421 and results into a ($73,421 / 12) = $6,118 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($73,421 + (12 X $1,000)) = $85,421/year ($7,118/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,107,280) = -$332,184 portfolio loss, reducing the portfolio to ($1,107,280 - $332,184) = $775,096 after the loss. This implies a (($24,708 - $4,116 + (($775,096 - $71,410) X 5.1%)) / 12) = $4,707 monthly portfolio withdrawal which represents a ($4,707 - $6,118) = -$1,411 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,411/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,411 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
The retiree will get $2,059/month Social Security payments in 3 years. That's $24,708/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($24,708 / 34.6%) = $71,410 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,107,280 portfolio, but $71,410 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,107,280 - $71,410) X 5.1%) = $52,829 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $24,708 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $52,829 VPW withdrawal. This sums up to ($24,708 - $4,116 + $52,829) = $73,421 and results into a ($73,421 / 12) = $6,118 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($73,421 + (12 X $1,000)) = $85,421/year ($7,118/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,107,280) = -$332,184 portfolio loss, reducing the portfolio to ($1,107,280 - $332,184) = $775,096 after the loss. This implies a (($24,708 - $4,116 + (($775,096 - $71,410) X 5.1%)) / 12) = $4,707 monthly portfolio withdrawal which represents a ($4,707 - $6,118) = -$1,411 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,411/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,411 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The retiree's portfolio is entirely invested into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX), an automatically-rebalanced low-cost global balanced index One-Fund Portfolio with a 60/40 stocks/bonds target allocation which, as of November 30, 2021, was spread across 4,156 U.S. stocks, 7,776 international stocks, 10,160 U.S. bonds, and 6,534 international bonds for a total of 28,626 global securities, approximating the (free float) Global Stock-and-Bond Portfolio with a moderate home bias.
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until November 30, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until November 30, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The Bureau of Labor Statistics has published the consumer price index for all urban consumers (CPI-U) for November 2021.
We're interested to calculate an average CPI-U to associate with our forward test at the end of November 2021. Here are the last 12 CPI-U values:
We take note that the average CPI-U for the last 12 months at the end of November 2021 was 269.442.
Last year, we calculated that the average CPI-U for the last 12 months at the end of November 2020 was 258.520.
The trailing 1-year average inflation at the end of November 2021 was ((269.442 / 258.520) - 1) = 4.23%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -3.76% below trailing average inflation.
We're interested to calculate an average CPI-U to associate with our forward test at the end of November 2021. Here are the last 12 CPI-U values:
Code: Select all
Month CPI-U
12/2020 260.474
01/2021 261.582
02/2021 263.014
03/2021 264.877
04/2021 267.054
05/2021 269.195
06/2021 271.696
07/2021 273.003
08/2021 273.567
09/2021 274.310
10/2021 276.589
11/2021 277.948
Last year, we calculated that the average CPI-U for the last 12 months at the end of November 2020 was 258.520.
The trailing 1-year average inflation at the end of November 2021 was ((269.442 / 258.520) - 1) = 4.23%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -3.76% below trailing average inflation.
Variable Percentage Withdrawal (bogleheads.org/wiki/VPW) | One-Fund Portfolio (bogleheads.org/forum/viewtopic.php?t=287967)
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Using average CPI-U calculated in this and previous posts, here's an inflation-adjusted chart of this forward test expressed in November 2021 dollars:
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Portfolio balance as of December 31, 2021
The December 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was 2.14% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of November 30, 2021 and apply December 2021 growth on investments and interest on savings.
The December 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was 2.14% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of November 30, 2021 and apply December 2021 growth on investments and interest on savings.
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): ($1,070,704.44 X (1 + 2.14%)) = $1,093,617.52
- Withdrawal cushion (at Ally Bank): ($30,479.72 X ((1 + 0.50%)^(1 / 12))) = $30,492.39
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Any chance of including a cumulative "money withdrawn to date" counter under the total portfolio balance? I know I'm interested in the total return, so to speak. I believe it is around 60K a year?longinvest wrote: ↑Sat Jan 01, 2022 5:42 pm Portfolio balance as of December 31, 2021
The December 2021 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was 2.14% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of November 30, 2021 and apply December 2021 growth on investments and interest on savings.
Total Portfolio Balance: $1,124,109.91
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): ($1,070,704.44 X (1 + 2.14%)) = $1,093,617.52
- Withdrawal cushion (at Ally Bank): ($30,479.72 X ((1 + 0.50%)^(1 / 12))) = $30,492.39
"Confusion has its cost" - Crosby, Stills and Nash
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Goblue100, cumulative retirement income is already provided at the end of monthly backtest posts. Here's the latest summary:
The details of monthly income are explained in posts like this one where we see how, by following the worksheet's guidance, the retiree is effectively reinvesting part of the fixed pension to dampen the bite of inflation, and taking bridge withdrawals until the start of Social Security in 2.5 years, in addition to VPW withdrawals (adjusted with transfers from or to the withdrawal cushion).longinvest wrote: ↑Sat Dec 04, 2021 3:56 pm Historical Annual Retirement Income
- 2019: $76,406 (annualized) -- $38,203 in 6 months, starting retirement in July
- 2020: $76,743
- 2021: $82,388
What matters is the resulting retirement income (available for taxes and expenses) which is illustrated in nominal and inflation-adjusted charts.
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Forward test as of December 31, 2021
We continue our forward test. Here's a link to the previous entry.
As of December 31, 2021, the retiree's portfolio is composed of:
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,180 per month (in 2022 dollars).*
* See forum member FiveK's post.
We update the Portfolio Balance cell as well as the Social Security amount in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,333 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
After withdrawal and transfer, ($1,093,617.52 - $6,333) = $1,087,284.52 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,492.39 + $195) = $30,687.39 is left into the withdrawal cushion for a total portfolio balance of $1,117,971.91 at the end of December 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
January 2022 total retirement income is $7,138 and on the morning of January 1, 2022, the total portfolio balance is $1,117,971.91.
Historical Annual Retirement Income
We continue our forward test. Here's a link to the previous entry.
As of December 31, 2021, the retiree's portfolio is composed of:
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): $1,093,617.52
- Withdrawal cushion (at Ally Bank): $30,492.39
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,180 per month (in 2022 dollars).*
* See forum member FiveK's post.
We update the Portfolio Balance cell as well as the Social Security amount in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,333 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
- Adjusted withdrawal amount: (($6,333 + $30,492.39) / 6) = $6,138
- Adjustment: ($6,138 - $6,333) = -$195
After withdrawal and transfer, ($1,093,617.52 - $6,333) = $1,087,284.52 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,492.39 + $195) = $30,687.39 is left into the withdrawal cushion for a total portfolio balance of $1,117,971.91 at the end of December 2021.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
January 2022 total retirement income is $7,138 and on the morning of January 1, 2022, the total portfolio balance is $1,117,971.91.
Historical Annual Retirement Income
- 2019: $76,406 (annualized) -- $38,203 in 6 months, starting retirement in July
- 2020: $76,743
- 2021: $82,388
- 2022: $85,656 (annualized) -- $7,138 in 1 month
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Here's how the VPW Accumulation And Retirement Worksheet calculated its suggested $6,333 portfolio withdrawal at the end of December 2021.
The retiree will get $2,180/month Social Security payments in 3 years. That's $26,160/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($26,160 / 34.6%) = $75,607 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,124,110 portfolio, but $75,607 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,124,110 - $75,607) X 5.1%) = $53,474 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $26,160 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $53,474 VPW withdrawal. This sums up to ($26,160 - $4,116 + $53,474) = $75,518 and results into a ($75,518 / 12) = $6,293 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($75,518 + (12 X $1,000)) = $87,518/year ($7,293/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,124,110) = -$337,233 portfolio loss, reducing the portfolio to ($1,124,110 - $337,233) = $786,877 after the loss. This implies a (($26,160 - $4,116 + (($786,877 - $75,607) X 5.1%)) / 12) = $4,860 monthly portfolio withdrawal which represents a ($4,860 - $6,293) = -$1,433 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,433/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,433 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
The retiree will get $2,180/month Social Security payments in 3 years. That's $26,160/year. The percentage for a 3-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 34.6%. As a consequence, ($26,160 / 34.6%) = $75,607 is kept aside (on paper) for Social Security bridge withdrawals.
The $1,000/month work pension isn't indexed to inflation. To dampen the erosion of inflation, only 65.7% of the pension is spent (see this post) and an annual ($1,000 X 12 X (100% - 65.7%)) = $4,116 is invested into the portfolio.
The retiree has a $1,124,110 portfolio, but $75,607 is kept aside (on paper) for Social Security bridge withdrawals. At age 67 with a 60/40 stocks/bonds allocation, the percentage in the VPW Table is 5.1%. This results into a (($1,124,110 - $75,607) X 5.1%) = $53,474 annual VPW withdrawal.
So, on an annual basis the retiree plans to withdraw $26,160 in replacement of future Social Security payments, to invest $4,116 to dampen the ravages of inflation on the fixed work pension, and to take a $53,474 VPW withdrawal. This sums up to ($26,160 - $4,116 + $53,474) = $75,518 and results into a ($75,518 / 12) = $6,293 portfolio withdrawal. The -$40 difference with the VPW Worksheet's suggested amount is due to rounding.
Note that Total Retirement Income also includes the monthly $1,000 work pension payment for a total of ($75,518 + (12 X $1,000)) = $87,518/year ($7,293/month) available for taxes and expenses.
The VPW worksheet also calculates a Required Flexibility that must be maintained by the retiree. To do so, it first applies a -50% loss to the stock allocation and then repeats its calculations. With 60/40 stocks/bonds allocation, this results into a (-50% X 60%) = -30% portfolio loss. That's a (-30% X $1,124,110) = -$337,233 portfolio loss, reducing the portfolio to ($1,124,110 - $337,233) = $786,877 after the loss. This implies a (($26,160 - $4,116 + (($786,877 - $75,607) X 5.1%)) / 12) = $4,860 monthly portfolio withdrawal which represents a ($4,860 - $6,293) = -$1,433 reduction after the loss.
The retiree must maintain the flexibility to easily cut spending by up to -$1,433/month because stocks could easily lose -50% of their value within a short time period. In other words, at least $1,433 must be budgeted for optional discretionary spending that could be eliminated without affecting the retiree's comfort.
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The retiree's portfolio is entirely invested into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX), an automatically-rebalanced low-cost global balanced index One-Fund Portfolio with a 60/40 stocks/bonds target allocation which, as of December 31, 2021, was spread across 4,139 U.S. stocks, 7,742 international stocks, 10,161 U.S. bonds, and 6,507 international bonds for a total of 28,549 global securities, approximating the (free float) Global Stock-and-Bond Portfolio with a moderate home bias.
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until December 31, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
Here's a growth chart of the Vanguard LifeStrategy Moderate Growth Fund and of the four markets it invests into since the start of this forward test until December 31, 2021:
Here's a comparative chart of the growth of the four markets relative to the Vanguard LifeStrategy Moderate Growth Fund over the same period:
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
The Bureau of Labor Statistics has published the consumer price index for all urban consumers (CPI-U) for December 2021.
We're interested to calculate an average CPI-U to associate with our forward test at the end of December 2021. Here are the last 12 CPI-U values:
We take note that the average CPI-U for the last 12 months at the end of December 2021 was 270.970.
Last year, we calculated that the average CPI-U for the last 12 months at the end of December 2020 was 258.811.
The trailing 1-year average inflation at the end of December 2021 was ((270.970 / 258.811) - 1) = 4.70%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -4.20% below trailing average inflation.
We're interested to calculate an average CPI-U to associate with our forward test at the end of December 2021. Here are the last 12 CPI-U values:
Code: Select all
Month CPI-U
01/2021 261.582
02/2021 263.014
03/2021 264.877
04/2021 267.054
05/2021 269.195
06/2021 271.696
07/2021 273.003
08/2021 273.567
09/2021 274.310
10/2021 276.589
11/2021 277.948
12/2021 278.802
Last year, we calculated that the average CPI-U for the last 12 months at the end of December 2020 was 258.811.
The trailing 1-year average inflation at the end of December 2021 was ((270.970 / 258.811) - 1) = 4.70%.
The chosen Ally savings account has an annual percentage yield (APY) of 0.50%. It's -4.20% below trailing average inflation.
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Using average CPI-U calculated in this and previous posts, here's an inflation-adjusted chart of this forward test expressed in December 2021 dollars:
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Portfolio balance as of January 31, 2022
The January 2022 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was -3.64% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of December 31, 2021 and apply January 2022 growth on investments and interest on savings.
The January 2022 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was -3.64% and the annual percentage yield (APY) of the Ally savings account was 0.50%.
We use account balances as of December 31, 2021 and apply January 2022 growth on investments and interest on savings.
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): ($1,087,284.52 X (1 + -3.64%)) = $1,047,707.36
- Withdrawal cushion (at Ally Bank): ($30,687.39 X ((1 + 0.50%)^(1 / 12))) = $30,700.15
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Forward test as of January 31, 2022
We continue our forward test. Here's a link to the previous entry.
As of January 31, 2022, the retiree's portfolio is composed of:
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,180 per month (in 2022 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,137 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
After withdrawal and transfer, ($1,047,707.36 - $6,137) = $1,041,570.36 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,700.15 - $3) = $30,697.15 is left into the withdrawal cushion for a total portfolio balance of $1,072,267.51 at the end of January 2022.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
February 2022 total retirement income is $7,140 and on the morning of February 1, 2022, the total portfolio balance is $1,072,267.51.
Historical Annual Retirement Income
We continue our forward test. Here's a link to the previous entry.
As of January 31, 2022, the retiree's portfolio is composed of:
- Vanguard LifeStrategy Moderate Growth Fund (VSMGX): $1,047,707.36
- Withdrawal cushion (at Ally Bank): $30,700.15
The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,180 per month (in 2022 dollars).
We update the Portfolio Balance cell in the Retirement sheet of the VPW Accumulation And Retirement Worksheet. No other entry needs updating. We get:
The VPW Worksheet suggests to take a $6,137 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
- Adjusted withdrawal amount: (($6,137 + $30,700.15) / 6) = $6,140
- Adjustment: ($6,140 - $6,137) = $3
After withdrawal and transfer, ($1,047,707.36 - $6,137) = $1,041,570.36 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($30,700.15 - $3) = $30,697.15 is left into the withdrawal cushion for a total portfolio balance of $1,072,267.51 at the end of January 2022.
The Ally savings account currently carries an annual percentage yield (APY) of 0.50%.
Chart
Here's a chart of total retirement income (blue bars, left axis) and total portfolio balance after withdrawal (red line, right axis). Amounts are displayed as of the morning of the first day of the month.
February 2022 total retirement income is $7,140 and on the morning of February 1, 2022, the total portfolio balance is $1,072,267.51.
Historical Annual Retirement Income
- 2019: $76,406 (annualized) -- $38,203 in 6 months, starting retirement in July
- 2020: $76,743
- 2021: $82,388
- 2022: $85,668 (annualized) -- $14,278 in 2 months
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
[deleted and re-posted to the correct place]
Last edited by Salad on Sun Feb 06, 2022 2:57 pm, edited 2 times in total.
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Salad, thanks and welcome to the forum!
This thread is about the forward test. The backtesting spreadsheet is discussed in the main VPW thread. I suggest to repost your message there.
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Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Will do and thanks! I'm very new to the forum, just lurking for a couple of months. I'll re-post in the right spot.
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Thanks all for the VPW worksheet and associated posts. As I enter my first year of retirement using this tool (and seeing the 3+ years of real world data that accompanies it) has eased my mind when it comes to making withdrawals after a lifetime of accumulation .
My question, and I apologize if it has been answered somewhere else (if it has I have not been able to find it), When entering data into the VPW spreadsheet is only possible to enter Pension information for one person? i.e. can I only enter my social security info and not my wife's ? When I try to enter a second social Security data set I get a warning that my funding is below 100%.
Thanks again!
My question, and I apologize if it has been answered somewhere else (if it has I have not been able to find it), When entering data into the VPW spreadsheet is only possible to enter Pension information for one person? i.e. can I only enter my social security info and not my wife's ? When I try to enter a second social Security data set I get a warning that my funding is below 100%.
Thanks again!
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Are you including their portfolio information as well?rookie87 wrote: ↑Thu Feb 10, 2022 8:37 am Thanks all for the VPW worksheet and associated posts. As I enter my first year of retirement using this tool (and seeing the 3+ years of real world data that accompanies it) has eased my mind when it comes to making withdrawals after a lifetime of accumulation .
My question, and I apologize if it has been answered somewhere else (if it has I have not been able to find it), When entering data into the VPW spreadsheet is only possible to enter Pension information for one person? i.e. can I only enter my social security info and not my wife's ? When I try to enter a second social Security data set I get a warning that my funding is below 100%.
Thanks again!
In mine, all of our assets are pooled together. The amount that goes into the portfolio is any of my money + spouses + joint accounts.
We then include both of our pensions + social security in those sections.
Works perfectly.
But if you've only included your retirement assets and then include both pensions, that could be a problem.
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
See longvest posting here: viewtopic.php?p=6359958#p6359958rookie87 wrote: ↑Thu Feb 10, 2022 8:37 am Thanks all for the VPW worksheet and associated posts. As I enter my first year of retirement using this tool (and seeing the 3+ years of real world data that accompanies it) has eased my mind when it comes to making withdrawals after a lifetime of accumulation .
My question, and I apologize if it has been answered somewhere else (if it has I have not been able to find it), When entering data into the VPW spreadsheet is only possible to enter Pension information for one person? i.e. can I only enter my social security info and not my wife's ? When I try to enter a second social Security data set I get a warning that my funding is below 100%.
Thanks again!
VPW sets aside money from the portfolio to bridge the retiree until social security and pensions start. I believe if the money that is set aside is more than what the remaining portfolio would be after a 50% equity drop this warning is issued.
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
But if you've only included your retirement assets and then include both pensions, that could be a problem.
[/quote]
Thanks for the reply. I have combined everything. However, due to our 9 year age difference we each will begin collecting SS at different ages, so I cannot combine the SS numbers. In the current model I use my start date for SS as I am the younger of us. Also there is only one entry for age so I use mine. Perhaps this is part of the problem.
[/quote]
Thanks for the reply. I have combined everything. However, due to our 9 year age difference we each will begin collecting SS at different ages, so I cannot combine the SS numbers. In the current model I use my start date for SS as I am the younger of us. Also there is only one entry for age so I use mine. Perhaps this is part of the problem.
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
You can enter multiple social security and pension streams. Just use the additional slots, e.g., Pension 3, Pension 4.
The first 2 slots are defaulted to say Social Security and Work Pension but you can add more. The name itself doesn’t impact things. What’s important is the amount, start date, and CPI yes/no.
The first 2 slots are defaulted to say Social Security and Work Pension but you can add more. The name itself doesn’t impact things. What’s important is the amount, start date, and CPI yes/no.
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
When I enter the second SS numbers I get a warning that I am below the 100% funded margin when the 50% loss is calculated.furwut wrote: ↑Thu Feb 10, 2022 10:09 am You can enter multiple social security and pension streams. Just use the additional slots, e.g., Pension 3, Pension 4.
The first 2 slots are defaulted to say Social Security and Work Pension but you can add more. The name itself doesn’t impact things. What’s important is the amount, start date, and CPI yes/no.
EDIT: I think it is because the the bridge costs to SS increase to much. If the worksheet doesn't know my wife's age it calculates the years to SS based on mine. When it combines the two bridge to SS costs the number is greater than allowed for the portfolio to be 100% funded. If this is the case I guess i simply disregard the warning?
Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Since everything in the spreadsheet is indexed to my age, I account for this by entering my wife's SS amounts starting at the age that I will be when she starts to collect. I use "Defined Benefit Pension #3" entry for when she will file for her own benefits and "Defined Benefit Pension #4" for when she will file for spousal benefits.rookie87 wrote: ↑Thu Feb 10, 2022 10:23 am If the worksheet doesn't know my wife's age it calculates the years to SS based on mine. When it combines the two bridge to SS costs the number is greater than allowed for the portfolio to be 100% funded. If this is the case I guess i simply disregard the warning?
Guess I'll learn from the rest of the thread whether that's correct or not!
motiv8ed