viewtopic.php?t=383126
Our original thought was to retire in Jan 2020 and it sure has been a rollercoaster 2 years since so I was curious how our plan would compare to VPW forward that simply gives you a higher withdrawal rate overall but without any guarantees it won't go down during your go-go years.
Here's the scenario for the VPW forward test:
viewtopic.php?t=284519
Plugging this general scenario into FICalc gives us a baseline of $59,000 constant dollar withdrawal rate for a 60/40 portfolio with 100% historical success rate for a 40 year retirement (age 65 to 105).The retiree's portfolio is entirely invested into the Vanguard LifeStrategy Moderate Growth Fund (VSMGX), a globally-diversified 60/40 stocks/bonds all-in-one index fund which internally invests:
36% into Vanguard Total Stock Market Index Fund Investor Shares (VTSMX): 3,599 domestic stocks
28% into Vanguard Total Bond Market II Index Fund Investor Shares (VTBIX): 8,238 domestic bonds
24% into Vanguard Total International Stock Index Fund Investor Shares (VGTSX): 6,414 international stocks
12% into Vanguard Total International Bond Index Fund Investor Shares (VTIBX): 5,885 international bonds
Monthly total retirement income will consist of:
Monthly $1,000 payment from work pension.
Eventually, starting at age 70 in July 2024, a $2,000 monthly payment from Social Security.
In preparation for retirement, an initial withdrawal is hypothetically taken today from the $1,000,000 portfolio, exceptionally equal to 6 monthly VPW withdrawals, to provide income for July 2019 and pre-fill the dampening savings account with an additional 5 months worth of withdrawals.
July 2019 total retirement income is ($1,000 work pension + $5,356 VPW withdrawal) = $6,356. Tomorrow morning, on July 1, 2019, total portfolio balance will be ($967,864 LifeStrategy Moderate Growth Fund + $26,780 dampening savings account) = $994,644.
2019: $76,272 (annualized) -- $6,356, 1 month, starting retirement in July
Note that this is below the required flexibility constraint for VPW...$61,286 and way below $76,272 the 2019 retiree gets. It is above the $40,000 used in a vanilla 4% calculation.
https://ficalc.app?additionalIncome=%5B ... tantDollar
I don't know what it means when your required expenses (ie as defined by the flexibility constraint - $61,286) is above the historical SWR amount.
In any case...when you factor in an extra $20K a year of travel for the first 10 years it looks like this:
https://ficalc.app?additionalIncome=%5B ... tantDollar
$52,000 a year + $20,000 travel = $72,000 for the first 10 years (65-75) followed by $52,000 a year from age 75-105.
Assuming that $52,000 a year works for you over the long haul then $72,000 for the first 10 years is not too far off the $76,272 provided by VPW.
Initial WR is $6,000 in 2019 dollars.
Jumping to today your withdrawal in Sept 1, 2022 is $6926 in 2022 dollars.
For VPW:
Hey, not bad, we're within a hundred dollars or so and actually ahead a little.longinvest wrote: ↑Sat Sep 03, 2022 7:58 am Forward test as of August 31, 2022
The VPW Worksheet suggests to take a $5,605 withdrawal. The retiree withdraws the suggested amount.
After making the withdrawal, the retiree calculates an adjustment using the withdrawal cushion balance:
The retiree transfers $252 out of the Ally savings account and combines it with the $5,605 withdrawal and the $1,000 September 2022 work pension payment for a total retirement income of $6,857 available for taxes and expenses in September 2022.
- Adjusted withdrawal amount: (($5,605 + $29,535.07) / 6) = $5,857
- Adjustment: ($5,857 - $5,605) = $252
After withdrawal and transfer, ($886,662.46 - $5,605) = $881,057.46 is left invested into the Vanguard LifeStrategy Moderate Growth Fund and ($29,535.07 - $252) = $29,283.07 is left into the withdrawal cushion for a total portfolio balance of $910,340.53 at the end of August 2022.
TL;DR
The VPW smoothing seems to have worked pretty well so far. Despite the losses in 2022 VPW is still around $6K income in 2019 dollars ($5,940 or $71,280/year) and was way ahead most of 2021. I do wonder if the ending portfolio balance would have been higher without the smoothing account.
SWR+Go-go budget caught up because inflation was high in 2022. This is a double edge sword since inflation the main way for constant dollar approaches to fail but as long as it's no worse than historical it works out. Given the higher portfolio balance you have a little more wiggle room in 2024 when you take stock of the universe and see if anything needs changing. You can drop immediately to the $52K number if you want, keep spending at $72K for the remaining 5 years or split the difference.
Now the portfolio balances are harder to figure out because there's no easy way in PV to factor in the pension but if you simply ignore it and take out the full $6000 a month from the portfolio the ending portfolio balance is $1.113M...$200K ahead of VPW. Not too surprising that if you take out less money the portfolio ends up bigger.
In comparison the Vanguard 500 investor has $1.391M. Oh well...
https://www.portfoliovisualizer.com/bac ... ion1_1=100
I think we're sticking with our current plan but even in a mild downturn with higher inflation VPW provides equal or higher Go-go year budgets so far.
* ObDis: any math errors are mine, etc...