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by longinvest
Tue Mar 26, 2024 8:14 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

I think that the following could be a good default portfolio suggested in answer to many queries about portfolio construction:... longinvest, Do you have any suggestions for an investor who might like the idea of a one-fund portfolio but who may not be comfortable with holding 40% of their equity allocation in ex-US stocks? This is not intended to be a debate about US/ex-US, but simply a question about someone who holds this opinion yet is looking for a one-fund solution. Consider the possibility that this person is not at Vanguard and may want an allocation more conservative or more aggressive than 60/40. Thanks for any insights you may be able to provide. Charles Joseph, the globally-diversified stock-and-bond index One-Fund Portfolio di...
by longinvest
Sun Mar 24, 2024 4:20 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

bbrock, you're not the only one who thinks municipal bonds have a place in many investors' portfolios. With federal income tax day less than a month away, now is a perfect time for an investor to compare the tax benefits of municipal bonds versus the "good enough" one-fund portfolio approach. Every investor has to make their own decision. In the above post, AlwaysLearningMore implies that I am against using municipal bonds. This is false . There's no justification for AlwaysLearningMore to make such implication as he is aware of my position which I've clearly stated in a post in reaction to a post he wrote 90 minutes earlier. It might be worth restating my February 17 post in full: In this thread, I have proposed that a One-Fund ...
by longinvest
Sun Mar 24, 2024 4:14 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

Apologies if you think I was making a personal attack against you or this thread. I had no malicious intent as that’s not me or my style. I’m not trying to derail this or any new readers. In fact, I’m an avid follower of your posts, this thread, and VPW. I merely still brainstorming and trying to think of a solution for my situation and DW if I depart 1st. I already told you straight that I’m not as mathematically, inclined as you are. And I told you that VTMFX not be your eyes, the fairest comparison, but not the least. That’s what I was using for my comparison. Plz don’t take it as a personal attack. I will flat out ask, why do you take my posts as an attack? Did I say something or do something to you that you don’t appreciate? If so, pl...
by longinvest
Sun Mar 24, 2024 11:36 am
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

I'm sure that readers of this thread have, by now, realized that gratuitous attacks on the One-Fund Portfolio can easily be identified by their lack of sound mathematical arguments. Readers don't need my help to identify them. Unfortunately, such posts can distract new readers away from this thread's main message. So, I'll repeat it.

I think that a One-Fund Portfolio is good enough. Using a single identical low-cost globally-diversified all-in-one index fund or ETF in all accounts (possibly including a taxable account, after running out of tax-advantaged space) can help an investor sidestep a long list of behavioral pitfalls. It can also significantly simplify things for a less financially-inclined caretaker or surviving spouse.
by longinvest
Sat Mar 23, 2024 9:50 am
Forum: Investing - Theory, News & General
Topic: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Replies: 784
Views: 236880

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 February 29, 2024, was spread across 3,731 U.S. stocks, 8,566 international stocks, 11,079 U.S. bonds, and 6,792 international bonds for a total of 30,168 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 from the start of this forward test until February 29, 2024 : https://lh3.googleusercontent.com/d/1ITXfcjVz7ZzEkHHwH-bf_ipStM6-IMz...
by longinvest
Sat Mar 23, 2024 9:41 am
Forum: Investing - Theory, News & General
Topic: Bill Sharpe's preferred portfolio
Replies: 683
Views: 158250

Re: Bill Sharpe's preferred portfolio

This post documents the monthly return and asset-class weights as of February 29, 2024 of the (free-float) Global Stock-and-Bond Portfolio or, if you prefer, William Sharpe's Market Portfolio . Here's a link to the previous entry . The February 2024 return was: Global Stock-and-Bond Portfolio: ((60.88% X 4.52% (global stocks)) + (39.12% X -0.96% (global bonds))) = 2.38% (USD) Global stocks: Vanguard Total World Stock ETF (VT) NAV return Global bonds: Vanguard Total World Bond ETF (BNDW) NAV return [/size] As of February 29, 2024 the weights were: Global stocks: $78,483,087 million USD Market cap -- 62.08% FTSE Global All Cap Index ( GEISLMS ) -- Net MCap [/size] Global bonds: $47,944,930 million USD Market cap -- 37.92% FTSE World Broad Inv...
by longinvest
Thu Mar 21, 2024 4:59 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

@longinvest, I don't remember if this was discussed pages ago, and I do recall seeing similar discussions on other threads (but not in the context of one-fund), but I wanted to ask if you would recommend a one-fund portfolio for a young adult just starting to save/accumulate? She's currently investing in a two-fund portfolio of ITOT and IXUS, which is of course US and international stocks with no bonds. Would it make sense for a single person under 30 to go with a one-fund and include bonds, or at her age, to stick with all-stocks? Thanks. Uncle Morris, this isn't the thread to discuss asset allocation (see the note in the first post). Yet, even Vanguard's most aggressive target date fund includes some bonds (10%), making the stock allocat...
by longinvest
Thu Mar 21, 2024 4:19 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

VTINX in taxable. That seems to be the least tax efficient b/c of the larger bond holding. However, you can't put a price on simplicity in order to KIS. Bbrock, you're claiming of that VTINX is the "least tax efficient". 1. What were the other portfolios, with similar after-tax risk, that you've compared it to? 2. What is the mathematical proof of your assertion, when comparing with portfolios that share a similar after-tax risk? It's easy to claim that a riskier portfolio, after tax, will deliver higher returns along with higher volatility, on average. It's much harder to prove that a portfolio of similar after-tax risk will always have higher returns. So, go ahead, provide your proof. I'm curious to see it. Until then, I sugges...
by longinvest
Thu Mar 21, 2024 4:04 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

SevenBridgesRoad wrote: Tue Mar 19, 2024 7:43 pm I guess every now and then, in a thread on the topic of "one-fund portfolio as a default suggestion", one should weigh-in with their actual one-fund portfolio as the default suggestion.

We have a one-fund portfolio. VTINX. Across all accounts. All at Vanguard. Taxable and tax-deferred. Simple, for the long haul. We use the VPW retirement sheet. Wife of 45 years understands and can handle it without me. She needs me for other things, but not survival.

Life is good.
SevenBridgesRoad, thanks sharing this. It's effectively quite reassuring to be confident that our spouses will be able to handle the financial side of things if they survive us.
by longinvest
Thu Mar 21, 2024 3:54 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

Caleb4387 wrote: Thu Mar 21, 2024 3:43 pm VTI until I die. Ok not really but until darn near retirement then I'll consider the fixed income portion of my portfoliosis.
Caleb4387, this thread is about all-in-one funds (including stocks and bonds, domestic and international). I suggest reading the very first post of this thread for more details.
by longinvest
Sat Mar 16, 2024 2:57 pm
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

Texanbybirth wrote: Sat Mar 16, 2024 1:40 pm Thank you for that interpretation, it makes perfect sense to me. Since I’ve had my paycheck set at 15% for over a decade now I’m loathe to ever change it, especially downward. However, as the sole-breadwinner with 5 young children in our family I know things can change quickly, and having some flexibility built into “the system” (our personal system) is a wise move.

I appreciate your willingness to engage a new user of your excellent worksheet! :-)
Texanbybirth, your questions were clear, along with detailed worksheet inputs; it's really enjoyable to reply to such well-written posts. Thanks for the nice comments and good luck with your big family!
by longinvest
Sat Mar 16, 2024 12:59 pm
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

Texanbybirth wrote: Fri Mar 15, 2024 8:39 am
Texanbybirth, I'll add to my previous post that the practical implication is to set the 401K savings rate to 13% (plus 5% employer match) for this year and remain ready to easily increase it to 18% next year, when worksheet inputs will be updated. Next year, portfolio contributions might not increase as much, could increase more, or could even decrease, depending on market outcomes and changes in the investor's circumstances. Yet, maintaining the required flexibility until then (budgeting $384/month for optional discretionary spending that could be eliminated without affecting comfort) is a sensible thing to do.
by longinvest
Sat Mar 16, 2024 10:57 am
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

Annual salary: $140,000 Employer match: 5% 401K employee contribution (5% of $140,000): $7,000 ⇒ Monthly 401K contribution (employee + employer) = ((2 × $7,000) ÷ 12) = $1,167 Worksheet inputs: Information for 2024 Age: 39 Annual Salary: ($140,000 + $7,000 employer match) = $147,000 Portfolio Balance: $300,000 Portfolio Allocation: 90/10 stocks/bonds Retirement Age: 60 Portfolio Contribution Frequency: Monthly Defined Benefit Pension #1 Name: Social Security Start Age: 70 Monthly Payment: $3,769 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS) Cost of Living Adjustments: Yes Annual Contribution: $8,680 (calculation excludes employer 401(k) match included in salary above) The reason I'm trying to hit a % and...
by longinvest
Sat Mar 16, 2024 8:16 am
Forum: Investing - Theory, News & General
Topic: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Replies: 784
Views: 236880

Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)

Here's how the VPW Accumulation And Retirement Worksheet calculated its suggested $5,698 portfolio withdrawal at the end of February 2024 . Detailed calculations are provided in the lower part of the Retirement sheet. Displayed amounts and percentages are rounded (see this post for explanations). https://lh3.googleusercontent.com/d/1h8XjwoIC9_7pzLO2Mp-_C_fYm-In5WVH https://lh3.googleusercontent.com/d/1HHXqC-YalHS0k3hK4Ab4H-tfAzBmSyOm The retiree will get $1,883/month Social Security (77%) payments in 1 years. That's ($1,883 X 12) = $22,596 /year. The percentage for a 1-year withdrawal schedule with a 60/40 stocks/bonds allocation in the VPW Table is 100.0% (called [ G ] above). As a consequence, ($22,596 / 100.0%) = $22,596 is kept aside (o...
by longinvest
Thu Mar 14, 2024 4:46 pm
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

I really like this workbook. I've saved a copy to Google Sheets, and I've upda269*ted it a little on my side with links to my personal social security estimates (updated once a year from SSA), so the benefit will auto-fill in the appropriate Accumulation box once I choose a retirement age. I'm still toying with the idea of saying "no" to COLA or using my adjusted numbers (75% haircut) - but either way I don't want to count on the full benefit from my SSA statement! I've also put in some calcs to show me explicitly the "%" I need to save each year. (My 401k provider uses a % to deduct from my paycheck each pay period.) I'm guessing employer contributions to 401ks would count toward that "%": is that right? Shou...
by longinvest
Thu Mar 14, 2024 4:02 pm
Forum: US Chapters
Topic: Suggestions for the Wiki
Replies: 699
Views: 537583

Re: Suggested edits for Calculating Personal Returns wiki page

scoothome wrote: Thu Mar 14, 2024 10:00 am I am requesting edits to this wiki page: Calculating Personal Returns.

I think it would be appropriate to add a link in the "See also" section to: Personal Investment Returns Spreadsheet (PIRS).
I've added the link.
by longinvest
Sat Mar 09, 2024 3:53 pm
Forum: Investing - Theory, News & General
Topic: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Replies: 784
Views: 236880

Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)

Forward test as of February 29, 2024 We continue our forward test . Here's a link to the previous entry . As of February 29, 2024, the retiree's investment portfolio and income cushion balances are: Investment portfolio (Vanguard LifeStrategy Moderate Growth Fund (VSMGX)): $914,941.72 Income cushion (Ally Bank savings account): $33,140.04 The retiree has a fixed $1,000 per month pension and is delaying Social Security to age 70 to receive $2,446 per month (in 2024 dollars). The Social Security and Medicare Boards of Trustees project that the OASI program will only be able to pay 77% of scheduled benefits starting in year 2033, unless changes are made. Consequently, the retiree considers (100% - 77%) = 23% of promised benefits as a temporar...
by longinvest
Sat Mar 09, 2024 3:52 pm
Forum: Investing - Theory, News & General
Topic: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Replies: 784
Views: 236880

Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)

Investment Portfolio and Income Cushion Balances as of February 29, 2024

The February 2024 return of the Vanguard LifeStrategy Moderate Growth Fund (VSMGX) was 2.20% and the annual percentage yield (APY) of the Ally savings account was 4.35%.

We use account balances as of January 31, 2024 and apply February 2024 growth on investments and interest on savings.
  • Investment portfolio (Vanguard LifeStrategy Moderate Growth Fund (VSMGX)): ($895,246.30 X (1 + 2.20%)) = $914,941.72
  • Income cushion (Ally Bank savings account): ($33,022.66 X ((1 + 4.35%)^(1 / 12))) = $33,140.04
by longinvest
Fri Mar 08, 2024 7:10 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Longinvest, is there a way to use the spreadsheet with 100/0 stock/bond? Regardless of the view on being too risky, many people don't allocate to bonds even during withdrawal... Even more so now with the new papers that have come out regarding bonds. Rcmoormt, are you talking about recent papers based on backtests of the illogical 4% SWR method?! I think that it would be foolish to choose an allocation for VPW based on such flawed analyses which completely ignore the volatility-dampening impact of bonds within a balanced portfolio. I suggest ignoring the noise. I'm speaking of the Scott Cederburg paper "Beyond the Status Quo: A Critical Assessment of Lifecycle Investment Advice" [...] Rcmoormt, I guessed correctly! You were talki...
by longinvest
Fri Mar 08, 2024 5:26 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Longinvest, is there a way to use the spreadsheet with 100/0 stock/bond? Regardless of the view on being too risky, many people don't allocate to bonds even during withdrawal... Even more so now with the new papers that have come out regarding bonds. Rcmoormt, are you talking about recent papers based on backtests of the illogical 4% SWR method?! I think that it would be foolish to choose an allocation for VPW based on such flawed analyses which completely ignore the volatility-dampening impact of bonds within a balanced portfolio. I suggest ignoring the noise. If not, is there a way on the next update to allow for that? Thank you! The worksheet is a Bogleheads tool; it encourages diversifying the portfolio across the two main asset classes.
by longinvest
Thu Mar 07, 2024 4:18 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Longinvest,, Why does the spreadsheet disregard some of the Portfolio balance as unusable when the Annual Salary input is low? What is the reasoning behind having some of the Portfolio Balance unattributed or unusable? Example Age 51 Portfolio balance $1,000,000 Salary $80,000 yields $71,778 available for taxes and expenses Salary $140,000 yields $131,778 availabel for taxes and expenses Go_Tigers, I need all the inputs (yellow cells). This includes asset allocation and retirement age, as well as realistic Social Security pension projections and annual contributions. In other words, I need two full sets of inputs, one for the $80,000 scenario and one for the $140,000 scenario. Obviously, both scenarios can't have identical inputs for their...
by longinvest
Mon Mar 04, 2024 10:51 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

The Accumulation sheet Portfolio Contribution amount is a pre-tax number for traditional account investing (like in a 401K, with taxes appropriately adjusted on paycheck). If part of the contribution is made after tax, into a taxable account for example, that part must be reduced appropriately. A conservative and simple estimate is to reduce that part by the investor's average tax rate. In general, saving more than one can contribute into traditional (401K, IRA, ...) accounts during accumulation complicates calculations. Fortunately, most employees have plenty enough of traditional account contribution space. As the Accumulation sheet works on a pre-tax basis, it works really well for most employees without any adjustment. When financially ...
by longinvest
Sat Mar 02, 2024 8:35 am
Forum: Investing - Theory, News & General
Topic: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Replies: 784
Views: 236880

Re: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)

The month of March 2024 has 5 weekends. I'll get back to my regular posts next weekend. The consumer price index for all urban consumers (CPI-U) is volatile from month to month for a number of reasons like seasonality in its basket of goods. Using 12-months average CPI-U allows for adjusting the amounts and charts of this forward test to the erosive impacts of inflation without introducing artificial monthly volatility. Here's a chart of CPI-U and average CPI-U during this forward test up to January 2024 ( February 1st, 2024 , in the chart, because the January 2024 value was used to adjust February 2024 income to inflation in last week's post ). The CPI-U line starts 11 months earlier to include all values on which average CPI-U is based. F...
by longinvest
Thu Feb 29, 2024 9:17 am
Forum: Personal Finance (Not Investing)
Topic: Help Me Understand VPW Accumulation Worksheet
Replies: 11
Views: 1580

Re: Help Me Understand VPW Accumulation Worksheet

Let me throw a hypothetical example at you to see if I understand the implications correctly. Let's say my wife and I make $200k per year and are able to contribute $50k per year to our retirement portfolio with no pain. Let's say we are planning to retire at age 60. Let's say we punch all our numbers into the VPW Accumulation Worksheet and it says OK, you really only need to contribute $10k per year to retire at age 60. Maybe our response shouldn't be, great, we have another $40k to spend every year to age 60, but rather we should try successively lower retirement ages in the spreadsheet until we get to the retirement age where the recommended contribution matches the $50k per year that we have determined is our comfortable annual contrib...
by longinvest
Thu Feb 29, 2024 8:50 am
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Hi longinvest. In my version 2.9 of the VPW Accumulation Works, I only have biweekly, semimonthly, and monthly for selections on the line "Portolio Contribution Frequency"? So, in this post, are you using VPW Accumulation worksheet or the Retirement sheet (Annual as a choice for Withdrawal Frequency choice on that sheet)? Bbrock, I'm using version 2.9 like you. The explanation is in the text you quoted. I added the emphasis: For calculation purpose, half of the annual contribution is invested at the beginning of the year and the other half at the end of the year. This isn't how it would be done in real life , but it approximates the impact of regular (biweekly, semimonthly, or monthly) contributions as the simulation uses annual ...
by longinvest
Thu Feb 29, 2024 8:43 am
Forum: Personal Finance (Not Investing)
Topic: Help Me Understand VPW Accumulation Worksheet
Replies: 11
Views: 1580

Re: Help Me Understand VPW Accumulation Worksheet

stuper1 wrote: Mon Feb 26, 2024 11:45 pm The VPW Accumulation and Retirement Worksheet is a thing of beauty and deserves to be more widely known [...]
Stuper1, thanks for the nice words.
by longinvest
Thu Feb 29, 2024 8:33 am
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

I completely agree that variable spending is a strength of a workable retirement plan and that planning to spend a fixed inflation-indexed spending level is a poor approach. However, I would gently push back against your recommended approach of targeting a specific retirement age using two lines of argument. The first line of argument looks at what I think of as common human behavior outside of the VPW Accumulation Worksheet. I do not think most people think of retirement as something that they aim for at a specific age, spending whatever is available to them when they reach that age regardless of their financial circumstances. Let's say someone were to receive a large windfall. This could be a large inheritance or something like private c...
by longinvest
Thu Feb 29, 2024 7:59 am
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

My comp is a mix of salary - which I always get, stock grants which vest over multiple years - so I always get "something" (how much depends on stock performance and how the good/bad the prior year's vests were), a bonus which I either get - or don't, with some additional variable income that is paid as an "advance" - meaning if I miss my metrics at year end, I could owe the money back. It's that "advance" part, and the timing of a potential "pay back" - which could see a negative $100k adjustment - not to my "salary" - but to my overall income... SnowBog, I think that you have a complex (business-like) situation. Generally speaking, when using the accumulation worksheet, an advance is a lo...
by longinvest
Mon Feb 26, 2024 8:05 pm
Forum: Personal Finance (Not Investing)
Topic: Help Me Understand VPW Accumulation Worksheet
Replies: 11
Views: 1580

Re: Help Me Understand VPW Accumulation Worksheet

Let me start by saying that I am a big fan of the VPW Retirement Worksheet. I plan to use it in a few years when I retire to help me decide on my yearly withdrawal amount. I have looked into it thoroughly. I believe I understand it well. It makes perfect sense to me, and I consider it to be an excellent and elegant tool. On the other hand, I don't understand the VPW Accumulation Worksheet. Maybe I need someone to explain it to me like I'm five. I'm probably missing something somewhere. To me, it seems like it's a mathematical situation where there are too many variables and not enough equations to solve for all the variables. Clearly, my current salary minus my annual savings minus my pension contributions must equal my current taxes/expen...
by longinvest
Mon Feb 26, 2024 9:51 am
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

[The content of this post is copied with minor modifications from this post on the main VPW thread] A frequent question, in our forums, is " How much should I save? " A good answer to this is " As much as you can, but not so much as to live like a pauper. " But, this is imprecise. The VPW Accumulation Worksheets provides an adaptive answer to this question by aiming for a similar amount available for taxes and expenses during accumulation and retirement. It's a conservative goal, as taxes during retirement are often lower (as a percentage of gross income) than during accumulation. So, here's a realistic simulation, in constant dollars , of an accumulating investor aiming for retirement or financial independence at age 6...
by longinvest
Mon Feb 26, 2024 9:14 am
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

Raspberry-503 wrote: Mon Feb 26, 2024 9:07 am I'm not sure what "business people" means. I don't think that applies to me?
Raspberry-503, it's right there at the top of the post!
longinvest wrote: Mon Feb 26, 2024 8:43 am SnowBog, the VPW Accumulation Worksheet wasn't designed for business people. The complexity of business situations is far outside the scope of such a simple tool. Many business owners take on huge debts. They control how much salary or dividends they pay themselves (or refrain from doing it, some years, for tax purpose). When fiscaly convenient, they can even borrow from their business instead of receiving income. They have astute business accountants to help them.
by longinvest
Mon Feb 26, 2024 8:45 am
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

As I felt this Accumulation specific discussion was more applicable in the actual Accumulation thread, I pasted it there - and have no objections if the mods want to move the other posts to the same thread. You can read the start of my post below, or go to the Accumulation thread for the full response . Note: below is a reply to longinvest for an Accumulation related discussion, which felt more appropriate to post here than in the main VPW thread. tl;dr version: Accumulation sheet works brilliantly when the assumption of your pre-/post-retirement "amounts available for taxes and expenses" are similar is true. If this applies to you, quit reading this post - as the rest is "just noise"... But if that assumption isn't tru...
by longinvest
Mon Feb 26, 2024 8:43 am
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

For "regular" W2 workers, their income - and thus savings - is usually fairly consistent from year to year. My working theory is the accumulation worksheet works just fine for these folks (which is likely the majority of people). SnowBog, the VPW Accumulation Worksheet wasn't designed for business people. The complexity of business situations is far outside the scope of such a simple tool. Many business owners take on huge debts. They control how much salary or dividends they pay themselves (or refrain from doing it, some years, for tax purpose). When fiscaly convenient, they can even borrow from their business instead of receiving income. They have astute business accountants to help them. In our personal case - our joint base i...
by longinvest
Mon Feb 26, 2024 7:12 am
Forum: Personal Finance (Not Investing)
Topic: The VPW Accumulation Worksheet
Replies: 109
Views: 18887

Re: The VPW Accumulation Worksheet

I wanted to chime in that I agree that the VPW Accumulation Worksheet also does not fully match my financial situation and goals. Phrased simply, the VPW Accumulation Worksheet assumes the user wants to smooth their consumption (level of spending) between accumulation and retirement. Furthermore, it calculates this each year within the constraints of the income available that year, the portfolio size that year, and the desired age of retirement. As a result, it will try to find a savings rate such that at retirement age X the user will be able to spend the same amount in retirement as they would spend now (i.e. today's salary minus savings). The place where that assumption breaks down for some (and I dare say many) users is that many users...
by longinvest
Sun Feb 25, 2024 10:41 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

longinvest, do you have a post somehow on how to utilize the retirement worksheet after one has reached the financial independence number but continues to work? I think that would be interesting to read. Tj, I haven't provided a detailed example. But, I've briefly explained how to do it in another thread: Eventually, when you'd reach financial independence age, you could switch to using the Retirement worksheet to determine how much you can spend (after estimating and subtracting taxes from the amount suggested by the worksheet). You'd spend that amount off your paycheck and continue investing whatever remains. Continuing to work, once financially independent, would allow you to slowly and safely increase your standard of living without fe...
by longinvest
Sun Feb 25, 2024 10:11 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Here's a realistic simulation showing how the VPW Accumulation Worksheet (often called accumulation sheet ) works. But, before I get into the simulation, let me restate the tool's objective. A frequent question, in our forums, is " How much should I save? " A good answer to this is " As much as you can, but not so much as to live like a pauper. " But, this is imprecise. The VPW Accumulation Worksheets provides an adaptive answer to this question by aiming for a similar amount available for taxes and expenses during accumulation and retirement. It's a conservative goal, as taxes during retirement are often lower (as a percentage of gross income) than during accumulation. So, here's the realistic simulation, in constant do...
by longinvest
Sun Feb 25, 2024 9:51 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

To repeat myself, I'm not attempting to criticize the worksheet. If I haven't been clear in stating so, my apologies - that was never my intent. At the end, it's just a tool (and an exceptional one at that :beer), and you are correct that it's up to the user to use it properly - as with any tool. More to the point, this particular tool is based on having "fixed" (entered) inputs on: Income Portfolio size Working years remaining (difference from Retirement Age - Age) Pensions / Retirement income AA SnowBog, This is incorrect. The worksheet is adaptive . It assumes that inputs will change over time . The worksheet isn't meant to be used once and forgotten. It's supposed to be used regularly. But, effectively, when making its annual...
by longinvest
Sun Feb 25, 2024 3:33 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Consider someone starting out with the "defaults" ($70k/year income, $50k portfolio, retire at 60), who experiences wage/career growth and avoids "lifestyle creep" . As they make more - and don't spend more (absent the extra taxes on the extra income) - they can save more, which following the Shockingly Simple Math Behind Early Retirement , would mean they could retire earlier . But that's not reflected in the Accumulation worksheet, instead the Accumulation worksheet is going to adjust its internal calculation of "available for taxes and expenses" - which could make it appear as they need to "save more and save longer" than they actually do. SnowBog, they can keep the same target retirement age or c...
by longinvest
Sat Feb 24, 2024 9:51 am
Forum: Investing - Theory, News & General
Topic: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Replies: 784
Views: 236880

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 and additional information expressed in January 2024 dollars:

Image

Inflation-adjusted initial portfolio balance: $1,206,121

Inflation-Adjusted Historical Annual Retirement Income
  • 2019: $91,815 (annualized) -- $45,908 in 6 months, starting retirement in July
  • 2020: $91,133
  • 2021: $95,640
  • 2022: $90,741
  • 2023: $81,363
  • 2024: $79,174 (annualized) -- $13,196 in 2 months
by longinvest
Sat Feb 24, 2024 9:50 am
Forum: Investing - Theory, News & General
Topic: A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test)
Replies: 784
Views: 236880

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 January 2024. We're interested to calculate an average CPI-U to associate with our forward test at the end of January 2024. Here are the last 12 CPI-U values: Month CPI-U 02/2023 300.840 03/2023 301.836 04/2023 303.363 05/2023 304.127 06/2023 305.109 07/2023 305.691 08/2023 307.026 09/2023 307.789 10/2023 307.671 11/2023 307.051 12/2023 306.746 01/2024 308.417 We take note that the average CPI-U for the last 12 months at the end of January 2024 was 305.472 . Last year, we calculated that the average CPI-U for the last 12 months at the end of January 2023 was 294.157 . The trailing 1-year average inflation at the end of January 2024 was ...
by longinvest
Fri Feb 23, 2024 10:03 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

The reality of the example might not make sense, but I saw the answer to the OP's question the moment I input his example numbers. @longinvest, you hit the nail on the head when you said, "...the investor's financial situation." An investor with a 60/40 portfolio of $1MM (doesn't matter how it got there), with 17 years to go until retirement, making $50-95k should have no trouble living off that portfolio if their standard of living stays in the $50-95k range (in today's dollars) in retirement. Therefore, VPW suggests no contribution on the Accumulation tab. Makes perfect sense to me. The other nail you hit was SS; OP didn't indicate if any DBP's were entered. Even if they are all zero, the outcome is still reasonable. :beer Skip...
by longinvest
Fri Feb 23, 2024 6:08 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

1,000,000 Portfolio Balance Age 50 60/40 Stocks/Bonds Retirement age 67 Salary 95,000 yields 95,000 available for taxes and expenses Salary 50,000 yields 50,000 available for taxes and expenses. It's like the spreadsheet is capping the retirement income at the the level of current salary. I'm not longinvest (obviously), but my interpretation is that the spreadsheet is set up to try to maintain a constant annual expenditure during both accumulation and retirement phases. So it functions by looking at what you have available for taxes and expenditures during accumulation and trying to mirror that in retirement. The spreadsheet doesn't really deal with scenarios where you are anticipating a big change in your spending (either up or down) duri...
by longinvest
Fri Feb 23, 2024 5:49 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Longinvest, On the Accumulation tab, when I put in a large value for Portfolio Balance and a relatively low value for Annual Salary, I see the Monthly Portfolio Contribution suggested for 2024 is zero, which makes sense. However, if increase the Annual Salary (with the recommended monthly contribution STILL at zero), the projected retirement income goes UP. Why does the spreadsheet disregard some of the Portfolio balance as unusable when the Annual Salary input is low? What is the reasoning behind having some of the Portfolio Balance unattributed or unusable? Go_Tigers, the objective of the Accumulation sheet is to suggest a sensible portfolio contribution amount based on the investor's financial situation. Most accumulating investors don'...
by longinvest
Thu Feb 22, 2024 6:58 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

GaryA505 wrote: Thu Feb 22, 2024 6:19 pm If you have $1M and are withdrawing $40k/yr, it seems to that giving an extra $2k/yr to the IRS is significant.
So, as we're discussing Bbrock's post and my reply, you'd prefer for the investor to pay 0.30% of a $3,333,333 portfolio, of which $1,000,000 (or 30%) is taxable, to Vanguard's PAS instead. That's paying an extra $10,000 to the financial industry, to avoid paying an extra $2,000 in taxes.
:oops:

And your calculation is wrong. It's $2,000 of a $133,333 withdrawal using the illogical 4% SWR withdrawal method ($3,333,333 portfolio, of which $1,000,000 is taxable, X 4%). That's before even considering that the analysis is flawed, as Zie acknowledged.
by longinvest
Thu Feb 22, 2024 4:42 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

Everyone keeps saying AOA is miserable because of dividends, so I decided to compare VT vs AOA. According to nasdaq.com[0], the difference in dividend yield between AOA and VT is .36% For every $10k of AOA in taxable, it's an extra $13.32 in taxes at the 37% tax bracket. So for a 1M portfolio of AOA vs VT, AOA will cost you an additional $3,600 of income in taxable. At the 37% tax bracket that's an additional $1,332 in tax. I don't know what magic AOA does to have such a small difference between VT, or if my math is just wrong(totally possible), but based on this, I'm definitely not losing sleep over having AOA in taxable vs VT and complicating my portfolio. Yes, convenience(laziness) has a cost, but it doesn't seem to be much of one. 0: A...
by longinvest
Wed Feb 21, 2024 7:25 pm
Forum: Investing - Theory, News & General
Topic: Variable Percentage Withdrawal (VPW)
Replies: 2256
Views: 608457

Re: Variable Percentage Withdrawal (VPW)

Hi longinvest, I am sure this has been asked but I couldn't find the answer using the search function. For Accumulators and Retirees, how would you handle a known windfall occurring in a date in the future (say 5 years from today?). Is there a way to model that with the VPW spreadsheet? Or should it not be included until it's received. I'm thinking presumably if you knew you were receiving $500k from the sale of a house, business, inheritance, gift, etc., it would impact how much you could withdraw/need to save? Silent cal, SnowBog and Raspberry-503 already replied above, but I'll add the following. Merriam-Webster defines windfall as an unexpected , unearned , or sudden gain or advantage . If the windfall is unexpected, it's obviously dif...
by longinvest
Sun Feb 18, 2024 3:03 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

Hi everyone, I finished reading through this entire thread and had a clarifying question: I'm a young investor in my 20s. I have been using the Boglehead VPW Accumulation worksheet to determine my biweekly savings goal which I have set to auto-invest into my 401(k). Currently, I'm making $65,000 with a 90/10 asset allocation in a TDF. That amount per the VPW spreadsheet is $425 per paycheck (assuming retirement at 55 with $50k in existing assets and $2,686 in SS benefits at age 70 not adjusting for inflation). That's a 17% savings rate. I'm really loving the appeal of the one-fund portfolio. I like the idea of once every year running the VPW accumulation spreadsheet to determine my bi-weekly savings amount, and otherwise not having to do a...
by longinvest
Sun Feb 18, 2024 2:51 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

bbrock wrote: Sun Feb 18, 2024 1:51 pm if you eventually have access savings and fund a taxable account, invest into VTI, and if that gets big, then put your retirement into VSMGX.
This would be inconsistent with this thread. To be consistent with this thread and preserve a lifelong 80/20 stocks/bonds asset allocation, the iShares AOA ETF could be used.
by longinvest
Sat Feb 17, 2024 8:12 pm
Forum: Investing - Theory, News & General
Topic: The One-Fund Portfolio as a default suggestion
Replies: 904
Views: 241950

Re: The One-Fund Portfolio as a default suggestion

In this thread, I have proposed that a One-Fund Portfolio is good enough . I have not proposed that it's optimal . I have explained various advantages of such a simple portfolio for a less-knowledgeable surviving spouse or care taker, or for helping the investor avoid behavioral pitfalls . If an investor prefers to hold a multi-fund portfolio, I have no problem with that. I'm actually a big fan of Taylor's Three-Fund Portfolio . I even held it for a while, but unfortunately, I couldn't resist tinkering with my portfolio. It's only by moving my portfolio into a single all-in-one index ETF in all accounts that I've succeeded to stop tinkering with my portfolio. In the first post, I've identified a series of flaws prevalent in arguments agains...
by longinvest
Sat Feb 17, 2024 7:13 pm
Forum: US Chapters
Topic: Roll Call for the Retirement Class of 2024!
Replies: 142
Views: 44209

Re: Roll Call for the Retirement Class of 2024!

Wow longinvest! Welcome to the Retirement Roll Call and this Great Class of 2024 - now you can put all your hard work preparing the VPW into action! Thanks, Miriam! I'm looking forward to putting the retirement worksheet in practice. And you're much too modest, longinvest :happy For the last 10 years, longinvest has created, invented, fiddled with and updated worksheets, spreadsheets and graphs in many sizes and colors, for stocks and bonds and everything in between, then posted them here on the BH forum for all of us to learn from and use :D Variable Percentage Withdrawal (VPW) A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test) The One-Fund Portfolio as a default suggestion The VPW Accumulation Workshe...