Variable Percentage Withdrawal (VPW)

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Wannabe
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Re: Variable Percentage Withdrawal (VPW)

Post by Wannabe » Tue Jul 15, 2014 4:53 pm

Cut-Throat, do you mind sharing your withdrawal percentage on a 30/70 allocation? I'm at just the inverse of you, but I'm maybe 4-years from pulling the trigger. Thanks.

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Cut-Throat
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Re: Variable Percentage Withdrawal (VPW)

Post by Cut-Throat » Tue Jul 15, 2014 5:02 pm

Wannabe wrote:Cut-Throat, do you mind sharing your withdrawal percentage on a 30/70 allocation? I'm at just the inverse of you, but I'm maybe 4-years from pulling the trigger. Thanks.


For a 37 year plan with a 30% Stock/ 70% Bond allocation in VPW, the starting Withdrawal percentage is 4.3%, but of course this increases with age.

Your question makes me think that you have not run VPW yet? Correct?
VPW varies withdrawal percentage with Age, so there is not a "Withdrawal Percentage" as your question infers.

longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Tue Jul 15, 2014 5:36 pm

apog wrote:To longinvest: Thanks! for all of the work regarding VPW. Steady state solutions to a dynamic problem always bug me, but I'm neither imaginative nor knowledgeable enough to develop an approach like yours. The simplicity (ie multiply balance by up to max of VPW percentage) & 'never fail' are very attractive to me and the higher VPW vs SWR amount sure would be FUN.


Dear Apog,

It's a whole set of people that you should thank: Cut-Throat, Siamond, LadyGeek, and many other Bogleheads who have helped through their comments and collaboration on this thread.

Haven't committed to VPW yet, but we (age 59 for me, 57 for wife) are seriously considering implementing under this scenario beginning next year:
[... specific information ...]


I invite you to start a new thread in the Help forum to discuss your specific situation (Hints for asking questions: viewtopic.php?f=1&t=6212). If you put "VPW" somewhere in the title of your thread, I'm sure you'll get the attention of VPW contributors. :happy

I'd like, as much as possible, to keep this thread focused on the discussion and developement of VPW.

Have really enjoyed this thread. Thanks once again for the ideas and spreadsheet.


You're welcome!
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Wannabe
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Re: Variable Percentage Withdrawal (VPW)

Post by Wannabe » Tue Jul 15, 2014 5:59 pm

Cut-Throat wrote:For a 37 year plan with a 30% Stock/ 70% Bond allocation in VPW, the starting Withdrawal percentage is 4.3%, but of course this increases with age.

Your question makes me think that you have not run VPW yet? Correct?
VPW varies withdrawal percentage with Age, so there is not a "Withdrawal Percentage" as your question infers.


No, I haven't run it yet for my situation. Interesting that it starts out at 4.3% for your scenario. I hope to tinker with the spreadsheet some more soon. Thanks for the detail.

apog
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Re: Variable Percentage Withdrawal (VPW)

Post by apog » Tue Jul 15, 2014 8:07 pm

Cut-Throat wrote:
apog wrote: Portfolio would continue to be 60% stock & 40% bond. Withdrawal variability backtesting with years like 1966 produce acceptable results for us (ie might take just one trip in bad years).

Can I ask why you would be still 60% Stock in your retired years? It sounds like you have enough ???? --- So, why risk it? I am 30% Stock/70 Bond..... At this point just trying to not lose $$$. I feel I have won the game, so why keep playing.

You mentioned if the 1966 scenario played out, you would only take 1 trip in a bad year. You could adjust your asset allocation and pretty much keep doing what you're doing. IOW - What are you trying to accomplish with 60% stocks? One of the goals of VPW is to spend your $$$, so you don't leave a pile on the table.


Hi. Re allocation, it's a combination of inertia and just that I'm comfortable with the allocation. It takes me awhile to convince myself regarding change. Will give it more thought when I roll over my 401k into Vanguard.

Also, I like your overall sense of optimism from your comments in the thread. It's good to remember there's an upside too.

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Sat Aug 02, 2014 4:23 pm

siamond wrote:
longinvest wrote:Siamond, let me try to summarize what you are seeking, just so that you can correct me if I am wrong. You're looking for a withdrawal method:
  • that can deliver smooth withdrawals regardless of AA,
  • that can continue to deliver sufficient withdrawals, in case you live longer than anticipated,
  • that lets you specify a target bequest.

Is this what you seek? If yes, I will start a new thread with a different proposal that addresses such constraints using some (hopefully nice) new ideas that I got! (It's actually different from VPW, due to your hard constraints).

Well, I would rephrase.

1. The primary point is really to aim at keeping an average trajectory of the portfolio centered on a predefined & sustainable value (in real $) while extracting (variable & optimal) income through withdrawals.
=> This addresses longevity risk, this addresses early retirement (hence -hopefully- long retirement), this addresses the desire for a bequest, this addresses self-insured LTC, this addresses the desire to plan for the worst as well as plan for the best (and everything in-between), etc. Simply focusing on the bequest isn't quite the point. And viewing it as a separate bucket of sorts is actually CONTRARY to my goals. No buckets! :wink:

2. Then yes, get variable yet reasonably smooth withdrawals - again while planning for the worst as well as planning for the best
=> Note that short-term smoothing is easy (the average technique I described does it). What is trickier is mid-term smoothing (avoid unnecessary humps).

3. And indeed not imply undue constraints on the AA in the process.

Sounds to me those should be fairly common goals. Taking maximum advantage of a sustainable portfolio, plus limited jitters on withdrawals, is really the bottomline. Those could be viewed as two separate problems solved by their own separate devices, actually. Or maybe kill two birds with one stone. I'm all ears...


As promised, I have just started a new thread to investigate this: viewtopic.php?f=10&t=144089
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antiqueman
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Worst Start year For VPW method

Post by antiqueman » Sat Aug 23, 2014 2:52 pm

[Thread merged into here, see below. --admin LadyGeek]

I have been testing VPW calculator . I think it defaults to 1972 for the year to begin the simulation.

For those of you who understand VPW well, can you tell me which year I should use if I want to forecast the worst 30 year period in history?

I am anticipating 30 years in retirement so would like to run the forecast for the worst 30 years in the past.


Also, how does VPW differ from Jim's Otar "aftercast " calculator?

Thanks.

antiqueman
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Re: Worst star year fir VPW method

Post by antiqueman » Sat Aug 23, 2014 2:58 pm

Sorry for the typos.

I meant Start year For VPW. I hit send before checking the spelling. How do I correct the errors?

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Re: Worst start year for VPW method

Post by livesoft » Sat Aug 23, 2014 3:07 pm

click on the edit button
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek » Sat Aug 23, 2014 3:21 pm

I fixed the thread title, then decided to merge the thread into the one which will provide the expert answers (here).
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Re: Worst Start year For VPW method

Post by Cut-Throat » Sat Aug 23, 2014 3:37 pm

antiqueman wrote:[Thread merged into here, see below. --admin LadyGeek]

I have been testing VPW calculator . I think it defaults to 1972 for the year to begin the simulation.

For those of you who understand VPW well, can you tell me which year I should use if I want to forecast the worst 30 year period in history?

I am anticipating 30 years in retirement so would like to run the forecast for the worst 30 years in the past.


Also, how does VPW differ from Jim's Otar "aftercast " calculator?

Thanks.


Your worst start year probably depends on your point of view and your asset allocation.

1966 is pretty grim due to the inflation of the late 70s and early 80s.... and the stagnate Stock market.

1937 is ugly also, with the depressed market and inflation after WWII

I read Otars Book and did not recall him suggesting a Variable Percentage Withdrawal Calculator.

VPW has a couple different goals than other Withdrawal Calculators.

1.) It cannot Fail - Ever!
2.) It strives to maximize withdrawals, so it gives you more to spend in your early retirement years than others.
3.) It will consume ALL of your Portfolio in your designated time frame. (Again you get to spend more money than other withdrawal methods!)

No other Retirement Calculator does this, that I know of.

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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek » Fri Aug 29, 2014 4:02 pm

FYI - Ken. is comparing VPW vs. Firecalc, he has a question: Variable Percentage Withdrawal Spreadsheet vs Firecalc.com
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek » Fri Aug 29, 2014 10:42 pm

Google has decided to "improve" the spreadsheet viewer experience, meaning that they broke the wiki's download instructions. :annoyed

Thanks to someone kind enough to fill out our wiki feedback form to report the problem,* I revised the download procedure. See: Variable percentage withdrawal

* "Help improve this page" is at the bottom of every wiki article.
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Re: Variable Percentage Withdrawal (VPW)

Post by Ken. » Tue Sep 02, 2014 6:53 pm

I have a question about the 'Withdrawal Statistics for Every Start Year' graph that shows the inflation adjusted median and minimum withdrawal amounts. I assume the minumum withdrawal amount is the minimum withdrawal amount that occurred during the specified period beginning from the Start Year indicated.

With the numbers that I used over a 45 year period the minimum withdrawal amount was about 25% below my minimum required income. However I wanted to know how frequently this happened so that I could work out how much I would need to put aside in a rainy day fund to cover this.

So I thought of another approach where maybe I could assume a normal distribution curve between the median withdrawal amount (assuming that was also the average) and the minimum, and then roughly say there is 3 standard deviations between those two points. Then use 2 standard deviations to calculate a minimum withdrawal amount that is at the 95% confidence level.

Then I could use that number as being my minimum required income.

I just want to have a high degree of confidence that the income generated doesn't fall below my minimum requirements for all periods, or that I have enough set aside to cover the shortfalls. Any thoughts?

Great spreadsheet by the way!

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Re: Variable Percentage Withdrawal (VPW)

Post by Cut-Throat » Tue Sep 02, 2014 7:18 pm

Ken. wrote:I have a question about the 'Withdrawal Statistics for Every Start Year' graph that shows the inflation adjusted median and minimum withdrawal amounts. I assume the minumum withdrawal amount is the minimum withdrawal amount that occurred during the specified period beginning from the Start Year indicated.

With the numbers that I used over a 45 year period the minimum withdrawal amount was about 25% below my minimum required income. However I wanted to know how frequently this happened so that I could work out how much I would need to put aside in a rainy day fund to cover this.

So I thought of another approach where maybe I could assume a normal distribution curve between the median withdrawal amount (assuming that was also the average) and the minimum, and then roughly say there is 3 standard deviations between those two points. Then use 2 standard deviations to calculate a minimum withdrawal amount that is at the 95% confidence level.

Then I could use that number as being my minimum required income.

I just want to have a high degree of confidence that the income generated doesn't fall below my minimum requirements for all periods, or that I have enough set aside to cover the shortfalls. Any thoughts?

Great spreadsheet by the way!


My rule of Thumb is that you should easily be able to cut your expenses by 50% of your Initial Withdrawal of VPW. If you cannot, you probably should not retire and keep working until you are able to.

No slick formula will save you if Markets tank badly or inflation rears it's ugly head.

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Tue Sep 02, 2014 9:52 pm

Ken,

I like Cut-Throat's rule of thumb.

Personally, I am very much in favor of, first, building a solid floor using delayed Social Security, and using a CD or TIPS ladder to bridge the gap between retirement and Social Security, and, second, build on top of that using VPW.

I have very low confidence in statistical approaches. The reason I built the back-testing spreadsheet was not to predict the future, but to get a good feel of the range of scenarios that have happened in the past. But the data is quite limited: U.S. and Canadian data only, so far. Japan had quite a different investment return history, but the data is not available without restrictions.

So, will the future be better or worse than the past? I just don't know. But, I won't live my life afraid of the future. I know that VPW won't fail. If VPW significantly reduces my withdrawals, all those people using 3% and 4% SWR will be facing high risks of portfolio depletion and will probably reduce their withdrawals, too. Even insurance companies might be facing a difficult time. Having both bonds and stocks, and being flexible with spending by reducing portfolio withdrawals to sustainable levels might be the only reasonable approach to face such a bad crisis.

Having a floor of Social Security (and associated bridge) is important for peace of mind.
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Re: Variable Percentage Withdrawal (VPW)

Post by mortal » Tue Sep 02, 2014 10:35 pm

Up until now, I've been using a SWR of 3% to forcast my number...

myNumber = myYearlyExpenses / 3%

I was all excited about having a new formula til I attempted to to adjust it for a 50% loss on a 50/50 stock / bond AA

.75 (50% loss on 50/50 s/b AA) * .041 = .03075 right? Or, roughly 3%

Seems I'm right back where I started. Oh well. :annoyed

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Tue Sep 02, 2014 10:45 pm

mortal wrote:Up until now, I've been using a SWR of 3% to forcast my number...

myNumber = myYearlyExpenses / 3%

I was all excited about having a new formula til I attempted to to adjust it for a 50% loss on a 50/50 stock / bond AA

.75 (50% loss on 50/50 s/b AA) * .041 = .03075 right? Or, roughly 3%

Seems I'm right back where I started. Oh well. :annoyed


The goal of VPW is not to lead Bogleheads to save less for retirement! It is to allow them to actually enjoy spending it without having to deprive themselves until there's a need for deprivation, if any.

But, before retiring, one must make sure to have accumulated (a little more than) enough. For guessing the required amount, the good old SWR rule of thumb is not so bad. Using Cut-Throat's rule of thumb should give a similar result. It's a rule of thumb, though. It might be too conservative or too aggressive, unless you have a crystal ball, there's no way to know.
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Tue Sep 02, 2014 11:01 pm

FYI, I personally use:

myNumber = (myYearlyGenerousExpenses - floor) / 3.5% + buffer + YearsUntilFloor * floor

for my 50/50 portfolio. I expect to be able to cut into the "generous" part without feeling deprived.
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Wed Sep 03, 2014 5:53 am

Just in case there was any ambiguity: I intend to use VPW. If I am lucky, I'll have way more than planned during retirement. If I am unlucky, I might only get what I planned for. It would take a pretty disastrous scenario for me to get much less than planned over a long period. Yet, even then, I should be able to live comfortably.
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Re: Variable Percentage Withdrawal (VPW)

Post by Cut-Throat » Wed Sep 03, 2014 8:08 am

mortal wrote:Up until now, I've been using a SWR of 3% to forcast my number...

myNumber = myYearlyExpenses / 3%

I was all excited about having a new formula til I attempted to to adjust it for a 50% loss on a 50/50 stock / bond AA

.75 (50% loss on 50/50 s/b AA) * .041 = .03075 right? Or, roughly 3%

Seems I'm right back where I started. Oh well. :annoyed


Think about it. If you cannot reduce your expenses easily by 50% of your Portfolio Withdrawal Amount, you aren't going to have that pretty of a retirement anyway. I don't think you want to retire with no Vacations, New Cars, Restaurants, Expensive Home Remodeling Projects, etc in your retirement budget.
So, make sure there are plenty of 'Luxuries' in your "myYearlyExpenses" number and then use VPW to keep you on track!

Here is the Formula I came up with for determining an adequate Nest Egg.

Nest Egg = (( Non Discretionary Budget * 2) - Annual Pension Amts and or S.S.) * 25

There has to be some flexibility in your budget to cut back if necessary. My formula for having 'Enough' $$$ to retire. (The constant of '2' is there to cut expenses by 50%, if need be)

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Re: Variable Percentage Withdrawal (VPW)

Post by Ken. » Wed Sep 03, 2014 6:27 pm

Thanks. For me once delayed Social Security kicks in that should be enough to cover any shortfalls in the VPW amounts.

Given that here is a calculation that I came up with for my number.

My Number = VPW Assets + RainyDayFund where RainyDayFund = (Minimum Income Requirement - InflationAdjustedMinumumWithdrawalAmount (for every Start Year)) x YearsTillSocialSecurity.

My VPW Assets are currently around 30 times my miniumum income requirements.

I guess instead of the InflationAdjustedMinumumWithdrawalAmount I could use FirstYearVPW/2 as well.

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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek » Tue Sep 23, 2014 8:34 pm

Thanks to the wiki's reader feedback,* a reader has identified a download problem with Google. I'm getting a download error:
Sorry, you can't view or download this file at this time.

Too many users have viewed or downloaded this file recently. Please try accessing the file again later. If the file you are trying to access is particularly large or is shared with many people, it may take up to 24 hours to be able to view or download the file. If you still can't access a file after 24 hours, contact your domain administrator.

I've never seen this error before. Did we exceed Google's capacity? :D

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Re: Variable Percentage Withdrawal (VPW)

Post by siamond » Wed Sep 24, 2014 9:14 am

LadyGeek wrote:Thanks to the wiki's reader feedback,* a reader has identified a download problem with Google. I'm getting a download error:
Sorry, you can't view or download this file at this time.

Too many users have viewed or downloaded this file recently. Please try accessing the file again later. If the file you are trying to access is particularly large or is shared with many people, it may take up to 24 hours to be able to view or download the file. If you still can't access a file after 24 hours, contact your domain administrator.

I've never seen this error before. Did we exceed Google's capacity? :D

*"Help improve this page" at the bottom of every wiki article. No login required.

Actually, I got the very exact problem yesterday and the day before, while trying to download a (perfectly legal!) copy of Microsoft Office on a newly acquired Mac. Strangely enough, it worked fine on a PC (then I transferred the file to the Mac via Google Drive, and installed the software on the Mac). Weird.

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Re: Variable Percentage Withdrawal (VPW)

Post by morph » Wed Sep 24, 2014 11:04 am

I've been trying to download that file for days :-( Can someone fix or send in a PM?

Mike

longinvest
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Wed Sep 24, 2014 1:04 pm

morph wrote:I've been trying to download that file for days :-( Can someone fix or send in a PM?

Mike


Hi Mike, I have added a new download link (Dropbox) on the VPW Wiki Page. Hopefully, one of the two links will work.
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Re: Variable Percentage Withdrawal (VPW)

Post by morph » Wed Sep 24, 2014 1:20 pm

Thank you! That DB linked worked fine.

Mike

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Re: Variable Percentage Withdrawal (VPW)

Post by morph » Wed Sep 24, 2014 1:58 pm

Now I've managed to open this up... I have a couple of question:

Does this work for UK based allocations? When I look at what my investments may go into, I see in the UK Vanguard All World ETFs and FTSE ones too - so I get that its domestic and Intl. But in terms of how a UK person enters data, is it roughly the same to just say X% Intl and Y% bond and forget the domestic, as All World includes domestic as well?

I did read through as many of the previous pages ... I don't think I understand why the % withdrawal is always set to increase - many other references talk about a *reducing* expenditure, say after 10 years of retirement.

Thanks for all the work - its a great tool.

Mike

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Wed Sep 24, 2014 2:29 pm

Mike,

The increasing percentage is a natural side-effect of spending a percentage of "current portfolio". Let me illustrate with a simple example.

Imagine that you wanted to spend 10 dollars in 5 days. You could say that you will spend $2 per day. Or, you could say that you will spend:
  • 20% on the first day. ( $2/$10 = 20% )
  • 25% on the second day. ( $2/$8 = 25% )
  • 33% on the third day. ( $2/$6 = 33% )
  • 50% on the fourth day. ( $2/$4 = 50% )
  • 100% on the fifth day. ( $2/$2 = 100% )

VPW expresses withdrawals as a percentage of current portfolio. As VPW intends to deplete the portfolio over the chosen time frame, it will naturally increase the percentage every year. As for the actual spending, it will vary with markets, according to the portfolio's asset allocation. A balanced portfolio will deliver a much smoother withdrawal stream than a high-stock portfolio.

The spreadsheet should work for UK-based allocations. The percentages computed by the VPW spreadsheet only depend on:
  1. Depletion years: the chosen number of years for depleting the portfolio (default: 35).
  2. The percentage of bonds and stocks in the portfolio: no distinction is made for various types of stocks (e.g. domestic / international).

The additional information in the VPW sheet is only used for backtesting (domestic vs international stocks, initial portfolio, start year, data set) or for presentation (start age).
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Sun Nov 16, 2014 5:46 pm

I have uploaded a new version of the VPW spreadsheet on the Bogleheads Wiki VPW Page.

Changes:
  • Display both nominal and inflation-adjusted amounts in Withdrawal and Portfolio Balance charts.

Enjoy!
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Re: Variable Percentage Withdrawal (VPW)

Post by BlueEars » Sun Nov 16, 2014 7:55 pm

Hi Longinvest, I tried to download the file and bring it up in Excel 2007. I did get a 15MB xls file. However, I get a "Security Alert - Office Validation File" message. I don't recall this happening on a previous download. Is there a problem, or is this benign, or am I doing something wrong?

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Sun Nov 16, 2014 8:10 pm

Did you download it from Google Drive or from DropBox?
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Re: Variable Percentage Withdrawal (VPW)

Post by BlueEars » Sun Nov 16, 2014 8:17 pm

longinvest wrote:Did you download it from Google Drive or from DropBox?

When I do it from Dropbox on a Win 7 PC, I get 2 files. One is zero size, the other becomes VariablePercentageWithdrawal.xls.part with 16MB. Not sure what this is doing or how to use it.

I also followed the procedure for Google Drive and get an xls file with the Security Alert message I mentioned. Now in the past I might have clicked past the security alert message which appears in a special box and looks kind of scary.

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Sun Nov 16, 2014 8:20 pm

BlueEars wrote:When I do it from Dropbox on a Win 7 PC, I get 2 files. One is zero size, the other becomes VariablePercentageWithdrawal.xls.part with 16MB. Not sure what this is doing or how to use it.

The ".part" suffix usually indicates that the download has not completed yet. Could you try downloading from DropBox again, and see if it works, this time?
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Re: Variable Percentage Withdrawal (VPW)

Post by BlueEars » Sun Nov 16, 2014 9:23 pm

OK, you were right it takes a little while to complete the download. Here is the security alert message I see:
Image

If you think it is alright to proceed then I'll ignore the message. I don't recall seeing this sort of message before when doing downloads. But then again I'm very cautious about doing them. I certainly trust you. :happy

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Sun Nov 16, 2014 9:45 pm

Let me check things, first. The last time something like this happened, it was because the spreadsheet contained a link to this site (Excel is suspicious of all links). I have removed all links, but let me check if any link was added back by mistake in my last modification.
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Sun Nov 16, 2014 9:54 pm

I downloaded the file from DropBox; it is identical to the copy on my hard drive. LibreOffice opens it without any complaint. :annoyed

LadyGeek, if you read this: I need you help! What did I do wrong that Excel doesn't like?
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek » Sun Nov 16, 2014 10:48 pm

I downloaded the file and ran both LibreOffice Calc (Linux) and MS Excel 2010 (Windows).

LibreOffice Calc does not complain, but MS Excel opens the file with a scary warning:

Image
This is known as Protected View.

MS is saying that the file structure has changed, meaning that something other than MS has messed with the file. Not the data or VBA, but the underlying internal stuff, i.e. the "guts". The most probable cause is malware and is why the warning appears. However, MS says that if you trust the source, it's OK to use.

In this case, longinvest is using LibreOffice Calc to develop the file then save in MS Excel format (going the other way, MS to LibreOffice, does not work). I'm betting LibreOffice Calc does not save the file in 100% perfect MS Excel format and is the reason for the warning. I ignored the warning (clicked on "Edit Anyway").

In MS Excel 2013, I believe the error is the Security Alert as shown by BlueEars. Here's more info, including how to turn it off: Plan Office File Validation settings for Office 2013
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Mon Nov 17, 2014 7:37 am

Thanks for the information, LadyGeek.

This situation could lead people to worry about the safety of using the spreadsheet. Is there any solution other than trying to get hold of a Windows computer with an Excel license? [I do not like the idea of using commercial software; it can threaten the long-term life of the spreadsheet once the commercial software becomes unsupported and dies]. Or, maybe I could simply provide the .ods LibreOffice file and let users convert the file to Excel format themselves.

VPW users: What do you think or propose?
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Re: Variable Percentage Withdrawal (VPW)

Post by dbr » Mon Nov 17, 2014 9:09 am

longinvest wrote:Thanks for the information, LadyGeek.

This situation could lead people to worry about the safety of using the spreadsheet. Is there any solution other than trying to get hold of a Windows computer with an Excel license? [I do not like the idea of using commercial software; it can threaten the long-term life of the spreadsheet once the commercial software becomes unsupported and dies]. Or, maybe I could simply provide the .ods LibreOffice file and let users convert the file to Excel format themselves.

VPW users: What do you think or propose?


I'm not a user, but trying to end run eventually creating a bona-fide Excel file is probably going to continue to be plagued by small glitches. The approach will definitely be more user friendly to the community if one bites that bullet. Does it have to be Windows? There is also the issue of Windows vs Mac.

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Re: Variable Percentage Withdrawal (VPW)

Post by BlueEars » Mon Nov 17, 2014 9:37 am

Thanks to Longinvest and LadyGeek for looking at the security issue. I'm comfortable with the situation as it stands now.

I went ahead and downloaded the VPW in Office 2007. Here is my procedure if anyone is interested:
1) Clicked on the Dropbox link to VPW here as Longinvest says: http://www.bogleheads.org/wiki/Variable_percentage_withdrawal
2) Selected Download and waited about 20 seconds for the Excel file to fully download to my computer
3) Selected the file VariablePercentageWithdrawals.xls and it comes up with a security warning box
4) Selected Open in the security warning. The Excel program stopped working. Windows brought it back up.
5) Then I was able to see the actual VPW file. It is in Comparability Mode. Saved it as an Excel Workbook (.xlsx file).
Last edited by BlueEars on Mon Nov 17, 2014 10:02 am, edited 2 times in total.

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Re: Variable Percentage Withdrawal (VPW)

Post by BlueEars » Mon Nov 17, 2014 9:39 am

Longinvest, I really like your VPW changes with the inflation adjusted data explicitly showing. Thanks!!

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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Mon Nov 17, 2014 1:30 pm

It's a brilliant idea suggested by a member of another forum as replacement for the previous inflation line.

While it works well for the Portfolio balance chart, I had to make a trade-off for the Withdrawals chart: I had to select an explicit minimum value ($10K) in order to use a logarithmic scale. As a consequence, the Withdrawals chart won't work well for small portfolios (e.g. $100K).
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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek » Mon Nov 17, 2014 3:57 pm

dbr wrote:I'm not a user, but trying to end run eventually creating a bona-fide Excel file is probably going to continue to be plagued by small glitches. The approach will definitely be more user friendly to the community if one bites that bullet. Does it have to be Windows? There is also the issue of Windows vs Mac.

The 'compatibility bullet" already bit us and is why we're doing this in LibreOffice (Open Office). In the direction from MS Excel to LibreOffice, features break. What works is going from LibreOffice to MS Excel.

Even then, you need to make accommodations to get things to "mostly work" for both. Don't worry, it's not the formulas. Chart formats and names are the problematic areas.

LibreOffice works on Windows, Linux, and Mac OS X.
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Re: Variable Percentage Withdrawal (VPW)

Post by longinvest » Fri Dec 05, 2014 12:54 pm

I have uploaded a new version of the VPW spreadsheet on the Bogleheads Wiki VPW Page.

As an experiment, I have added a visual comparison to the popular SWR method on the backtesting charts. Personally, I feel that it makes the charts harder to understand, but maybe it is of interest to new users. What do you think?

Changes:
  • Rounded VPW percentages (principle of least astonishment).
  • Added visual comparison to SWR.

Enjoy!
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Re: Variable Percentage Withdrawal (VPW)

Post by BahamaMan » Fri Dec 05, 2014 1:39 pm

longinvest wrote:I have uploaded a new version of the VPW spreadsheet on the Bogleheads Wiki VPW Page.

As an experiment, I have added a visual comparison to the popular SWR method on the backtesting charts. Personally, I feel that it makes the charts harder to understand, but maybe it is of interest to new users. What do you think?

Changes:
  • Rounded VPW percentages (principle of least astonishment).
  • Added visual comparison to SWR.

Enjoy!


I really like changes! -- The graphs are more cluttered, but there is some very valuable information there. I hope you decide to keep it!

Good Job !!

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Re: Variable Percentage Withdrawal (VPW)

Post by BlueEars » Fri Dec 05, 2014 5:59 pm

longinvest wrote:...As an experiment, I have added a visual comparison to the popular SWR method on the backtesting charts. Personally, I feel that it makes the charts harder to understand, but maybe it is of interest to new users. What do you think?
...

I wasn't sure what the "SWR withdrawal" really meant on the charts. So I had to look at the ChartData tab to see that this is what I might call "4% inflation adjusted withdrawal". If you want to keep it I'd think a descriptive note on the Instructions page might be useful. But what I'd want to know is how the withdrawals of the two methods look. This would perhaps be put in as an additional column and/or some change to the withdrawal statistics chart ... but I would not recommend this. I think the VPW sheet shouldn't try to compare methods. Maybe just add another "compare" sheet?

Perhaps another way to attack this for people who feel comfortable with spreadsheets is:
1) Add a note to the instructions directing the user to the ChartData sheet.
2) Modify the Chartdata titles with maybe smaller fonts so one can read the column headings. Right now my copy had the columns to narrow and I didn't know what was quite in them. So I had to unprotect the sheet. Another thought would be to group the columns with some column color coding, i.e. VPW oriented in one color and 4% withdrawal in another color.

I hope I'm not coming off as picking at this addition. It could be useful to many to compare VPW to a popular current approach.

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Re: Variable Percentage Withdrawal (VPW)

Post by Workinghard » Fri Dec 05, 2014 8:24 pm

Cut-Throat wrote:
mortal wrote:Up until now, I've been using a SWR of 3% to forcast my number...

myNumber = myYearlyExpenses / 3%

I was all excited about having a new formula til I attempted to to adjust it for a 50% loss on a 50/50 stock / bond AA

.75 (50% loss on 50/50 s/b AA) * .041 = .03075 right? Or, roughly 3%

Seems I'm right back where I started. Oh well. :annoyed


Think about it. If you cannot reduce your expenses easily by 50% of your Portfolio Withdrawal Amount, you aren't going to have that pretty of a retirement anyway. I don't think you want to retire with no Vacations, New Cars, Restaurants, Expensive Home Remodeling Projects, etc in your retirement budget.
So, make sure there are plenty of 'Luxuries' in your "myYearlyExpenses" number and then use VPW to keep you on track!

Here is the Formula I came up with for determining an adequate Nest Egg.

Nest Egg = (( Non Discretionary Budget * 2) - Annual Pension Amts and or S.S.) * 25

There has to be some flexibility in your budget to cut back if necessary. My formula for having 'Enough' $$$ to retire. (The constant of '2' is there to cut expenses by 50%, if need be)


I love this Cut Throat. It makes me feel so much better with the option of decreasing expenses. I've been "padding" by multiplying our annual expenses by 30 and not factoring in SS. It's also nice to know we can increase our spending when the time comes. T- 16 months for my husband (Medicare age).

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Re: Variable Percentage Withdrawal (VPW)

Post by LadyGeek » Fri Dec 05, 2014 10:50 pm

longinvest wrote:I have uploaded a new version of the VPW spreadsheet on the Bogleheads Wiki VPW Page.

As an experiment, I have added a visual comparison to the popular SWR method on the backtesting charts. Personally, I feel that it makes the charts harder to understand, but maybe it is of interest to new users. What do you think?

To follow BlueEars' comments, how about a check box to turn the SWR comparisons on/off? When the box is checked, the SWR comparisons are shown. When the box is unchecked, the charts look like they did before (no SWR is plotted).

This technque is done in Simba's backtesting spreadsheet Portfolio tab to show 3-year, 5-year, 10-year, 15-year rolling returns. Just check the box to show as much as you like. The same technique could be applied here. :wink:
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Re: Variable Percentage Withdrawal (VPW)

Post by Hexdump » Sat Dec 06, 2014 9:00 am

I follow this thread closely and try and keep the most current spreadsheet downloaded.

One thing that I was trying to do was to vary the projected growth of my portfolio.
We use a 100% allocation to Wellesley and I wanted to use their growth % since inception. I pare it down a bit at 6% which I think is reasonable. (Probably get a few arguments re this)
So, is there a way in the spreadsheet to adjust for this ?

Thanks for a terrific tool.

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