Marseille07 wrote: ↑Thu Nov 24, 2022 3:16 pm
Yes that's the table I'm talking about.
Front-loading means you spend a high percentage of your portfolio early on. I don't see how else you can front-load spending.
Also, when you're using VPW, your "WR need" doesn't really drop much because your portfolio doesn't grow and can even shrink as you take out 6%~8%/year. This person can't just drop their WR to 2% when they receive SS (though they can certainly *lower* WR, it might not be a big drop). But that's just unavoidable when you front-load your spending early on.
Couple of clarifying points...
Specifically, one shouldn't "compare" the WR
of SWR and VPW.
The typical 4% WR of SWR applies only
to the initial
withdrawal, after which it is updated with inflation - and as a % of portfolio could be significantly more - or less - than VPW. It's goal is to attempt to "normalize" spending, such as spend the inflation adjusted equivalent of $x each year. Most likely, you'll leave behind a large portfolio when you die, but if you catch a bad sequence of returns and don't adjust you could end up broke.
WR of VPW can change every year (based on age), but is applied every withdrawal
against the portfolio - this the withdrawal amount will vary as the portfolio balance varies. It's designed to not prematurely deplete the portfolio (although it will reduce the amount available to spend if needed) but also to avoid leaving you with a large unspent balance.
As a gross generalization, under "normal" conditions VPW will let you spend more annually and have a smaller ending balance.
The VPW spreadsheet simplifies the process, and accounts for things like social security - where you'll need to "replace" the social security money during earlier years with withdrawals from the portfolio, which will be balanced by smaller withdrawals when social security kicks in.
But I'm not sure I'd call this "front loading". Again, it's likely more than SWR, but it's still a reflection of the portfolio with the intent of "lifetime" spending. There's nothing inherent
in VPW that will force a "higher" early spend (for more travel/etc. while younger/healthier) and a "reduced" later spend (when you reduce travel). VPW can guide your withdrawals and be used per OP as a "rule" to prevent being a "miser", as you could spend (inclusive of taxes) or gift/donate the suggested withdrawal amount. But if you want to budget for and spend "more" in your early retirement years, VPW alone isn't going to give you a good view of how that works for your plan.