Bogleheads' Variable Percentage Withdrawal Method--Pros and Cons
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- Опубліковано 4 жов 2024
- Today we'll look at the Variable Percentage Withdrawal method first introduced on the Bogleheads forum. It's a very easy retirement withdrawal strategy to follow, and it's designed so that a retiree never runs out of money (well, in theory).
I do think there are several serious downsides to this approach that one should understand before deciding whether to use the strategy in retirement.
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While still working as a trial attorney in the securities field, I started writing about personal finance and investing In 2007. In 2013 I started the Doughroller Money Podcast, which has been downloaded millions of times. Today I'm the Deputy Editor of Forbes Advisor, managing a growing team of editors and writers that produce content to help readers make the most of their money.
I'm also the author of Retire Before Mom and Dad--The Simple Numbers Behind a Lifetime of Financial Freedom (amzn.to/3by10EE)
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Good topic, Rob. I kind of take that 4% rule with increasing withdrawals every year with a grain of salt. Everyone's personal situation is unique, and inflation hits people differently based on circumstance. I might put 10 gallons of gas in my car every 6 weeks or so, so I know gas is more expensive, but it doesn't crush me. I know groceries are more expensive, but again, it doesn't crush me. I don't have many bills and have lived kind of frugally since I was laid off ~3.5 yrs ago. I'm surprised how much less I live off of now. When I start taking from my IRA in 8 months, I'm not going to go 'hog wild' with spending. it will certainly rise a bit, but I don't anticipate adding x-% a year - but base it on the impact of inflation on my life at the time. Yeah, it would simplify these calculations a great deal if we all knew our exact expiration date, wouldn't it? 🤣
Great stuff, Rob! I agree that I want to spend more early than late. If I have to make adjustments later, so be it but I want to travel the world now while my health is very good. I'm retiring after March of 2023 after just turning 60 in January. The whole age you'll live to is such a crapshoot. My family has very good longevity but my dad died at 77 with Parkinson's so you never know! Best thing you can do is take care of your body. I learned the hard way after having a heart attack a year ago. Since then I started eating heart healthy, lost a bunch of weight, and I've been consistently working out with weights. I'm in better shape now than in the last 30 years. Can't wait to start the next phase of life and I'll continue to learn how to make my money last.
Keep up the great work! Not bad for a guy without all those fancy investment advisor letters following your name. 😁
Hi there: How has the first year in your retirement gone?? I'm seeing this comment as of 6/2024. Best of luck! We flip the switch in exactly 2 months at ages 53/55.
@@susanharkema2888 It’s been fantastic! It doesn’t hurt that the stock market has done so well since I retired. I have more now than when I retired a year ago. Plus, I’ve done a fair amount of traveling both abroad and within the country. Best of luck to you!
I want two things from my portfolio
1. To leave a Legacy and
2. To not worry about running out of money.
By assuming you'll live until 110 accomplishes both.
If you can arrange your budget around other streams of income, even if that's just SS, you may be able to plan on a 2-3% witdrawal, which in all cases should last indefinitely
Great video Rob. I like Fi Calc a lot. As I approach retirement I've run through several scenarios. Adding in "additional income" and making it start at age 70 (when wife and I are planning to start SS) makes a huge difference too. Keep up the great work, this channel is excellent.
I retired at 63 and have withdrew from cash to fill in gaps between income (SS) and expenses . RMD withdraw from investments at 72- letting my investments grow and compound ( 60 stocks, 40 bonds) at that point .No debt when retired .Simple strategy
what about health insurance prior to Medicare?
Thanks Rob - a great discussion. I'd like to see a model with a withdrawal rate strategy that starts higher and diminishes with age - reflects the real world spending as we age... any that you can share would be appreciated!
Thank you for this detailed explanation. We are working on figuring out our spending plan starting in a year.
Great job, Rob!
love this show it shows even with market sell off my withdrawal is in line with what i thought was reasmble for my age in percent.think you.
Second the request for a Guyton-Klinger analysis. It’s a relatively simple approach, uses a guide rail approach that smooths out the withdrawals in a way this plan certainly does not.
The rmd tables can also cover before rmd age. If you use them you will not run out of money.
Good advice. Flexibility is the key as time goes on.
Thanks Rob. Great insights and thanks for sharing as I was not aware of this Boglehead's Strategy. As a near retiree myself, I am struggling a bit finding a withdrawal method that I can have confidence in such that I won't run out money and also won't be withdrawing a percentage of something that I've drained down to only a mere fraction of what it was. Probably the best method I've seen so far is the Guyton-Klinger method. Wonder what your thoughts are on this method--and if you'd consider doing a video on it as well as any effective withdrawal strategy--which ideally, in my opinion, get's you down to zero on the day you assume or calculate your death to be at as well as allows you to take greater amounts out when you are a younger more mobile retiree than an older more sedentary one. Always appreciate your great insights. Thanks.
Just one more aside--I think for someone planning on retiring at 60, Bill Bengen's 30 year time horizon is too short and not really a confidence-inducing approach. Additionally, we don't know if history will repeat itself.
VPW guards against 2 risks: running out of money in old age and dying the wealthiest in the cemetery. Regarding volatility the VPW spreadsheet calculates “required flexibility” assuming 50% market drop. Individuals with high equity allocations (90/10, 80/20) need greater flexibility and should not be surprised taking a haircut. Agree with previous post higher % withdraw as we age to compensate for portfolio drawdown down -not necessarily getting a huge raise as we age…
I HAVE A QUESTION. By the way, excellent videos! I have watched your different videos on withdrawal strategies, and I am not sure which one is your favorite. It seems to me that perhaps the 4% Bengen strategy seems to be the one that you favor most, is that correct? Would you mind doing a video on what you would consider to be your favorite strategy. Thank you and best regards.
Thanks Rob all the talk is about retirement % withdrawal.
A great video would be kind of the opposite how can we dye with zero before we get too old to enjoy the experiences with family & friends. Love for you to talk about this strategy?
That's too easy. Simply spend as much as you want, and die when you run out.
Or else tell me exactly when you will die, put all your money under your mattress, and I'll tell you how much you can spend.
Or else it is impossible - investing return is hard enough but we can work around that single variable. But now you want to add in the unknown of when you will die?
Hi Rob, thanks for the video. Could you do a video about SWR with guardrails? Do you have a preferred withdrawal strategy?
Wondering if you think VPW is a better tool, if you don't spend the recommended withdrawal every year. I have a Monte-Carlo model using this withdrawal method, and that model has spending at a start number plus spending inflation. So, instead of spending all the withdrawn money that is recommended by the VPW model each year, my model saves the withdrawal amount that is above the spending amount. Dramatically changes outcomes for portfolio survivability if you don't spend every dollar the VPW model recommends.
I'm a dividend investor. I spend 85 percent of my dividends and save 15 percent for tax. I get a raise every year and have yet touched any principle. It has worked great so far. 100 percent stock and zero bonds. Just spending dividends. It's like I'm in a dream.
steve is smart guy................
What if the stock market crashes when dividends are cut? do you still withdraw the same amount every month?
@baybay7898 he is only spending dividends and not selling principle. His stated method wpuld imply that his spending would cut in half if dividends were cut in half. So the real question is: at what point would he withdraw principle or incur capital gains if dividends were cut by X%? 30% 50%? 70%?
@@zsi Even during the great depression dividends didn't suffer that much and same for the great recession. A properly invested dividend portfolio and dynamic spending will never result in you outliving your money. You can easily get a good dividend portfolio that yields 3.5-4% that'll last forever.
Intriguing keyboard... mechanical? ;)
Fi Calc is interesting. Thanks!
@Rob Thank you for all the content. I got a query and would appreciate if you could help. I am 39 year old with a 3 year old son. I want to start investing early for him so he could reap the benefits of compounding. Should I invest into a single Index (VTI) for 15 years (till he becomes 18) or should I create a portfolio? What would you suggest to be more beneficial in the super long term as part of the amount might go for his college fees but remaining would be for his wealth creation (horizon of 40-60 years). Thank you in advance.
Thanks Rob for another great topic. Wow, these UA-cam comments sure do attract a lot of bogus spammers! - Bill
Bot driven comments. I remove them when I see them.
@@rob_berger Thanks Rob. Some of them usually message me directly posing as "Rob Berger," as I'm sure you are aware. I guess I'll have to get all of my "hot crypto" tips elsewhere! ;-0