How does VPW calculate withdrawal amounts?

VPW uses the formula: Withdrawal = Portfolio Value × (1 / Remaining Life Expectancy). As you age and remaining life expectancy decreases, withdrawal percentages increase, naturally spending down your portfolio.

Is VPW better than the 4% rule?

VPW often provides higher income and better success rates than the 4% rule, especially for longer retirements. However, income is more variable and decreases in later years. VPW is mathematically optimal for spending down a portfolio.

What happens to my income in later retirement with VPW?

Income naturally decreases as you age because remaining life expectancy shortens. This is intentional - you're spending down your portfolio rather than trying to preserve capital for heirs. Income in later years may be 20-40% of early retirement income.

Does VPW work for couples?

Yes, VPW works well for couples using joint life expectancy tables. The withdrawal rate is based on the longer life expectancy, ensuring the surviving spouse has adequate income throughout retirement.

How does VPW handle market volatility?

VPW adjusts automatically to market conditions. When markets are down, portfolio value decreases, reducing withdrawal amounts. When markets are up, withdrawals increase. This natural adaptation helps prevent sequence risk.

Can I combine VPW with other strategies?

Yes, VPW works well in hybrid approaches. Use VPW for essential expenses, 4% rule for discretionary spending, or add Guyton-Klinger guardrails for additional safety. Many retirees use VPW as their base strategy.

Is VPW suitable for early retirement?

VPW is excellent for early retirement as it's designed for longer time horizons. The systematic spending approach works well for 40+ year retirements. However, the decreasing income in later years requires careful planning.

Educational use only: This platform provides information for educational purposes and should not be considered financial, investment, or legal advice.

What is Variable Percentage Withdrawal (VPW)?

Q: What is Variable Percentage Withdrawal (VPW)?

VPW is a withdrawal strategy that adjusts your withdrawal percentage based on your remaining life expectancy and portfolio value. It systematically spends down your portfolio over your lifetime, typically providing higher income than the 4% rule.

A strategy for the retiree who wants to enjoy their wealth, not hoard it. It aims to spend your portfolio down to zero by the time you pass away.

The Philosophy

Popularized by the Bogleheads community, VPW uses a predefined schedule of withdrawal percentages based on your age and asset allocation.

Unlike the 4% rule (which tries to preserve capital forever), VPW increases the withdrawal percentage as you get older. The goal is to safely spend the maximum amount possible each year without prematurely depleting the portfolio.

How It Works

Age-Based Increases

At age 60, the percentage might be 4.0%.
At age 70, it might rise to 5.0%.
At age 80, it might be 6.5%.

As your life expectancy decreases, you can safely spend a larger chunk of what's left.

Market Adjustments

You apply that percentage to your current portfolio balance at the start of each year.

If the market drops, your balance drops, so your withdrawal amount drops. If the market soars, you get a raise.

Pros and Cons

The Upside

No Depletion Risk: Because you are always taking a percentage of the remaining balance, the portfolio theoretically never hits zero (though it can get small).
Higher Spending: It usually allows for higher total spending over retirement compared to constant-withdrawal methods.
Simplicity: No complex inflation math. Just Look up percentage -> Multiply by balance -> Spend.

The Downside

Variable Income: Your income will fluctuate with the market. You need a flexible budget or a cash buffer to smooth out the bumps.
No Legacy Guarantee: The method is designed to spend the money. If you want to leave a large inheritance, this might not be the best tool.

Planning Your Legacy

Whether you want to spend it all or leave a legacy, Delphina helps you model the outcome.

Create Your Retirement Plan

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