Investing - Theory, News & General • Re: Confusion about VPW instructions
Hi, I have been reading dozens and dozens of posts and comments regarding VPW as a means to prepare for and then handle retirement withdrawals. However in reviewing the Instructions, I was confused on a number of points. It's difficult to envision beginning to utilizing this strategy when I am unclear on various points. Can anyone explain these matters or fix the instructions? Thanks much!
Annapolitanuu, welcome to the forum!
See below.
Under the VPW-Accumulation-And-Retirement-Worksheet's instructions and in the info provided in Wiki, I don't see anything stating the length of the planned retirement. I gather from comments made and from the VPW Table – Variable Percentage Withdrawal Rates Based on Age and Asset Allocation, that the duration is to the age of 100. If so, why isn't this stated? Also, in this table, ages 89 through 100 are marked as dashes rather than ages. Why?
VPW assumes that retirement continues for as long as the retiree lives (or for as long as the surviving spouse lives, in a couple). Consequently, VPW Table percentages are calibrated so that enough is left in the portfolio to use part it, around age 80, to buy a SPIA (joint SPIA, for a couple) to reduce financial risks related to living past age 100.* The VPW Accumulation and Retirement Worksheet (VPW worksheet) also caps withdrawal percentages to 10% in old age, so that the portfolio is never completely depleted while the retiree still lives.
* Some retirees already have sufficient pension income (Social Security and a generous work pension, for example) and don't need to buy a SPIA.
For retirees who don't use the VPW worksheet and prefer to use the VPW Table with a pen and paper, steps 4 and 5 of instructions suggest considering to buy a SPIA around age 80 and capping the withdrawal percentage to 10% in old age. That's why ages 89 to 99 are are marked with a dash, in the VPW table, as the age-based withdrawal percentage is 10% starting at age 88 or age 89, depending on asset allocation. VPW Table percentages for 11 remaining withdrawals down to 1 remaining withdrawal are useful for bridging pensions, that's why they're shown even though they're not useful for age-based withdrawals.
To get a better overall understanding of VPW, I suggest reading the following posts (and posts they link to):
These links (and other links) can be found the first post of this thread.
Under the Retirement Table section, there is a reference to "taken into account current and future pensions with and without cost of living adjustments." I'm not sure what "with or without cost of living adjustments" is referencing. I assume all dollars are inflation adjusted, although I don't see that stated. I don't see unadjusted numbers.
Effectively, inputs and projections are expressed in constant dollars (today's dollars, inflation-adjusted dollars). There's one exception, though.
The payment of a pension without cost of living adjustments should be entered in nominal dollars (even if it starts in the future). Pension entries have a "Cost of Living Adjustments" parameter. When it is set to "No"', the VPW worksheet adjusts calculations to dampen the erosive impact of inflation on the purchasing power of the provided pension payment. This is illustrated in this post of the forward test thread.
Again, under the Retirement Table section, it says "Starting at age 80, the sheet displays the projected income floor after age 100." Where is this?
It is displayed in the Required Flexibility section when the Age cell is set to 80 or higher. Here's an example:
In this example, the VPW Worksheet shows an "Annual Income Floor After 100" of $31,887, which seems quite low relative to the current $94,362 income and the projected $75,619 after-loss income. That's an indication that it might be a good idea for the retiree to use part of the remaining $900,000 portfolio to buy a SPIA.
Under Suggestions, it is suggested to save 5 months worth of withdrawals in a savings account and further says "as illustrated in the above detailed example" but I don't see an example. I see an example provided elsewhere, A Simple Bogleheads Retirement Using Variable Percentage Withdrawals (VPW Forward Test) which was posted in June of 2019. Perhaps that is what the text is referencing?
In the Instructions sheet, there's a Detailed Example section above the Suggestions section:
Recent forward test entries (like this one) use an income cushion containing approximately 5 months of retirement income, instead of 5 months of withdrawals, to eliminate the need for compensating calculations when a pension starts or a temporary retirement income stops (see this post for details).
Statistics: Posted by longinvest — Tue Sep 08, 2026 8:17 pm
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