The Vanguard Dynamic Spending Rule: A Closer Look at Its Pros and Cons

[@steveprice9462]

4 years into retirement. Age 70. Videos very helpful. Thanks.

[@markw6309]

This is a great analysis, I've watched a number of other videos on this subject and this is the clearest by far. It's really important to see how much spending can actually drop by. As in many cases that are "successful" in not running out of money they're not really successful as a retirement plan as the spending is cut by so much. Thanks for the thorough explanation

[@noreenn6976]

80k subscribers, congratulations Rob!

[@noreenn6976]

@@midnightsun24c7 82K now

[@noreenn6976]

That's awesome!

[@gnoekus]

Greetings from Malaysia. Thank you Rob, love your video and analysis So insightful and inspiring and beneficial. :)

[@janethunt4037]

Thank you for explaining this. Your examples were very helpful.

[@thaddeus46]

I think the Guyton/Klinger withdrawal rate rules deserve a look. I see mention of it in the comments. Jonathan Guyton did an interview in July 2020 on Morningstar's The Long view and explained his process and the application of it to retirement portfolios. Well worth the time.

[@angstfree2008]

They include wild swings in spending which are probably unrealistic for spending plans.

[@william719]

I think the ABW (Amortization Based Withdrawal) that I found on the Boglehead's forum is the best for me and really easy to comprehend too.

[@payroll970]

I think the Vanguard Dynamic Spending rule is the best you going to get especially if you value making the most of all your money (not leaving it behind when you leave the planet). I think the analysis at the end is a little deceptive. Look at the difference between the median spend of the VDS and the percent of portfolio median. Or look at the average spend between '75 and '85. The VDS recognises that the percentage of portfolio rule is the way to go, but you don't have to panic if the market drops, you can work you way down.

[@traciandkennymcdermott7696]

We have been trying to understand the Vanguard Dynamic Spending rule since I began using them as a Personal Advisor a few year now. None of their advisor's has been able to explain it clear enough to me. Thank you for your examples on the this and your teaching it in a clear manner.

[@jefftheobald6367]

Fantastic video. Thanks for the information. I am a Vanguard customer and was wondering how this really worked. You mentioned it’s not a strategy you would use. What strategy would you use?

[@rickdunn3883]

@Rob Berger nice job.

[@michaelevans5328]

So helpful as always, Professor Berger. After looking at all these different strategies, it seems like the best one is (1) starting with a conservative withdrawal rate (like 3%) if you can afford to and (2) using some common sense, informed by a good retirement planner like New Retirement, to see if you need to pare back spending. These strategies also need to account for the gap years between retirement and Social Security (62 to 70). Mike Piper has an interesting plan for that, involving setting aside money from the rest of your portfolio. And then there is the idea of setting aside some money from your portfolio to anticipate long-term care needs. Good luck, average retiree!

[@jimclark5037]

interesting, I can see how people that like to do math would follow this! I expect to retire this year, wife already retired. I think we'll do something simple like take 4%, if market was good increase $10k, market bad subtract $10k. soc sec will provide $50k base anyway.

[@Erginartesia]

Excellent session! None of these formulas are hard core rules, but this suits a LOT of things I have been noodling over (in my head) and starts applying benchmarks I think mixing this up with Retirment Manifesto’s idea of adjusting the ceiling and floor, based on just how big the market fluctuates each year, would get even closer… I guess I’m making it even more convoluted. I’m all in on doing the homework each year .. I speak excel. Once you reach RMD age, you have tokeep track of these things, anyway. Speaking of floors, your 2.5% might not meet the RMD requirements … I would make the floor the RMD minimum requirement. If you are not yet RMD age, make sure your floor is less than the RMD requirement.

[@rdspam]

13:30 “All of these calculations” took, what, three minutes? Once a year? It is really that onerous?

[@retiredandroaming]

Does this FICalc program actually output a scheduled yearly withdrawal amount based on the inputs provided? I see that it measures the chances of success against a number of historical periods, but is there a schedule of "recommended" annual withdrawals based on all the input parameters? I'm struggling with understanding the output results. BTW, if you made a video ob this aspect of the calculator, I'd be forever grateful, as I've tried to find answers to this question. I'm assuming the calculator does not expect the user to manually calculate the annual withdrawals themselves OUTSIDE of the calculator??? Many Thanks....your videos are INCREDIBLY useful for an investment noob like me! Barry.

[@Very_Concerned-Citizen]

Don't see the value in Fi Calc since it doesn't calculate against expenses.

[@rainydayswithdogs]

Very helpful video. Thank you for posting.

[@aaront936]

When do adjust for inflation?

[@aaront936]

When is that tax software video coming out? I can't wait.

[@lailaatallah1857]

Rob: This was so incredibly helpful. I hope you’ll keep doing more videos like this where you show the math and also the charts and how to use the retirement calculators. In this case, having you discuss and compare the different retirement draw down strategies while doing that was immensely helpful. Cheers!!

[@spencert5588]

Hi Rob, great video and really useful. Are you planning to do a video on Michael McClung retirement strategy? It looks good to me but would value seeing you break it down. Thanks Spencer

[@tab_nebraska235]

Very interesting, thanks Rob!

[@owenmortensen607]

What about taking social security into account? If my spend if $50k per year and my SS is 36k a year…

[@mlhundt2064]

Rob, I prefer to adjust monthly to the balance of my portfolio. I hate making an assumption of a fixed monthly withdrawal based on what you ended the year with.

[@robharris5658]

Great video, Rob. Appreciate the demo of FICalc and your analysis.

[@ericb2872]

Nice job today Rob.

[@markolmstead4709]

It sounds like it would only take 5-10 minutes a year to utilize this system. Not too bad if it gives you a potentially higher spend rate.

[@dcnewark1]

Great job explaining this concept. The $1M portfolio examples always go a long way in clearing up concepts.

[@randolphh8005]

It seems to me that we have lots of methods and “rules”. In essence all of the methods described use a dynamic approach of some type. Rebalancing your portfolio, is a dynamic strategy, to lower risk. So is the bucket strategy or the guardrail strategy.

[@huntsail3727]

Interesting

[@markianhawryluk3664]

Good video! What would say are the advantages & disadvantages of the Vanguard approach versus Guyton's Guardrails?

[@HB-yq8gy]

I like the V D S it's easy and simple to implement but, the 4% rule is better and easier & might beat out the VDS ?

[@stevec.7017]

Would I spend my dividends and then also do this calculation, or do I have to reinvest my dividends and then do the calculation?

[@alexsotir]

Rob, would you talk about Equal Weight indexes such as RSP in a future video? I can see that it outperforms the market cap weighted index and seems to be less volatile.

[@willharris5562]

Hey Rob, question about 401k contributions here. I want to get my contribution into a total market or S&P 500 fund, but all of my options look like they require minimums to invest (i.e. $3,000 minimum for the vangaurd funds). The only ones that don't are the fidelity target date funds for 2060, but I don't care for them (especially seeing their performance the last 8 years). Can I contribute to the S&P 500 with my monthly contribution of much less than $3000?

[@dseagull3567]

Great analysis Rob. One question I have about FiCalc is that spending seems off if you have an inflation adjusted pension. Let's say you currently have a 30K pension, wouldn't that mean spending would never be below 30K. I'm getting minimum spending below that figure. How does this work?

[@argcargv]

I think as a modeling strategy this is good. In general if the stock market is down you are probably going to be looking at your budget to cut corners, and when the market is high you are going to be more carefree in your spending. One aspect that bothers me about all of these analysis is that it assumes that inflation is increasing at a continuous rate when in fact it should be treated statistically just like the other parameters. Over time your property taxes might be tracking inflation, but most years it may not change much. Same for other factors, costs can go up and down while they are statistically likely to increase. This can be important because if we have a few years of high inflation that are correlated with bad market performance then that is where we really need to tighten our belts, but if inflation and the markets are increasing together, then the risks are obviously reduced. In the end we need to stress test our plan, but as we execute our plan we need to continuously reevaluate our situation. What was *my* inflation this year. If it wasn't so much, no need to withdraw more just because it was part of the model we used to estimate our risks.

[@rodisham]

Interesting review. We’re Vanguard account holders. In 2019-21 we were careful to stay disciplined not to over spend when the market was exploding. Then 2022 took us all the way back to Jan 2019. The system generally worked but we were blindsided by the steep decline n bonds. It’s been unsettling.

[@AnnChavarria]

Rob: Today I came across the FINRA Fund Analyzer. It looks like an interesting tool - I've only spent a few minutes using it so far. Perhaps it is worth is worth a review in a future video.

[@ronwheeler4529]

The 60’s were not that bad, more people had a pension and relied less on savings