I must be even more conservative than I thought. I just filled in the Bogleheads VPW spreadsheet and it's suggesting a withdrawal rate double our current rate. I didn't even include our cash on hand and some various acts adding up to an additional $150k.
Even if you don't wind up spending any more than you would have otherwise, I think that the VPW spreadsheet is very reassuring.
Under normal circumstances I don't have any interest in spending more than I currently do, but worry about the effect of some extraordinary expense impacting my retirement savings.
The way I personally use the BH VPW spreadsheet is as follows:
- Put my #'s into the spreadsheet and come up with the 'permissible' withdrawal amount.
- Make my usual, smaller, withdrawals but put the excess into a separate bucket that functions as a 'slush fund.'
- The next year, calculate my 'permissible' amount based on my actual account values minus the balance of that bucket
Example: Say you have $1 million at age 60, expect $2,000/month from SS at age 70, and have a 60/40 asset allocation.
The VPW worksheet estimates you can withdraw $61,367 for the year.
Now let's say you actually withdraw $50,000 over the course of the year, and your net worth rises to $1,020,000 over the course of the year.
Your slush fund is $61,367-50,000=$11,367.
The next year, you put in the numbers of $1,020,000-(11,367)=$1,008,633 and the calculator projects an allowable withdrawal of $63,015.
You would also have that slush fund available to spend in its entirety, so you could spend up to $71,382 if necessary and still be 'on schedule' to not run out of money early.
In my case, I've done this for three years and build up a slush fund of around $100k. If I had an impulse purchase (e.g. wanting to replace my 16-year-old car ahead of schedule) or wanted to make extra donations or gifts, I wouldn't be too anxious about spending too much as long as it was less than the slush fund value.