Variable Percentage Withdrawal (VPW): The “Die With Zero” Retirement Algorithm

Variable Percentage Withdrawal (VPW): The “Die With Zero” Retirement Algorithm

โœ๏ธ By Team BMT (CPA) | ๐Ÿ“… Updated: Dec 15, 2025 | โš–๏ธ Authority: Bogleheads Methodology / PMT Table

EXECUTIVE SUMMARY

  • The Philosophy: Traditional rules (like the 4% Rule) focus on “Capital Preservation” (leaving a huge inheritance). VPW focuses on “Consumption Maximization.” It aims to spend the last dollar on the last day of your life.
  • The Mechanism: It uses the PMT (Payment) functionโ€”similar to a mortgage calculationโ€”combining your Portfolio Balance, Asset Allocation, and Remaining Life Expectancy (e.g., to age 100) to determine the precise withdrawal amount each year.
  • The Trade-off: You get significantly higher income in your 60s and 70s (the “Go-Go Years”), but your income will fluctuate with the market. It sacrifices stability for efficiency.

The biggest regret of many retirees is not “running out of money,” but “dying with too much.” If you die with $2 million in the bank, that represents years of work you did for free and vacations you didn’t take. Variable Percentage Withdrawal (VPW) is the antidote to hoarding. It provides a mathematically determined permission slip to spend more now, knowing that the math guarantees you won’t run out before age 100. According to Team BMT Analysis, this is the preferred strategy for engineers and math-oriented investors who want to optimize utility. Source: Bogleheads VPW Worksheet / Die With Zero (Perkins)

Strategic Mechanics: The PMT Logic

Scenario: 65-year-old with $1M Portfolio (60/40 allocation).

  • Input A (Balance): $1,000,000.
  • Input B (Horizon): 35 years (Age 100).
  • Input C (Growth): Expected Real Return (e.g., 4.5%).
  • Calculation: The algorithm calculates the annuity payment that depletes the account exactly at age 100.
  • Result (Year 1): Withdraw ~5.4% ($54,000).
    Compare: 4% Rule only allows $40,000. VPW gives you a $14,000/year raise immediately.

Spending Path Comparison

Age Phase 4% Rule (Static) VPW (Dynamic)
65-75 (Go-Go Years) 40000 56000
75-85 (Slow-Go Years) 40000 50000
85-95 (No-Go Years) 40000 42000

*Chart Note: VPW front-loads your spending when you have the health to enjoy it. The 4% rule “back-loads” wealth, often leaving a massive pile for heirs instead of you.

CRITICAL SCENARIO: The “Market Crash” Adjustment

What happens if the market drops 20%?

Condition 4% Rule Response VPW Response
Portfolio Value Drops to $800k Drops to $800k
Next Withdrawal Still $40,000 (Risky) Drops to ~$44,000
Verdict Depletion Risk Increases Math Auto-Corrects
Verdict: VPW forces you to take a pay cut in bear markets, just like the Guyton-Klinger Guardrails (#417). However, because the withdrawal percentage increases every year as you get older (mortality credit), the income drop is cushioned.

Execution Protocol

1
Download the Worksheet
The Bogleheads community maintains a free “VPW Worksheet” (Excel). Do not try to build this yourself. It uses complex historic return data to backtest the withdrawal percentages.
2
Combine with “Floor” Income
VPW income is volatile. You must cover your “Needs” (Food, Utilities) with guaranteed income like Social Security or a QLAC (#413). Use VPW only for discretionary spending (Travel, Hobbies).
Fail Condition: Relying on VPW for your mortgage payment. If the market crashes 50%, your VPW check drops, and you can’t pay bills.
3
Re-Calibrate Annually
Every January 1st, input your new portfolio balance into the spreadsheet. It will spit out the exact dollar amount you are allowed to spend this year. Spend it all. Do not save it. The system works only if you obey the math.

WEALTH STRATEGY DIRECTIVE

  • Do This: Adopt VPW if you have no intention of leaving a large inheritance and want to maximize your own lifestyle. It is the most “selfish” (in a good way) strategy.
  • Avoid This: Using VPW if you panic easily. Your income will drop in a recession. If you cannot handle a variable paycheck, stick to a static withdrawal rate.

Frequently Asked Questions

What if I live past 100?

The standard VPW table calculates withdrawals up to age 100. If you are still alive at 101, the math assumes the portfolio is empty. This is why you need a longevity hedge like Social Security or a Deferred Annuity (QLAC) kicking in at age 85.

Is this better than the 4% Rule?

Mathematically, yes. It has zero “failure risk” (you never run out of money, you just get paid less). But psychologically, it is harder because income is unstable.

Does it adjust for inflation?

Indirectly. By recalculating based on the current portfolio value (which theoretically grows with inflation) and increasing the percentage with age, it tends to keep pace with purchasing power.

Disclaimer: VPW guarantees that you will not deplete the portfolio before age 100, but it does not guarantee a minimum level of income. In severe bear markets, withdrawal amounts can drop significantly.