Vanguard Dynamic Spending

The Vanguard Dynamic Spending strategy comes from the Vanguard Research team. Like other "Longevity" strategies, it aims to capture the best parts of the Constant Dollar and Percent of Portfolio strategies.

Strengths

  • It responds to market conditions, increasing risk of success by reducing spending when the market is performing poorly and increasing spending when the market does well.
  • It responds smoothly to market conditions, so that year-after-year changes to your withdrawal are small, unlike the Percentage of Portfolio strategy.
  • It has a low likelihood of exhausting your portfolio, even over long retirement lengths.
  • Its algorithm is straightforward enough to calculate annual withdrawals by hand.

Weaknesses

  • Like all withdrawal strategies that vary based on market conditions, annual withdrawals can become too low without a minimum withdrawal in place.