Variable Percentage Withdrawal (VPW): Amortizing Your Portfolio by a Target Age

Variable Percentage Withdrawal (VPW), developed in the Bogleheads community, applies loan-amortization mathematics in reverse: where a mortgage amortizes a balance owed down to zero by a fixed date, VPW amortizes a portfolio balance down to zero by a fixed age, under an assumed rate of return on the remaining balance.

The Formula

Each year, the withdrawal percentage is:

percentage = r / (1 - (1 + r)^-n)

where r is your assumed real (after-inflation) rate of return, and n is the number of years remaining until your target end age. This is the same formula used to calculate a level mortgage payment — applied here to a portfolio being spent down instead of a loan being paid off.

As n shrinks each year, the percentage rises. In the very last year, n = 1 and the formula calls for withdrawing 100% of whatever remains — by design, VPW is meant to fully exhaust the portfolio by your target age, not preserve it indefinitely.

Why the Percentage Changes Every Year

Early in retirement, with decades remaining, the percentage is relatively low, because the balance is amortized over a long horizon. As the horizon shortens, each year's percentage rises, because fewer future years remain across which to distribute the balance.

A Simplification Worth Knowing

Textbook VPW typically applies this percentage schedule against an inflation-adjusted balance history to keep withdrawals level in real terms. The spend-down step applies the percentage directly to the nominal current balance instead, which keeps the underlying simulation simpler at the cost of not fully isolating inflation's effect on the withdrawal schedule. The defining property — a rising percentage that fully amortizes the portfolio by the target age — is preserved.

Who VPW Suits

Unlike the 4% rule, VPW does not attempt to preserve the portfolio indefinitely or satisfy a fixed success threshold. It is explicitly designed to spend down to approximately zero by a chosen age. It suits retirees who:

• Have a specific target end age in mind (rather than wanting to preserve principal for heirs)
• Are comfortable with a withdrawal amount that changes, typically rising, with age
• Want a systematic, formula-driven answer rather than a fixed rate picked in advance

Applying it

The spend-down step runs this amortization schedule through thousands of simulated market scenarios, showing the percentile range of portfolio value and annual withdrawal over time.