Vanguard Dynamic Spending Calculator
A percent-of-portfolio target with a ceiling and a floor on how far spending can move from one year to the next.
Part of the FIRE simulator, a historical backtest calculator that replays your plan across every rolling window of market history since 1871.
How the Vanguard Dynamic Spending strategy works
Vanguard’s dynamic spending rule aims for a percent-of-portfolio target and then clamps the change: spending can rise only up to a ceiling and fall only to a floor relative to last year’s amount, by default +5% and -2.5%. The target supplies most of the responsiveness of a percentage rule; the clamp supplies the year-to-year stability of guardrails.
What the Vanguard Dynamic Spending strategy trades off
Capping the year-to-year change keeps spending tied to the portfolio without letting it swing: both the rise and the fall are bounded and known in advance. In a deep downturn the floor can outpace the portfolio, and in a strong market the ceiling trims the upside.
Pros and cons
Pros
- Balances responsiveness with income stability
- Bounded, predictable year-to-year changes
- Backed by Vanguard research
Cons
- The floor can outpace the portfolio in deep downturns
- Caps trim upside in strong markets
- Three inputs to tune (target, ceiling, floor)
Parameters you can adjust
- Target portfolio percent: The percent-of-portfolio spending target before the ceiling and floor below limit how much it can change year to year.
- Ceiling (max yearly increase): The most spending can rise from one year to the next, as a percent of last year. Caps upside jumps in strong markets.
- Floor (max yearly decrease): The most spending can fall from one year to the next, as a percent of last year. Limits painful cuts after a bad year.
Backtest Vanguard Dynamic Spending against market history
Opens the simulator with Vanguard Dynamic Spending already selected, so you only set your portfolio and horizon.