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View Poll Results: Take your net worth and divide by (90 minus your age). Divide this by your annual expenses. The res
less than 0.5 11 25.58%
greater than 0.5 to 0.7 5 11.63%
greater than 0.7 to 0.8 3 6.98%
greater than 0.8 to 1.0 11 25.58%
greater than 1.0 13 30.23%
Voters: 43. You may not vote on this poll

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SG FOM (for retirees)
Old 07-26-2005, 11:11 PM   #1
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SG FOM (for retirees)

As far as I know, this FOM has no merit, but I wanted to try out the poll function.* *

Note that the "typical" $1M net worth retiree with 30 years of retirement ahead and an annual expense rate of $40,000/year would score a 0.83 on this test. Values larger than that are probably very safe. Values smaller than that are more risky.
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Re: SG FOM (for retirees)
Old 07-27-2005, 01:12 PM   #2
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Re: SG FOM (for retirees)

So if I am interpreting your FOM correctly:

Your FOM represents the net worth divided by the (long life - 90 years) expected spending.

IE., the ratio of assets to lifetime expected spending.

Since the assets can be assumed to (hopefully) grow faster than spending, the ratio need be somewhat less than 1.0

You have listed the knee in the curve at 0.83. Where did that (magic) number come from ??

Another way to look at this FOM: Is that if your burn rate is too high you go broke and end up eating dog food. If your burn rate is too low you die with way too many assets and waste the opportunity to spend them.

Those with a FOM greater than 1.0 need ask themselves why they are not spending more.
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Re: SG FOM (for retirees)
Old 07-27-2005, 01:14 PM   #3
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Re: SG FOM (for retirees)

What does FOM stand for?
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Re: SG FOM (for retirees)
Old 07-27-2005, 01:15 PM   #4
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Re: SG FOM (for retirees)

FOM is shorthand for "Figure of Merit"

FOM ==> ballpark number to get handle on spending versus savings
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Re: SG FOM (for retirees)
Old 07-27-2005, 02:37 PM   #5
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Re: SG FOM (for retirees)

Didn't vote (since I'm not retired) but my FOM is almost 0.1!!

....guess I'll hold off on retiring just yet....
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Re: SG FOM (for retirees)
Old 07-27-2005, 02:41 PM   #6
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Re: SG FOM (for retirees)

Soooo - if you are higher than 2-3 range - - probably a good idea to raise your expected spending.

This says the women of the house are right and I'm wrong.

Not sure I like that - maybe I should change the 90 to 110 or maybe even a 120.

Heh, heh, heh.
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Re: SG FOM (for retirees)
Old 07-27-2005, 03:20 PM   #7
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Re: SG FOM (for retirees)

Right on 0.5. Thought I'd be lower.

JG
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Re: SG FOM (for retirees)
Old 07-27-2005, 03:28 PM   #8
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Re: SG FOM (for retirees)

Quote:
Originally Posted by ((^+^)) SG
As far as I know, this FOM has no merit...
I would agree since it ignores pension and SS.

REW
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Re: SG FOM (for retirees)
Old 07-27-2005, 03:41 PM   #9
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Re: SG FOM (for retirees)

Hmmm

I dinked around and backed out pensions/SS covered part of expenses - and only used the part that 'the portfolio income stream' had to cover.

In real life - this would be the most variable/easy part of the expense budget since - I allocate pension/SS(was divs) toward the essential core items first.

Food, shelter, transportation, dryer sheets - and then lagniappe fun stuff.
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:01 PM   #10
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Re: SG FOM (for retirees)

A few comments. If you include a pension and SS then these must be subtracted from the burn rate before the calculation is done.

Hopefully your pension and your SS will never run out.

The FOM is a ratio of your assets to your non-pension, non-SS spending.* In other words a ratio of your assets to the lifetime spending that your assets are funding. It helps to answer the question - Do I have enough savings ?*
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:05 PM   #11
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Re: SG FOM (for retirees)

Quote:
Originally Posted by MasterBlaster
A few comments. If you include a pension and SS then these must be subtracted from the burn rate before the calculation is done.
Got it. Moved my FOM up to a 1.0. Good thing I retired or I could have become another unclemick.

REW
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:13 PM   #12
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Re: SG FOM (for retirees)

Got it. Stayed at 0.5. BTW, there are worse things than ending up
like unclemick

JG
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:20 PM   #13
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Re: SG FOM (for retirees)

Quote:
Originally Posted by MRGALT2U
Got it. Stayed at 0.5. BTW, there are worse things than ending up
like unclemick

JG
It's not being a tightwad that concerns me, its all his talk about "the women". I've only got one around here and that's about all I can handle.

REW
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:25 PM   #14
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Re: SG FOM (for retirees)

It's a tough job - I'm telling you.

BTY - the local Walmart - has Dickies winterweight coveralls on sale.

Generic - fix a flat - in can is 3.98 at Pep Boys - whereas the State environmental fee for tire disposal is $3 a tire - plus now $10 to mount and balance a well selected junkyard 'Maypop' tire at various prices.

Maybe I'll get a spare - to help the FOM number - but I do like $3.98 - plus tax of course.

Heh, heh, heh.
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:25 PM   #15
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Re: SG FOM (for retirees)

Perhaps a better FOM would be one that included the time value of money (your assets)

something like :

FOM = Assets(1+int rate)^(90-AGE) - BurnRate(90-AGE)

where:

int rate is the INFLATION ADJUSTED gains on your assets normalized by percent
(ie. 5 per cent annual gains ==> int_rate of .05)

^ is the exponent

so the new FOM is then the lifetime inflation adjusted Assets compounded over your lifetime less your lifetime inflation adjusted spending. If this new FOM is greater than zero then you are in good shape.

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Re: SG FOM (for retirees)
Old 07-27-2005, 04:28 PM   #16
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Re: SG FOM (for retirees)

88 year old Mom, SO, and step daughter in spare room.

Now - if I were younger and lived in France - wellllll??

Heh, heh, heh.

My buddy - the dog - is male.
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:30 PM   #17
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Re: SG FOM (for retirees)

Quote:
Originally Posted by MasterBlaster
Perhaps a better FOM would be one that included the time value of money (your assets)

something like :

FOM = Assets(1+int rate)^(90-AGE)* * - BurnRate(90-AGE)

where:

int rate is the INFLATION ADJUSTED gains on your assets normalized by percent
(ie. 5 per cent annual gains ==> int_rate of .05)

^ is the exponent

so the new FOM is then the lifetime inflation adjusted Assets compounded over your lifetime less your lifetime inflation adjusted spending. If this new FOM is greater than zero then you are in good shape.

You're thinking man. *Too complicated. *Maybe you didn't know. *We're just screwing around and killing time here *

JG
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:39 PM   #18
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Re: SG FOM (for retirees)

.998

Well, at least UncleMick isn't letting it affect his wealth like this guy

http://news.bbc.co.uk/2/hi/africa/4720457.stm

Shiney
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Re: SG FOM (for retirees)
Old 07-27-2005, 04:43 PM   #19
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Re: SG FOM (for retirees)

Quote:
Originally Posted by REWahoo!
It's not being a tightwad that concerns me, its all his talk about "the women".* I've only got one around here and that's about all I can handle.*

REW
I feel your pain, man !

JG
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Re: SG FOM (for retirees)
Old 07-27-2005, 05:12 PM   #20
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Re: SG FOM (for retirees)

Quote:
Originally Posted by REWahoo!
I would agree since it ignores pension and SS.

REW
It ignores pension and SS only if you do. I use annuity calculators to establish a present net worth for my pensions, then include that in my net worth calculation. I don't include SS though. You can do it several ways and see what it indicates.

But it still has questionable meaning. I think like a lot of FOMs, it might provide some crude information.
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