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Old 01-25-2008, 10:42 PM   #41
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The probability is pretty small, however. For planning purpose, I use 90.
OK, but according to this calculator:

https://personal.vanguard.com/us/pla...ireContent.jsp

18% of the current 55 YO Males will make age 90. (35 years of SWR)

And in terms of the OP -

38% of the current 55 YO Males will make age 85. (30 years of SWR)

So a 30 year time span for most 'early' retirees seems a bit short-sighted.

And I don't consider an 18% occurrence to be something I can ignore. Many of us insure against much lower rates of risk than that.

I don't want to be 90 YO and say to my kids " You know, when your Dad decided to retire, he knew there was about a 1 in 5 chance that he'd live to 90 and run out of money, and guess what.....".

Add a spouse to the mix: there is a 5% of one reaching 100 (45 year span), a 17% of one reaching 95 (40 year span).

I'm assuming these calculators are based on current actuary tables. I don't think they try to project increased life spans into the future, so things could be 'worse' than that.

-ERD50
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Old 01-25-2008, 11:00 PM   #42
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The Retirement Calculator from Hell, Part III, including the quote "Thus, any estimate of long-term financial success greater than about 80% is meaningless."
On one hand, since we cannot predict the future, it is ALL pretty meaningless.

OTOH, FireCalc does not 'predict' anything. It is actual historic data. And since the future could be worse than the past, I see no reason to accept a 95% success rate as 'good enough'. The data really says 'we KNOW this WILL FAIL in 5% of the previous sequences'.

It's a baseline. I feel more secure knowing that an X% SWR actually survived 100% of the historical sequences. That still leaves lots of unknowns - my spending could increase, the future could be worse than the past, and I or my spouse might live to an old age.

I'd need to check my notes, but IIRC going down to 3.7-3.5% SWR adds a lot of margin to the plan. 3.25% seemed to be getting into the 'forever' range.

-ERD50
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Old 01-25-2008, 11:23 PM   #43
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WADR, that's 1 time in 20. Would you bet $1,000,000 on a coin toss if you won, 19 times out of 20?
But it's not an even bet, so that question makes no sense at all.

If I win, I got to spend a bit more each year. If I lose, I'm out of money and out on the street at age 90. I don't like the losing bet at all. The winning bet isn't big enough to be worth the risk of losing, even if it was a small chance.

I don't see why it's anyone else's concern if I chose to be cautious with my SWR.
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Old 01-26-2008, 12:00 AM   #44
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Here is the Actuarial Life Table
Actuarial Life Table

Life expectancy for a man of 50 year of age is 28.09, and 31.91 for a woman. I guess it does not hurt to plan for a higher number (just in case).
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Old 01-26-2008, 04:45 AM   #45
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I second Want2Retire...

as to "why stick to 4%" aenlighten has a good response.
Things will go up and down. While our basic living costs are under 4%.. we did spend almost 2x that last year due to some major home expenses. So this year we will try and tighten our belts some. It also doesn't help that for us "4% is the new 3%"!!
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Old 01-26-2008, 10:36 AM   #46
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If you could comfortably live on 2.5% but withdraw and spend 4% anyway because you deserve and can afford to live better in retirement than you did in your saving years.....and then the market starts tanking 10 years later or whatever, you can always pull back to 2.5% with no problems.

Not too mention the fact that if the reason you want to spend more at the beginning is to travel extensively, you will probably naturally spend less when you hit 80 than when youre 55 anyway because you probably will cut way back on travel at that point due to declining health and energy levels.

So even if the 95% survival rate of 4% withdrawals worries you, I still dont see a problem.
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Old 01-26-2008, 11:13 AM   #47
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Not too mention the fact that if the reason you want to spend more at the beginning is to travel extensively, you will probably naturally spend less when you hit 80 than when youre 55 anyway because you probably will cut way back on travel at that point due to declining health and energy levels.
Not me ... I'm going to have 'one of dem' body parts transplants....
I got dibs on Brad Pitts!
Sorry ..l getting punchy again .. It's 1:15am here.
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Old 01-26-2008, 11:37 AM   #48
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Here is the Actuarial Life Table
Actuarial Life Table

Life expectancy for a man of 50 year of age is 28.09, and 31.91 for a woman. I guess it does not hurt to plan for a higher number (just in case).
I think that many people misinterpret that number. A dangerous thing to do, IMO.

Please do not forget - that is a MEDIAN life expectancy! Half of the people live longer. So don't plan on a higher number 'just in case' - plan on a higher number because there is a 50-50 chance that you WILL exceed the number.

Even 'worse' when you factor in a spouse'. The vanguard calculator is much better for this - it shows the % chances of hitting any age you enter, and will factor for the 'last surviving'.

A better than 50-50 chance that a 50 year old couple will have one person exceeding a 38 year span. That's 8 years of eating dog food, and maybe many more years ahead - no thanks!

https://personal.vanguard.com/us/pla...ireContent.jsp

-ERD50
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Old 01-26-2008, 11:50 AM   #49
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Okay, I'm going to plan a comfortable retirement with a LBYM lifestlye that I enjoy and feel fortunate to have. I may spend less than I could, but it's a choice not a deprivation. In fact, I'm planning on living on less than 4% SWR and here's why:

1. I don't believe in the goal of maintaining a given standard of living accounting for inflation. I want to fund a slowly rising standard of lving even into my very old age. I've read the studies that older folks spend less and I believe there are factors overlooked in the research and don't believe the conclusions. I watched my parents and grandparents become progressively more dependent on others for help as they aged. If I can afford to retire to a small cabin on a lake when I FIRE, I want to be able to afford to stay there even when I'm so old I need to hire a handyman or housekeeper to stop in and do stuff I used to take care of myself. Likewise if I want to travel a bit in FIRE, I may enjoy cheap off the beaten path adventures when I'm younger, but I'm expecting I'll be more inclined to pricey comfortable accomodations when I'm older. Should I live so long, I want to have the option of the nicest possible care facility if I need one. I'd like to plan to have the means to take care of myself as these kinds of expenses increase later in life.

2. Freedom. I've done a lot of planning, but no matter how much I do I cannot include all future optoins. I may develop a new hobby or interest and wish I had means to enjoy it. My family circumstances coud change and I need money I didn't expect to need. New technology could be developed that I want to use to change my life, health, lifestyle or who knows what. I want to have choices, more than I want to have maximum current spending power.

3. Contingencies. Markets may not behave as they have historically. Over the 50 years or more I hope to be retired there could be all sorts of social changes, wars, diseases, tax laws, flood, earthquake, whatever. With excess capacity in my savings and SWR comes safety in that I should be able to adapt and accomodate whatever might happen, or not. I want to have security more than I want to make maximum use of my savings. If some is leftover because I was buying safety with it, then I will be happy to pass it on to family and charities when I no longer need it.
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Old 01-26-2008, 05:42 PM   #50
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I will move when I retire and have not a perfect idea what it will cost me. So I plan to have way too much money. I will build or buy a nice home in the country on acreage. The first year I will have a start up budget to build sheds, fences and get it to my comfort level. Then I will hope it doesn't cost more than a little bit to live so I can live on a small percentage of my assets. Then after I see what it actually cost will adjust to spending more on things I don't need like a new boat. I will spend a little less the first few years because I will have roommate income so won't need as much. If I outlive my roommate that income will be gone. Then I would need to no only draw out more but replace his labor, hire someone to things I don't know how to do. Also in my elderly years being in the country I may have to start paying for things like someone to drive me places if I lose my license or don't feel safe driving. I can always ramp up spending but it is harder to reduce things you are used to.
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Old 01-26-2008, 05:54 PM   #51
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Hi kumquat.....

I don't get your point or understand the bet. That is, I don't understand your bet in regards to my post. Please clarify.
I guess I didn't phrase it so well. 95% success still fails one time in 20. I'm a big chicken and like higher success rates.
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Old 01-26-2008, 07:26 PM   #52
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One more time.

Pssst - Wellesley! Current yield: 4.31% as of Friday.

Now in 1993 - never heard of 4%, SWR or anything like that - didn't even have a webtv. Paperback Vanguard booklet and thought's of 6- 8%.

Actually a hand grenade SWAG - over 14 years - maybe 2% to 8.9% due to those silly little events called life.

Now that I've upgraded, become an ER, can use FireCalc and ORP planner and others, I can stay awake long winter nights worrying - or not. I was an avid reader of Efficient Frontier before he went over to the dark side and started writing - BOOKS!

Also had an ultra thrifty period and there was the Market of the 90's.

heh heh heh - RMD in 6 years so I 'will' get an offer I can't refuse - even if I don't spend it. Plus looking over my shoulder - I'm not getting younger. Party on the best you can.
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Old 01-26-2008, 10:31 PM   #53
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I was an avid reader of Efficient Frontier before he went over to the dark side and started writing - BOOKS!
I kind of miss that site and the 'coffee house pondering' site also. I guess it is more lucrative to write books than to publish articles on a site.
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Old 01-27-2008, 09:01 PM   #54
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I guess I didn't phrase it so well. 95% success still fails one time in 20. I'm a big chicken and like higher success rates.
Well, I certainly agree with you in that I also prefer a conservative approach to RE planning.

I'd add that not only does 95% mean that one in twenty fails, but that you also need to remember there will be others that will have close calls. FireCalc defines a close call (nearly running out of money) as a success. But some of us might get a little stressed if our net worth takes a huge plunge midstream, even if, unbeknownst to us at the time since we couldn't look into the future, our net worth was destined to pull out of the tail spin and survive!

None of the FireCalc successes, by definition, run completely out of money. But some will have a wild ride with net worth crashing towards zero at breath taking speed! A later recovery will do little to heal heart attack or stress attack victims! I think it's a really exciting adventure to be on and 19 months into RE, I'm getting one hell of a kick out of it!
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Old 01-27-2008, 09:11 PM   #55
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My planning numbers are a 3% SWR, 2% return over inflation (personal inflation, not CPI-U), and likely some part-time consulting work here and there after I "retire". We envision some years off to work the "farm" and get things going and then some.

I suppose it's conservative, but what let's us each sleep at night is going to be different for everyone. Someone might have no problem with 4%, others might thing 2.5% is too risky.
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