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 05-21-2014, 10:02 AM #21 Thinks s/he gets paid by the post   Join Date: Jul 2006 Location: Denver Posts: 2,677 Why not return to the US & work for a year? Wouldn't that increase your nest egg faster? __________________ __________________
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 05-26-2014, 04:46 AM #22 Dryer sheet aficionado   Join Date: May 2008 Posts: 25 Thanks all again for your inputs. I cannot help but wonder whether the aggregate of 2 lowest cycles is unrealistic. Taking the lowest of two 25-year cycles in sequence creates a sort of 'double worse' case scenario, does it not? In other words, the worst possible outcome of 25 years is taken among 110+ possible periods that FireCalc looks at. Then, this is paired again with exactly same worse case - As both periods are overlapping, this is not historical data just a math exercise. This kind of double-worse outcome is a probability of (1/110)*(1/110) = 8.25 E-05 or 0.0083%. While probability is calculated by simple math, the likelihood of two consecutive 25-year disasters in global capital markets - both identically worst case in outcome as FireCalc reports - may be even more remote than what the probability estimates. It just never happened in the last 100+ years of capital market history, at least from what I have read (which may be wrong). So, while on one hand, I appreciate the new insight this kind of conservative FireCalc analysis shows, I am wondering if this should drive ER decision or not? Do you all do this and decide on ER based on the 'double worse' case scenario in all your analysis? For example, do you split even a 30-year retirement into 2 consecutive 15-year periods where the 'low' of first period is input into the second period? As to my decision, I am mentally preparing myself to move to a full-time job rather than part-time and earn about \$120K/year as per an offer I just got. My idea is that a job like this for even 3 years will help increase both the retirement pool and reduce the years to fund my retirement to hopefully make the situation better. But I shudder to run the 'double worse' case scenario again. :-( __________________ __________________
 05-27-2014, 12:11 AM #23 Dryer sheet aficionado   Join Date: May 2008 Posts: 25 As a follow-up to my previous post, I found another instructive way to address the risk raised by molof. The biggest risk to retirement income survival that retirees face is early years' market performance. To simulate that, I re-ran FireCalc for 50-year period with the starting portfolio as \$750K (25% less than my retirement pool - to simulate a 30-35% decline in equity markets). With this reduced asset base, I tried how much would my starting withdrawal would have to decline for high confidence level. For 96% success, I got \$27,000 per year and 100% success is \$25,000/year. In other words, to deal with a major 25% reduction in starting portfolio, FireCalc says I only need to reduce my spending by 10% (From \$30K to \$27K). Given the cushions I have built in my current expenses (presumed tax rate itself is a cushion), I don't see this as such a big deal. Also, in none of the above cases is Social Security even included, so that is also a cushion. My question to the experts on FireCalc: Is this a more realistic way of 'stress testing' the retirement portfolio or is the 'double worse' case scenario of my previous post better? What are the ways you all stress test your retirement income portfolio? __________________
 05-30-2014, 05:48 AM #24 Dryer sheet aficionado   Join Date: May 2008 Posts: 25 No replies yet to my previous 2 posts?! :-( I request FIRECalc experts and ERed folks to please share your thoughts on the methodologies mentioned. __________________
 06-14-2014, 04:46 AM #25 Dryer sheet aficionado   Join Date: May 2008 Posts: 25 I request other early retirees to share their views about the two approaches to 'stress test' the portfolio described above. Do you do something similar? I would appreciate any ideas in this regard. Sent from my GT-I9300 using Early Retirement Forum mobile app __________________ __________________

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