Being worth more at the end than the start

[street]

Here is another question I have for the retired people. What are the odds or percentage would you think that a person retiring and can structure their spending relatively close to what they had at the start of retirement to death.

That a person would be worth more at death then you had at the start of retirement. So at death you will be worth more then when on the first day of retirement.

 

[exnavynuke]

With proper planning, a person should be able to plan a SWR that keeps their portfolio growing throughout retirement with a 99% probability. They just have to wait to retire until they can accumulate a sufficient amount to fund that SWR first.

 

[RunningBum]

There's at least 2 factors:


1. What return you get on your investment over retirement. If the market does well, it's likely you'll finish with more.


2. Whether you try to have more. It's just not a goal for some people, and they will retire as early as possible and be happy to spend their last dime on their deathbed. Others want to leave money for heirs, or don't want to take any risk at all of running out or having to cut back in old age.


My suggestion is to run Firecalc for your situation and see how many runs wind up with more money than you started with. IIRC for me there were quite a few that did.

 

[folivier]

Well at 6+ years into FIRE I'm worth a bit more than when I started. So at least for now I'm on the right path.

 

[Aerides]

If you run numbers in firecalc, you'll see a fair number of scenarios where your net worth after 30 years of being retired is 4x or more your starting NW.

 

[UnrealizedPotential]

Here is another question I have for the retired people. What are the odds or percentage would you think that a person retiring and can structure their spending relatively close to what they had at the start of retirement to death.

That a person would be worth more at death then you had at the start of retirement. So at death you will be worth more then when on the first day of retirement.

While I can't comment on spending and ending amounts, I will say without exception if you leave a little slack in your budget it would serve you well if you reinvest to build your position once you retire. As has been said not everyone wants to do this. The good thing is it will be an option for you if you choose to do it that way and plan for it.

 

[street]

Interesting answers and yes there are many factors that come into play with this question. I have used Firecalc many, many times and yes in my case the odds are that I will be worth more. In the real world I wanted to hear from people to see if that really can be the case.

To answer my own question I would say it would be a very high % that if spending stays about the same and the world doesn't end you would most likely have more.

 

[Totoro]

For a long retirement (35+ years) on average I would expect one ends up with more than you started with, since otherwise it would be unsafe to retire in the first place.

Obviously, that's excluding gifting once you realize there's plenty.

 

[zinger1457]

Having a nice pension that easily covers your expenses, and includes healthcare coverage, certainly increases the odds.

 

[Bamaman]

My wife and I got our education and had good jobs for 36 and 30 years. We worked very hard. We lived within our means, saved for our retirement and took some moderate investment risks that paid off in the long run.

After retiring at 58 and 50 years of age, we are financially stable. But we're going to continue living a reasonable standard of living in retirement.

We don't owe our children a better living than they deserve, and it's up to them to make their own lives and save for their own retirement. Up until now, we've dedicated our lives to our children and grandchildren. Our real estate is substantial, and they'll inherit that. But our investment accounts are there for us to spend, as it's now our time in life.

 

[mathjak107]

kitces found a 60/40 mix has a 90% chance of ending 30 years with more than you started , non inflation adjusted of course . there is a 67% chance of ending with 2x what you started

 

[ERD50]

Interesting answers and yes there are many factors that come into play with this question. I have used Firecalc many, many times and yes in my case the odds are that I will be worth more. In the real world I wanted to hear from people to see if that really can be the case.

To answer my own question I would say it would be a very high % that if spending stays about the same and the world doesn't end you would most likely have more.

I understand why you want this, but it really won't be meaningful to you. Each of those people reporting would have gone through a different scenario than you will, so their experience does not apply to you. And you'd really need to get input from people who have been retired for maybe 20+ years and actively responding to questions like this - and that's probably a pretty small group, even on this forum.

FIRECalc shows you the history and distribution. I don;t think we have mich more to go on than that.

I guess it's time for me to take another look at my NW history and do the inflation adjustment but I'm pretty sure I am now > start, and about 13 years into it. But DW still works by choice (small income), but I'm also not taking SS or pension yet. See how circumstances are differ?

-ERD50

 

[Senator]

Having only been retired for 5 months, it's a bit hard to tell. But here goes anyway.

I have not touched my investment accounts and they are about $60K more than they were when I retired. I still have a pension to take, SS and will pay off a mortgage soon (less than 6 months) which will add a few more dollars to the mix.

I fully expect to continue to ramp up spending in the future.

 

[Big_Hitter]

kitces found a 60/40 mix has a 90% chance of ending 30 years with more than you started , non inflation adjusted of course . there is a 67% chance of ending with 2x what you started

that assumes one survives 30 years - about half will perish before that date

 

[NW-Bound]

Looking at the historical data, one can draw different conclusions depending on whether he looks at the average, or plans for the worst case. In the worst case, a typical portfolio barely grew to keep up with inflation. Then, at 4% WR, it will last 25 years or 30 years at 3.33%.

I plan to draw even lower than the above, plus I will have SS. And I do not think I will live that long. These are my safety margin. I used to be more cavalier, but after seeing ridiculous things happening with healthcare costs, I cannot be so sure anymore. And within recent memory, we have seen the tech bubble burst, then the housing bubble and the Great Recession.

If 5 or 10 years from now, I have a lot of money, I will deal with it. It's an easy problem to fix.

 

[Danmar]

For a long retirement (35+ years) on average I would expect one ends up with more than you started with, since otherwise it would be unsafe to retire in the first place.

Obviously, that's excluding gifting once you realize there's plenty.

Agree. I've been retired 10 years and portfolio is up a fair bit over this period. Just starting the process of thinking about what to do about that. Spend more, or gift more (now or on demise). Or obviously a combo of these. Those are the only real choices. Good problem to have.

 

[W2R]

I retired in 2009, and my portfolio has grown by over 10% since then despite buying my "dream home" in cash. Well, over 20% at first glance but only over 10% after removing the effects of inflation.

BUT - - this is not great, and is to be expected; in 2009 the market was low, and it has done nothing but improve since then. I don't think this would continue forever.

Other than buying the house, my average portfolio withdrawal has been around 2% per year. My spending has been going up each year as my portfolio rises due to the booming market.

What's more important is that this approach appears to be sustainable, for me, I have what I need and want, and so far so good.

Now when we hit the next recession, look out! I'll be scrambling trying to get back into LBYM mode and spend less. I anticipate that my posts will more upset and frantic instead of being so rosy and self congratulatory.

 

[NW-Bound]

... Now when we hit the next recession, look out! I'll be scrambling trying to get back into LBYM mode and spend less. I anticipate that my posts will more upset and frantic instead of being so rosy and self congratulatory.

No more Wh***?

 

[CyclingInvestor]

10 years in, about +15% after inflation

 

[walkinwood]

It depends on your motivation - do you want to be worth more at the end? If so, be conservative and flexible in your withdrawals, and have a substantial chunk of your portfolio in equities.

We are into our 9th year of ER and are worth more than when we started. But we are still in our mid-50s so that's okay. If you look at portfolio values in typical SWR studies, they often grow in the first years of retirement.

We are also very comfortable and satisfied with the lifestyle that our spending allows. However, we'll probably get more aggressive with withdrawals as we get older since we don't have children to leave the money to.

 

[W2R]

No more Wh***?

"Wh***" might change to "Whoa!!!"

 

[scrabbler1]

I ERed in late 2008 when the markets were crashing. Despite spending about $24,000 per year in my budget, my portfolio has risen about 40% since late 2008, 8 years ago.


I have run Fidelity's RIP program several times and each time it shows me, under pessimistic conditions, that by age 92 I will be far wealthier than I am today (adjusting for inflation). This is mainly due to the reinforcements which will arrive when I am in my 60s. Those include unfettered access to my IRA (which won't make me any wealthier), SS, and my frozen company pension. And that doesn't count a reduction in my health insurance costs when I become eligible for Medicare in 12 years.


Maybe I buy a house in 10 years once those reinforcement arrive?

 

[pb4uski]

Here is another question I have for the retired people. What are the odds or percentage would you think that a person retiring and can structure their spending relatively close to what they had at the start of retirement to death.

That a person would be worth more at death then you had at the start of retirement. So at death you will be worth more then when on the first day of retirement.

The odds are very high if one is following the 4% rule or some similar approach because those approaches are typically designed to ensure that you still have money left in your old age under some very draconian scenarios, which leaves many scenarios where the results are much better.

For example, if you plug in Firecalc with a $1m starting portfolio at age 60 and living to age 100 and 4% WR ($40k in first year) and a 60/40 portfolio (and leave all other inputs as default) then you get:

FIRECalc looked at the 106 possible 40 year periods in the available data, starting with a portfolio of $1,000,000 and spending your specified amounts each year thereafter.

Here is how your portfolio would have fared in each of the 106 cycles. The lowest and highest portfolio balance at the end of your retirement was $-925,081 to $7,802,709, with an average at the end of $1,520,715. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 40 years. FIRECalc found that 21 cycles failed, for a success rate of 80.2%.

Note that there are many scenarios where the ending balance exceed $1m

As for my personal experience, I'm coming up on 5 years and our portfolio is 12.5% higher than when we retired, and 21% higher if I include in the ending value our winter condo that we bought from portfolio funds.

 

[Danmar]

We don't owe our children a better living than they deserve, and it's up to them to make their own lives and save for their own retirement. .

I certainly respect this viewpoint and agree our children's retirements are their own responsibility. However, others often want to give their kids as good a "boost" as they can within the constraints of their (parents)resources and lifestyle desires. Without knowing your demise date, it is difficult to spend it all. You could of course annuitize the whole thing but most here wouldn't consider that.

Not sure how you determine how much lifestyle someone deserves?

 

[NW-Bound]

"Wh***" might change to "Whoa!!!"

With so many posters talking about having so much money, I think they are overriding your recent restraint on the Wh*** proclamation. I think my early belt-tightening is the proper measure to take.