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Can 95% Safe = 100% Safe?
Old 10-14-2008, 03:08 PM   #1
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Can 95% Safe = 100% Safe?

Hi everyone -

Supposing you retired in 2004 and enjoyed a return on your 65% stock allocation that was a little more than double that of the Total Market until last month.

And then the recent downturn occurs. In it's aftermath, I'm sort of trying to "re-firecalc" my retirement going forward.

Would you consider a 95% SWR setting in Firecalc to be 100% safe if you enjoyed such outsized return (a little more than twice the Total Market) in the first 4-5 years of retirement?

Also, when you select the portfolio to never drop below a certain amount, is that amount inflation-adjusted so it always has the same purchasing power?

Thanks for your input.
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Old 10-14-2008, 06:13 PM   #2
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There is no such thing as 100% safe. Earning double that of the total stock market means (or meant) taking similarly out-sized risks, which can cut both ways.

If you are asking if an inordinately positive return early on in retirement makes a retirement safer, then yes, it likely does. "Safe," no, but "safer" - yes.

Regardless of the above, you are wise to recalculate at this point.
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Old 10-14-2008, 06:42 PM   #3
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Quote:
Originally Posted by halo View Post
Would you consider a 95% SWR setting in Firecalc to be 100% safe if you enjoyed such outsized return (a little more than twice the Total Market) in the first 4-5 years of retirement?
Hopefully you're referring to a 95% success rating and not a 95% SWR. A 95% SWR is probably only going to be 100% successful for one year.

Mathematically, a 95% success rating is 5% more dangerous than a 100% success rating. From a personal perspective I guess it depends which side of the 95% you end up on. The FIRECalc warranty is worth what you've paid for it.

Statistically speaking there's no difference between a success rate of 95% and 100%:
(FAQ archive): Bernstein's "Retirement Calculator from Hell" articles

Quote:
Originally Posted by halo View Post
Also, when you select the portfolio to never drop below a certain amount, is that amount inflation-adjusted so it always has the same purchasing power?
Been a while since I've read the FIRECalc fine print, and I don't know how often Dory36 drops by here. You might want to send him a PM on this one.
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Old 10-14-2008, 07:56 PM   #4
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There may be math involved but this ain't science. If you get it all figured out to where FIRECalc gives you a 100% success rate and that lets you sleep at night then that's cool. But the world has ways of tossing curve balls at us on a regular basis, and that's why I have a Plan B. Well, more like Plans B through E-ish. But then I've learned to not worry about if something bad happens more than I think about what could happen and how to deal with it.
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