Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 10-16-2010, 12:31 PM   #21
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
I use 100 in ESPlanner.

For me, it doesn't make a difference if I chose 90 or 100, or even 80. I have to use a withdrawal methodoloy that will essentially allow my portfolio to last forever. I chose the 4%/95% method advocated by Clyatt.

As I age, I guess the longevity estimate will be useful if I need to or want to change my withdrawal methodology to something more aggressive.
__________________

__________________
walkinwood is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 10-16-2010, 12:55 PM   #22
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,261
Quote:
Originally Posted by walkinwood View Post
I use 100 in ESPlanner.

For me, it doesn't make a difference if I chose 90 or 100, or even 80. I have to use a withdrawal methodoloy that will essentially allow my portfolio to last forever.
There is no magic in making a portfolio last forever. I'm not sure that taking out less and less as it gets smaller and smaller really qualifies as a "methodology" though. If it does, I guess cat food and a cardboard box is a "methodology" also.

-ERD50
__________________

__________________
ERD50 is online now   Reply With Quote
Old 10-16-2010, 01:50 PM   #23
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by ERD50 View Post
There is no magic in making a portfolio last forever. I'm not sure that taking out less and less as it gets smaller and smaller really qualifies as a "methodology" though. If it does, I guess cat food and a cardboard box is a "methodology" also.

-ERD50
The 4%/95% methodology has been back tested and proved to keep the purchasing power of the portfolio intact after 40 years 90+% of the time, with an AA of 50/50 rebalanced annually. I also monitor my withdrawals to make sure they are within the limits that Guyton defines in his paper.

I don't see how making your portfolio last indefinitely equates to it getting smaller and smaller. Endowments do this all the time.
__________________
walkinwood is online now   Reply With Quote
Old 10-16-2010, 02:15 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,261
Quote:
Originally Posted by walkinwood View Post
The 4%/95% methodology has been back tested and proved to keep the purchasing power of the portfolio intact after 40 years 90+% of the time, with an AA of 50/50 rebalanced annually. I also monitor my withdrawals to make sure they are within the limits that Guyton defines in his paper.

I don't see how making your portfolio last indefinitely equates to it getting smaller and smaller. Endowments do this all the time.
And how low did the WR go? And how much to kick it up to a 98-99% success rate?

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 10-16-2010, 02:20 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,964
I use 94-96, though DW is 2 years younger than I am. My parents are both 88, her Mom is 84.

But I sincerely hope I don't live into my 90's, I'd rather live well than long...
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is online now   Reply With Quote
Old 10-16-2010, 02:45 PM   #26
Thinks s/he gets paid by the post
 
Join Date: Jan 2006
Posts: 2,971
I use 80 which I think is more than necessary since on male member of my family on either side ever lived past 76. I'm tempted to use 70 as an end to my savings and live off SS after that since I live very cheaply.
__________________
aaronc879 is offline   Reply With Quote
Old 10-16-2010, 03:07 PM   #27
Moderator Emeritus
Rich_by_the_Bay's Avatar
 
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
Assuming we are talking about intervals of 25 years or more, the consequences of using too large a number are probably pretty small for purposes of FIRECALC type calculations. That is, a 50 year horizon won't fail that much more often than a 35 year calculation. Example (FC default settings): 50 yrs, $1mm, $40k withdrawals = 86% chance of success. Change it to 35 years and it's 92%, not that different considering the widely different assumptions.

So I use a life expectancy of 85 years, but if I live to 90 or even 95 the implications are not that different.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.

As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
Rich_by_the_Bay is offline   Reply With Quote
Old 10-16-2010, 03:18 PM   #28
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by Rich_in_Tampa View Post
Example (FC default settings): 50 yrs, $1mm, $40k withdrawals = 86% chance of success. Change it to 35 years and it's 92%, not that different considering the widely different assumptions.
So I use a life expectancy of 85 years, but if I live to 90 or even 95 the implications are not that different.
I sure hope so. I'd hate to be wrong, especially if the only other alternative is working 10 more years to achieve 33x instead of 25x or 22.3847x.

I guess it's worth re-running Bill Bernstein's existential take on the planning:
(FAQ archive): Bernstein's "Retirement Calculator from Hell" articles

(Heh. Accidental literary joke. "Hell", "existential", get it? Heh-heh.)
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 10-16-2010, 03:28 PM   #29
Thinks s/he gets paid by the post
 
Join Date: Jun 2010
Location: France
Posts: 1,195
I think that everyone needs to factor in Bernicke (discretionary expenditure declining with age, although FIREcalc's interpretation which starts this at age 56 means I have to lie about my age to it!), but also the cost of keeping ourselves in the best quality diapers in the nursing home.

My current planning calls for FIRE at age 54 (DW will be 57), 120% of our pre-retirement expenditure until 62, 100% until 70, 75% until 80, then 40% (sit in front of TV and dribble) until , then a couple of painful years for the inheritance watchers. The key to all that seems to be getting to 80 with enough in the COLA'ed pensions to pay for the dribbling, and 70K or so to pay for the immediate needs annuity when the dam breaks.
__________________
Age 56, retired July 1, 2012; DW is 60 and working for 2 more years. Current portfolio is 2000K split 50 stocks/20 bonds/30 cash. Renting house, no debts.
BigNick is offline   Reply With Quote
Old 10-16-2010, 03:33 PM   #30
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Quote:
Originally Posted by BigNick View Post
I think that everyone needs to factor in Bernicke (discretionary expenditure declining with age...
I like his observations and his analysis and I really really want to believe, but he does admit that this doesn't include medical-related end-of-life spending like the Alzheimer's full-time memory-care unit.
__________________
*
*

The book written on E-R.org, "The Military Guide to Financial Independence and Retirement", on sale now! For more info see "About Me" in my profile.
I don't spend much time here anymore, so please send me a PM. Thanks.
Nords is offline   Reply With Quote
Old 10-16-2010, 03:56 PM   #31
Full time employment: Posting here.
 
Join Date: Nov 2009
Posts: 510
Quote:
Originally Posted by Khan View Post
When calculating your retirement, what age cut off point do you use?

Looking at the TSP calculators I see they go all the way to 115.

I consider 80 the far point.

I really do need to get all finances in order for 5 10 20 years.

Lot of different projections given here - thought I'd give you the U.S. Census Bureau's idea of age projections. FYI - as of 2009 < 2% at +85, project 2035 will be < 3% at +85, and project 2050 just over 4% at +85.
Attached Files
File Type: xls current population as of 2009.xls (14.5 KB, 5 views)
File Type: xls population projection to 2050 (released 2008).xls (12.5 KB, 4 views)
__________________
fritz is offline   Reply With Quote
Old 10-16-2010, 04:05 PM   #32
Thinks s/he gets paid by the post
Bikerdude's Avatar
 
Join Date: Jul 2006
Posts: 1,901
Quote:
Originally Posted by Rich_in_Tampa View Post

So I use a life expectancy of 85 years, but if I live to 90 or even 95 the implications are not that different.
I tend to agree with Rich. However, I plan to skid sideways into the funeral home parking lot at 85, put my last quarter in the parking meter, hop in the casket and close the lid.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
Bikerdude is offline   Reply With Quote
Old 10-16-2010, 04:49 PM   #33
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by ERD50 View Post
And how low did the WR go? And how much to kick it up to a 98-99% success rate?

-ERD50
There was a thread earlier about just how low the 4%/95% SWR went. The worst case was pretty bad. However, it wasn't "dog food" bad. We have enough slack in our budget.

I don't worry about bumping the probability up from 90+ (I don't remember what Clyatt's exact number) to 98-99%. See the William Bernstein paper that Nords posted.
__________________
walkinwood is online now   Reply With Quote
Old 10-16-2010, 07:26 PM   #34
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by Nords View Post
(snip) I guess it's worth re-running Bill Bernstein's existential take on the planning:
(FAQ archive): Bernstein's "Retirement Calculator from Hell" articles (snip)
Quote:
Originally Posted by walkinwood View Post
(snip) I don't worry about bumping the probability up from 90+ (I don't remember what Clyatt's exact number) to 98-99%. See the William Bernstein paper that Nords posted.
Despite having read the Calculator from Hell articles, I've always felt that a portfolio with a success rate of 100% in modeling really is better than one with 80%. I wonder if this is based on a misunderstanding of either the models, the articles or both. As I understand it, Bernstein says any result over 80% is meaningless because he estimates that our way of life itself has only about an 80% chance of survival. But ISTM that the portfolio that survives everything the modeling software throws at it really is better than one that doesn't, because it will almost certainly succeed in the approximately 80% of future timelines which, if Bernstein is right, do not experience "the end of life as we know it", whereas the one with an 80% success rate in modeling has a 1 in 5 chance of failing even if life goes on as it always has in the past.
Perhaps all modeling results should be multiplied by a factor of 0.8 to take this into account?
__________________
kyounge1956 is offline   Reply With Quote
Old 10-16-2010, 08:10 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,380
Quote:
Originally Posted by kyounge1956 View Post
throws at it really is better than one that doesn't, because it will almost certainly succeed in the approximately 80% of future timelines which, if Bernstein is right, do not experience "the end of life as we know it", whereas the one with an 80% success rate in modeling has a 1 in 5 chance of failing even if life goes on as it always has in the past.
With this you are on the right side of Pascal's Wager. If the modern capitalist world falls apart, what could any individual do anyway? If it endures, the more conservative path will have a better shot of making it. It seems always to be better to reasonably defend against not necessarily the more likely outcome, but the most damaging one that can be defended against or mitigated.

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 10-16-2010, 08:24 PM   #36
Thinks s/he gets paid by the post
walkinwood's Avatar
 
Join Date: Jul 2006
Location: Denver
Posts: 2,676
Quote:
Originally Posted by haha View Post
With this you are on the right side of Pascal's Wager. If the modern capitalist world falls apart, what could any individual do anyway? If it endures, the more conservative path will have a better shot of making it. It seems always to be better to reasonably defend against not necessarily the more likely outcome, but the most damaging one that can be defended against or mitigated.

Ha
You are right. If every one of 5 components of your retirement plan have 99% success rate, your retirement plan success rate is only 93.6% (99%^5). So, it makes sense to maximize the success rate of any one aspect of your retirement plan (SWR in this case)

However, most of the SWR methodologies assume that you will not make any changes to the plan based on current realities (portfolio value, inflation etc.). I think most people (at least on this board) will review their portfolios regularly and will be aware of macro conditions and WILL make changes to their SWR to increase the survivability beyond what the model suggests.

Speaking for myself, I'll take the chance of having to correct mid-way (either reduce expenses in bad years, stash away the excess in good years or work a bit) over working till I can get to some theoretical 100% success rate. I have not counted on SS in my calculations, so there is some fudge factor built in. I'm also hopeful that Bernicke is on to something real.
__________________
walkinwood is online now   Reply With Quote
Old 10-16-2010, 09:25 PM   #37
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Quote:
Originally Posted by kyounge1956 View Post
As I understand it, Bernstein says any result over 80% is meaningless because he estimates that our way of life itself has only about an 80% chance of survival.
It does seem to be a non sequitur. At most, he's shown that a result not taking into account the chance of our way of life enduring must be discounted to something less than or equal to 80%. That's not meaningless.
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 10-16-2010, 09:35 PM   #38
Recycles dryer sheets
 
Join Date: Nov 2007
Posts: 95
This is one of those datapoints that is difficult to ascertain, and we all must simply make our best guess, add a few years for insurance, and then move along. Otherwise none of us would ever retire early.
My Dad died of lung cancer at age 57 (my age now). (He was a heavy smoker for the many years.) I never have smoked. (Other than his second hand smoke until he stopped smoking when I was 14) My mom is still alive at 84, although she is in a nursing home with parkinsons.

I was recently diagnosed with Prostate Cancer with a gleason score of 9. (not good) I'm on the downhill side of a radical retropubic prostatectomy, and I currently feel pretty good. Last psa was 0.04, and just took my first hormone injection. (Every 4 months for next two years.) I may live another 10 years, or another 20. I suspect my quality of life will not be good during the last 3 to 5 years no matter how long I live.

That being said, I'm using the 20 year number which equals age 77 for me. I'm still w##king three days a week doing some consulting and making over $100k.

Brand new home is paid for. Both vehicles are paid for and have low mileages so they should last for many more years. $1.5mm in ira's and 401k's. We have some paid for rental property which produces $9300 annually. This is about a wash with what our health insurance costs. Health ins is 50% subsidized by ex megacorp employer. (Great insurance, but expensive)

So, at this point, assuming the market doesn't collapse (again), then I feel relatively secure with where I am. Still plan on working another year so that I'm close enough to 59.5 that a 72t will not be required.

It's very interesting to me that many of you are using 90 plus ages in your calculations. Men rarely live that long, although I wish you the best in reaching that milestone.

So, the 64$ question is this; Will the market crash? <again> and if it does, what will the recovery time be? Okay, time to get the crystal balls out.

b
__________________
bentley is offline   Reply With Quote
Old 10-16-2010, 09:42 PM   #39
Moderator Emeritus
Khan's Avatar
 
Join Date: Aug 2006
Location: Pine Island, Florida
Posts: 6,868
Send a message via AIM to Khan
Quote:
Originally Posted by Nords View Post
Well, that's a different kind of survivor bias than we usually discuss, but it still skews the sample statistics.

You already know how you're going to feel in 10-20 years. Your longevity risk (the "risk" of living longer than your assets) rises slightly with every year you survive from now on. How would you feel if you survived those 10-20 years and realized that you could make it another 20? Do you want to add longevity risk to your list of worries? Or would you rather put a number on your plans that will minimize the risk of outliving your money, allowing you to do more philanthropy today?

I use age 115 or 120, depending on what limit the software allows. Spouse's Ashkenazim lineage has four centenarian grandparents to verify her longevity risk. She says she's going to nag me to stay with her, which will have the same relative time-dilation effect as living to age 115-120.

One option for you would be to see how Social Security at age 62/66/70 affects your longevity risk. Another would be to consider annuitizing what's not already covered.
I'm not worried about outliving my assets.

I know I'm past my software support date.
__________________
"Knowin' no one nowhere's gonna miss us when we're gone..."
Khan is offline   Reply With Quote
Old 10-16-2010, 10:36 PM   #40
Full time employment: Posting here.
 
Join Date: Feb 2009
Posts: 886
If you really believe you have a life expectancy above the average, due to your fantastic genes, clean living, lack of risk taking and wonderful luck, the numbers say you should buy annuities, or at least take the self only choice on a DB pension, and postpone Social security.
__________________

__________________
Emeritus is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
turning point economy runnerr FIRE and Money 18 08-15-2008 01:29 PM
25 Basis Point Emergency Cut barbarus FIRE and Money 6 03-17-2008 09:01 AM
Half a point? cute fuzzy bunny FIRE and Money 27 03-08-2006 07:40 PM
The tipping point: When to get out Traveler Other topics 29 05-05-2004 06:22 PM

 

 
All times are GMT -6. The time now is 07:35 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.