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How do you estimate your 'end game'?
Old 04-04-2014, 08:26 AM   #1
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How do you estimate your 'end game'?

Not to be morbid, but I've been estimating our retirement savings for different 'end games' or ages to see just how much may be left, if any.

I use two scenarios which 'bracket' our savings:
1) SS at 70, and 0% 'real return' (after inflation and any management fees/loads/etc), and we cut our expenses to minimums

2) SS at 70, a 2% 'real return' and a bit more to play with for vacations, home upgrades, etc.

I also run my spreadsheet so that I find the age of my own demise when I have 1 years worth of expenses left.

Doing so, for scenario 1 I have enough until age 94 and for scenario 2, 101.

The 2% 'real' return makes a huge difference in longevity of funds.

I guess the unknown is when my own 'end game' is....

So, how do you approach your own estimate?
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Old 04-04-2014, 09:13 AM   #2
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Many calculators default to age 95 for planning purposes. Unfortunately some people can use lower estimates based on family history, existing conditions, lifestyle habits, etc.

The retirement planning rule of thumb I've read is to estimate your expected longevity as best you can, and then add 10 years.

Just Google "life expectancy calculator" or "longevity calculator" and you'll get lots of options. It's a little 'cutesy' but here's just one that factors in family history, health & exercise, smoking-drinking-drugs, stress handling, driving habits, etc. FWIW

The Longevity Game Intro | Northwestern Mutual
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Old 04-04-2014, 01:29 PM   #3
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Given US life expectancy and family longevity history, I am planning that DW (same as me) is likely to outlive me by 10 - 15 years. Her SS payment will be 1/2 of what mine is. So, our end game is to last until 70 with what we got (I think we got enough), start taking SS at age 70, and train DS to manage our remaining asset, look after DW.

Aging and dying s**ks.
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Old 04-04-2014, 01:46 PM   #4
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Not yet FIREd but plan to do so in 3 years at 59. I model using 0% real return for bonds/cash and (I hope) conservative 2% above inflation for our stock portion. I also assume SS will lag inflation by 0.5% per year (again trying to be conservative). I plan to file and suspend my SS to allow DW to claim 50% of my benefit at her FRA, then both use our age 70 benefits later. I believe these are just about as conservative as possible using a At retirement I plan to be 55 - 60 % stock, ~30 % bond, ~10% cash/CD/stable-value. These plans say we can live forever... (a rising final balance). FIRECalc suggests near 100% success (can't remember exact number).
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Old 04-04-2014, 02:37 PM   #5
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A recent Scott Burns column on this topic:

AssetBuilder - Measuring Longevity, Another Way - AssetBuilder Inc., Registered Investment Advisor

The takeaway quote:

Quote:
What do these figures tell us? Interpretations will vary, but the message I get is that people who prefer to eat dessert first are quite reasonable. The glass empties pretty fast. Another message is that a 20-year planning horizon— as in age 65 to 85—is likely to be a lot more rewarding than a 30-year planning horizon, even if it entails a greater risk of dying broke.
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Old 04-04-2014, 03:36 PM   #6
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Here's my thinking: If we both delay SS until age 70, We could live on the SS payments alone.
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Old 04-04-2014, 03:41 PM   #7
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In my calculations, I estimate 100. Seriously doubt I'll make it that long, but I don't want to run out of money before I run out of life.
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Old 04-04-2014, 03:48 PM   #8
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I use one scenario that has us (a couple) living past 100. Then I occasionally check what happens if I die early, our worst case.

My safety margin is all in building the portfolio to a huge number. That keeps us in the 3% SWR range while still assuming average market gains and inflation for planning purposes.
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Old 04-04-2014, 03:49 PM   #9
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Realistically, I will probably croak in my mid 80's. For planning, I use 95 but intend to revise that to a later year if I live to 80 in good health.
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Old 04-04-2014, 06:21 PM   #10
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I'm closing in on 70 and have a time horizon of
30 years. DW has a bit longer cuz she's a gal. Some of you folks seem to know when you will check out (or check in), but I plan for the best...a long, healthy journey on planet earth.

Those six income streams that supports our longevity scheme will lose on this deal.
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Old 04-04-2014, 08:55 PM   #11
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I run my numbers to age 100 for good measure. One of us has a good chance of 90, but mid-80's is probably more realistic.

I have two scenarios now:
A) we both live to 100 and
B) I die at 67, just after I stop working.

My priority has been to protect us (or, more likely, the survivor) from destitution in old age (my nightmare). The thing that I am concerned about most is long-term care and its cost, which could really sink the boat. I do not want to happily empty the piggy bank (as MRDs would do) and get a bad surprise later. Same strategy as Animorph's (except his 'huge' is probably a lot more than my 'huge'.):
Quote:
My safety margin is all in building the portfolio to a huge number. That keeps us in the 3% SWR range while still assuming average market gains and inflation for planning purposes.
It is very important how we manage things in the first 3-5 years. I am focusing on how to live cheap (or minimizing using assets, which is not the same thing--it means keep working) in that time but Scott Burns is getting me to rethink.

Quote:
A recent Scott Burns column on this topic:

AssetBuilder - Measuring Longevity, Another Way - AssetBuilder Inc., Registered Investment Advisor

The takeaway quote:

Quote:
What do these figures tell us? Interpretations will vary, but the message I get is that people who prefer to eat dessert first are quite reasonable. The glass empties pretty fast. Another message is that a 20-year planning horizon— as in age 65 to 85—is likely to be a lot more rewarding than a 30-year planning horizon, even if it entails a greater risk of dying broke.
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Old 04-04-2014, 09:05 PM   #12
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Originally Posted by David1961 View Post
In my calculations, I estimate 100. Seriously doubt I'll make it that long, but I don't want to run out of money before I run out of life.
That's my thinking/planning as well. In the off-chance I or DW reach 100, I want to have some cash left to provide something above minimum care, or be a drag on the kids. If it happens it happens, but I want at least a sporting chance of providing for ourselves.

Quote:
Originally Posted by Katsmeow View Post
A recent Scott Burns column on this topic:

AssetBuilder - Measuring Longevity, Another Way - AssetBuilder Inc., Registered Investment Advisor

The takeaway quote:
Quote:
What do these figures tell us? Interpretations will vary, but the message I get is that people who prefer to eat dessert first are quite reasonable. The glass empties pretty fast. Another message is that a 20-year planning horizon— as in age 65 to 85—is likely to be a lot more rewarding than a 30-year planning horizon, even if it entails a greater risk of dying broke.
WADR to Mr. Burns, that deserves a BIG "DUH!!!!". Of course you will have more fun spending all your money now than saving it for later. Classic Ant/Grasshopper.

And I'm not afraid of dying broke, I'm afraid of living broke. That's a mighty fine line unless you already know your date of demise.


Quote:
Originally Posted by TromboneAl View Post
Here's my thinking: If we both delay SS until age 70, We could live on the SS payments alone.
But there's always the chance of cuts to SS, and maybe even targeting it by amount, regardless of 'value' (actuarially, the value of a delayed SS is the same as an early SS). And survivor benefits come into play.

But generally, I agree, assuming we can delay to 70 (very likely), then SS and modest pensions would carry a pretty high % of something we could manage on. Would not need a big portfolio to make up the difference, so hopefully the portfolio will allow for a cushy/plush lifestyle in old age, rather than meager and 'getting by'. But we will survive.


OFF TOPIC: The OP used the term 'morbid' exactly as I would. But just the other day, DS was talking to me about a pharmacological study he was involved in regarding 'morbidity and death', and I had to interrupt and ask "isn't that the same thing?". Nope, morbidity is sickness, and death is death. And not just in technical terms, that is the standard dictionary definition. So I learned something that day (and probably forgot something I already knew!).

Quote:
morbidity
The relative incidence of a particular disease

-ERD50
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Old 04-04-2014, 09:24 PM   #13
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By the way, I am figuring on a 25% cut in SS benefits (one way or another) in 2013 for my planning. Also 1.5% COLA for SS, ROI of 6% and inflation at 3% (so 3% real growth net of inflation).

Quote:
And I'm not afraid of dying broke, I'm afraid of living broke. That's a mighty fine line unless you already know your date of demise.
My fear as well.
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Old 04-04-2014, 09:26 PM   #14
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The current plan is to live off less than our retirement income and still save money so our portfolio will continue to grow the older we get. So there is no set end date. The older we get the more we save. I am happy to leave money we don't use to the kids or our favorite charities. I don't feel the need to spend it all.
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Old 04-04-2014, 09:27 PM   #15
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Planning for 100 for DW and myself.
Those "averages" that you see are just that -- Averages across the US population.

I would not consider the group that frequents this board representative of the average population.

-gauss
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Old 04-04-2014, 10:22 PM   #16
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Originally Posted by W2R View Post
Realistically, I will probably croak in my mid 80's. For planning, I use 95 but intend to revise that to a later year if I live to 80 in good health.
Same here.
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Old 04-04-2014, 11:07 PM   #17
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I think the most important number in the OPs post was the estimate for the real return, either 0 or 2%.

I can see a 50/50 portfolio generating a 0% real for bonds and maybe 4% low for stocks, so a real return of 2%, but I think that's the lowest that I have seen prophesied I.e., Schwab retirement calculator uses that. Anyone else use low numbers like that with any conviction rather than just conservatism/fear?
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Old 04-05-2014, 09:03 AM   #18
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Originally Posted by bmcgonig View Post
I think the most important number in the OPs post was the estimate for the real return, either 0 or 2%.

I can see a 50/50 portfolio generating a 0% real for bonds and maybe 4% low for stocks, so a real return of 2%, but I think that's the lowest that I have seen prophesied I.e., Schwab retirement calculator uses that. Anyone else use low numbers like that with any conviction rather than just conservatism/fear?

Good point.

I'd like to see how others respond.

I use the 0% as the worst case (knowing that my own excel 'calculator' is static and not a monte carlo 'simulator').

And the 2% I use is just out of conservatism/fear.

If I can do better than 2%, then, well, a world cruise or a luxurious stay in Europe will be enjoyed!
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Old 04-05-2014, 12:09 PM   #19
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You could always get a SPIA to pay the very bare minimum so you don't live broke.
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Old 04-05-2014, 12:20 PM   #20
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Planning on 85 based on family history, although I have healthier habits than Mom/Dad. Already had a sister pass at 57 and one with cancer at 60. Not a good track record here. Uncles/Aunts all gone by mid-60's. Some from liver failure, others from cancer.

DW has a family history of congenitive heart failure. Two sisters and one brother passed in their early 60's from heart failure. Her older brother (74) is running on a pacemaker and needs a heart transplant. Not a good track record here either.

So we are going to try to spend it all over the next 15 years, leaving the last bulk of spending for medical treatment, etc.

What's my number? Not much.
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