Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: life expectancy
Old 11-24-2006, 10:17 AM   #41
 
Posts: n/a
Re: life expectancy

Quote:
Originally Posted by donheff
Yes, I do the later. What I was suggesting is that it doesn't make sense to calculate your odds of a long life and then plan your withdrawals based on the assumption that you will die at the average (or shortly after) for your type. For example, my father-in-law's three brothers all died in their early 60s from heart attacks. My FIL suffers some of their problem and had by-pass surgery. He did not live frugally because he figured he would be dead before he was 70. He is now 75 and doing fine except for the fact that he is low on money. We had to help him set up a reverse mortgage to supplement SS so he can continue to live in his condo. He beat the odds but didn't plan on it.
It seems we have to be extreme one way or the other here! - What I have suggested before is you take a somewhat balanced approach! Spend half of your principle by age 90.

So if you retire at age 50 with $1 Million, plan to have half of it gone by the time you reach age 90. Since most of us will expire before we even reach age 90, this is a pretty conservative plan. Preserving the entire spending power of $1 Million by age 90 intact accomplishes very little in safety of assets.

Examples of folks running out of money at age 75 and other examples of people increasing their spending power out past age 100 are both at the extreme ends of financial planning. I am trying to achieve some balance.
__________________
  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!

Re: life expectancy
Old 11-24-2006, 10:44 AM   #42
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Re: life expectancy

Quote:
Originally Posted by Cut-Throat

So if you retire at age 50 with $1 Million, plan to have half of it gone by the time you reach age 90.
CT, there are two ways to look at this and I'm not sure which point of view you're taking. Are you thinking that if your retirement time period is financially favorable and your portfolio is doing well, you'll step up spending to ensure 50% (real) is consumed by 90? Or, are you saying that you're plugging into Firecalc a 50% residual portfolio amount below which Firecalc will consider the year a "failure?" The first is a more financially liberal approach, the later more conservative.

Also, while you advocate spending and enjoying your money to avoid going to the grave while still having a stash, your plans seem quite conservative! Budget = 2X base needs, live to 100, etc.

__________________

__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Re: life expectancy
Old 11-24-2006, 11:03 AM   #43
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,457
Re: life expectancy

Quote:
Originally Posted by youbet
Also, while you advocate spending and enjoying your money to avoid going to the grave while still having a stash, your plans seem quite conservative! Budget = 2X base needs, live to 100, etc.
That Budget = 2X base needs is more about being able to enjoy your retirement - especially the early years - rather than having to sweat it out year after year because you have some unexpected expenses or you're just cutting it too close on the expenses.

Amass a generous portfolio to retire on, but then spend it!

Audrey
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Re: life expectancy
Old 11-24-2006, 11:12 AM   #44
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Re: life expectancy

Quote:
Originally Posted by audreyh1
That Budget = 2X base needs is more about being able to enjoy your retirement - especially the early years - rather than having to sweat it out year after year because you have some unexpected expenses or you're just cutting it too close on the expenses.

Amass a generous portfolio to retire on, but then spend it!

Audrey
Actually I thought CT was advocating having a 2X base budget so that you could reduce spending during extended poor market conditions without impacting your access to life's essentials.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Re: life expectancy
Old 11-24-2006, 11:39 AM   #45
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 9,965
Re: life expectancy

Makes sense to me CT.

You're espousing conservative planning (2X bare bones budget + 100 year longevity) but advocating responding to favorable market conditions by increasing spending over time if the numbers so indicate. Can't argue with that.

My plans are similar. Of course personal situations come into play and everyone must call their own shots and live with the consequences. For example, I didn't get to RE until 58, I have some issues that impact my ability to be physically active and I enjoy fishing, canoeing and that sort of thing. So, I'm being a little more aggressive about early spending on those types of activities since it's unlikely I'll be able to enjoy them too much longer. Everyone's situation is unique.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Re: life expectancy
Old 11-24-2006, 11:47 AM   #46
Moderator Emeritus
Nords's Avatar
 
Join Date: Dec 2002
Location: Oahu
Posts: 26,616
Re: life expectancy

Quote:
Originally Posted by JJac
But the idea of eating into the principal at any point was alien to me.
The key point though is that I wanted to insure that I would live only off of the interest until age 100. This conservative investment approach allowed me about a 2.3% withdrawal rate at 35. With this 2.3%, I need to pay health insurance, taxes, and cost of living. (The swr grew to 3% at age 70 as medical insurance costs grew. At age 100, it reached 6% and thus my withdrawal the following year would start to eat principal.) I considered age 100 to be the end of the road.
To be completely "safe" I want something more, and that entails keeping the principal sound.
So even after hearing of FIREcalc, I stand by my original viewpoint.
The most important thing about withdrawal rates is being able to sleep at night.

You're golden if you can sleep well without feeling like you're having to be excessively frugal to conserve your principal. And your heirs will be extra solicitous... although technically you'll be worth more to them dead than alive.

But even FIRECalc is pretty conservative about 4%, even with fairly constant withdrawals. Early research is showing that 5% might work quite well overall with even higher withdrawal rates in the earlier years in exchange for lower rates during "no-go" years (when your travel budget is converted to healthcare spending). FIRECalc also allows a little bit of variable spending, but Cut-Throat's bare-bones budget system (have you trademarked that yet, C-T?) gives you even more flexibility to avoid pushing your portfolio over a cliff.

The issue isn't whether the SWR is 2.38769% or 4.01632%. The challenge is a SWR that doesn't feel like a life sentence without parole. In your case there might be more danger of that than of running out of money.

Another danger is making sure that principal conservation doesn't push you to low-return investments that allow your portfolio to be chewed up by inflation. But you don't seem to be heading that way.

Quote:
Originally Posted by Cut-Throat
No one wakes up at age 90 and runs out of money. The signs are there 30 years in advance of that.
Well, my grandfather came pretty close after 14 years in a full-care facility. Of course senile dementia kept him from recognizing just about anything, let alone warning signs, but his portfolio barely outlived him.

I'd start giving large chunks to charity if I was convinced that we wouldn't be spending it on our own life-extending long-term care. It's probably another balance discussion-- give away a little now and save the rest (just in case you need it after all) to give away when you're dead.
__________________
*
*

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
Re: life expectancy
Old 11-25-2006, 02:22 PM   #47
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: life expectancy

Quote:
Originally Posted by donheff
I think it is a bad idea to plan withdrawal rates that allow depletion of the portfolio over an estimated likely lifetime. Improving the estimate with a bunch of health related data merely amplifies the illusion of safety. We really need to plan on the longest potential lifetime because we may be surprised by beating the odds. If we believe Ray Kursweill could be right, that potential lifetime needs to effectively be perpetuity.
I'm starting to worry a little bit less about this as I consider my retirement plans. The possibility of financing a ~60 year retirement originally seemed insurmountable. But in addition to all the other protections we built into the plan (low initial withdrawal rate, a big chunk of highly discretionary spending, some non-investment income, etc.) I realized some other options. We could cut our spending by 30-50% by moving away from the city and into bumpkinville, if need's be. We could probably cut another 30% or so by moving to Thailand. If none of that works we'll save the last $500 bucks of our portfolio for a bottle of champaign, some bullets and a Smith & Wesson the ultimate longevity insurance.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Re: life expectancy
Old 11-25-2006, 06:12 PM   #48
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 5,714
Send a message via Skype™ to kcowan
Re: life expectancy

Quote:
Originally Posted by 3 Yrs to Go
...We could probably cut another 30% or so by moving to Thailand. If none of that works we'll save the last $500 bucks of our portfolio for a bottle of campaign, some bullets and a Smith & Wesson the ultimate longevity insurance.
We have a friend who lived on the income from $250k in Puerto Vallarta for five years. Then he started buying property. Now he is rich enough to consider buying another property in the south of France.
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Re: life expectancy
Old 11-25-2006, 06:23 PM   #49
Thinks s/he gets paid by the post
 
Join Date: Sep 2006
Posts: 1,318
Re: life expectancy

Quote:
Originally Posted by kcowan
I know that much retirement planning involves guessing how long we might live. Most actuarial tools tend to lump everyone together into a median age regardless of lifestyle difference.

The best one that I have found so far is from Wharton, because it considers many of the same lifestyle factors that insurance companies include. I also like it because it gives the lower and upper quartiles for a range of projected lifetimes.

I am interested in your reactions to this tool. And especially the spreads to lower and upper quartiles. It caused me to be more conservative regarding how long my money needs to last.

(Now if I could just get the upper decile! Here is the long form of the hotlink above:
http://gosset.wharton.upenn.edu/~fos.../CalcForm.html)
Pretty interesting calculator with a big spread from Lower to upper percentiles. It said that my median is 86.87 but I could improve it by .14 year if I have 0 sexual partners instead of one. What's that 2 more months? I 'll pass.
__________________
Corporateburnout is offline   Reply With Quote
Re: life expectancy
Old 11-25-2006, 06:47 PM   #50
Moderator Emeritus
Khan's Avatar
 
Join Date: Aug 2006
Location: Pine Island, Florida
Posts: 6,868
Send a message via AIM to Khan
Re: life expectancy

Crap, it says 91.
__________________
"Knowin' no one nowhere's gonna miss us when we're gone..."
Khan is offline   Reply With Quote
Re: life expectancy
Old 11-25-2006, 11:25 PM   #51
Full time employment: Posting here.
bosco's Avatar
 
Join Date: Jul 2005
Posts: 987
Re: life expectancy

Quote:
Originally Posted by 3 Yrs to Go
If none of that works we'll save the last $500 bucks of our portfolio for a bottle of campaign, some bullets and a Smith & Wesson the ultimate longevity insurance.
why wait? buy the S&W now and stash it. You might not be able to affor it later. Plus they make a decent inflation hedge
__________________
I have an inferiority complex, but it's not a very good one.
bosco is offline   Reply With Quote
Re: life expectancy
Old 11-26-2006, 08:01 AM   #52
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Re: life expectancy

Quote:
Originally Posted by bosco
why wait? buy the S&W now and stash it. You might not be able to affor it later. Plus they make a decent inflation hedge
I've given some more thoughts to "longevity insurance" since that last post. I've concluded I've got one more option before having my "going away" party . . . debt! Run up the credit cards and pop the champaign cork just as the creditors are closing in - could provide a few last years of living high on the hog.
__________________

__________________
Retired early, traveling perpetually.
Gone4Good 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
What to do when you can't get life insurance? LRAO FIRE and Money 8 09-21-2006 11:10 AM
term life recommendations Rich_by_the_Bay FIRE and Money 9 08-24-2006 09:50 AM
Life insurance change ferco Other topics 6 02-14-2006 12:09 PM
What to do with Met Life Ins. Policy Adventuregirl FIRE and Money 6 02-04-2006 06:50 AM
U.S. Life Expectancy Hits All-Time High MJ FIRE and Money 1 12-08-2005 03:37 PM

 

 
All times are GMT -6. The time now is 11:38 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.