planning assumptions

[Katsmeow]

Quote:

Originally Posted by traineeinvestor Another 100 percenter. Anything less and I would lose even more sleep. Even so, there are plenty of things that can derail even the best of plans with my on emotions (aka bad decisions) edging out government action for first place on the list.

Two comments.

First - most of us can probably easily devise a plan that is 100% and then make a couple of small changes and it is now 95%. That is, on my plan as input into Firecalc it is at 100%. On the other hand, if I decide to run a version of it with any extra $3k a year in discretionary spending then it drops slightly below 100%. So, just making small changes could make a difference. Now, I'm happy with the 100% plan. But, an extra $3k a year might be nice too. So I could see someone going with the 99% plan, though, with a plan to adjust if need be.

Second - all of this is very dependent on time period selected. Yes, I know lots of people want to prepare to live to 95 or 100 and that is fine. That said, there is always some point to call a stop to it. I mean I doubt that many people want to make sure their plan will last to 115. Let's say you have a plan that is 100% to age 90 and is 99% to age 95. The reality is that that is much lower than a 1% failure rate since the changes to getting to 95 aren't 100%. I could see a rational choice to say that 100% to 90 and 99% to 95 is fine.

[palomalou]

95/95. We'll see what the future brings

[traineeinvestor]

Quote:

Originally Posted by Katsmeow Two comments. First - .... So, just making small changes could make a difference. Now, I'm happy with the 100% plan. But, an extra $3k a year might be nice too. So I could see someone going with the 99% plan, though, with a plan to adjust if need be. Second - all of this is very dependent on time period selected. Yes, I know lots of people want to prepare to live to 95 or 100 and that is fine. That said, there is always some point to call a stop to it. I mean I doubt that many people want to make sure their plan will last to 115. Let's say you have a plan that is 100% to age 90 and is 99% to age 95. The reality is that that is much lower than a 1% failure rate since the changes to getting to 95 aren't 100%. I could see a rational choice to say that 100% to 90 and 99% to 95 is fine.

I don't disagree with this at all but (i) my confidence in my ability to plan to adjust spending down should the need arise is greater than my ability to actually do it and (ii) there is no practical difference between a plan designed to last for 50 years (until DW is 90) and one designed to last forever so I might as well take the forever option for planning purposes so it shouldn't really matter whether she makes to to 90 or 100 or beyond.

[ERD50]

Quote:

Originally Posted by Katsmeow ... Yes, I know lots of people want to prepare to live to 95 or 100 and that is fine. That said, there is always some point to call a stop to it. I mean I doubt that many people want to make sure their plan will last to 115. Let's say you have a plan that is 100% to age 90 and is 99% to age 95. The reality is that that is much lower than a 1% failure rate since the changes to getting to 95 aren't 100%. I could see a rational choice to say that 100% to 90 and 99% to 95 is fine.

Quote:

Originally Posted by traineeinvestor ... there is no practical difference between a plan designed to last for 50 years (until DW is 90) and one designed to last forever so I might as well take the forever option for planning purposes so it shouldn't really matter whether she makes to to 90 or 100 or beyond.

I agree with traineeinvestor on this. I just ran some numbers:

For a 100% HSWR (Historically Safe Withdraw Rate), going from a 40 year to 45 year (about the max you can run before excluding some bad periods), which is a 12.5% longer period, your spending would decrease by a mere 3% (3.34% down to 3.24%). You really are moving closer to an asymptotic point of a 'forever portfolio'. I prefer the conservative approach.

Second, and I've mentioned this many times, I just don't look at the odds of reaching 100 in a pure statistical way, because I have an extremely small (yet important to me!) sample size of one (or two, including a spouse). I either reach 100 or I don't. And if I do, I want to have some funds to support me, beyond SS and a non-cola pension that might buy lunch by that time. So I don't look at them as percentages to be weighted, they are binary.

-ERD50

[hiker88]

My plan is for a retirement savings amount that is good for 100% to age 95 plus a cushion. That cushion will be two years of expenses in cash, than an additional 10% deduction for a stock market drop.

[gcgang]

http://www.advisorperspectives.com/n...awal_Rates.pdf

Above is a link to an article that appears to be written for FAs. As opposed to what you might expect, that because the FA has an incentive to keep the largest pool of investment assets to have larger fees (like insisting on 100% success to age 100+), it focuses on how FAs can advise their clients to get the most out of this one and only life they get to live without dying with a bunch of money stuffed in the mattress.

Seems to conclude that if you are targeting 100% success, it means you've guaranteed 100% excess funds in your estate, and 100% that you are not using your $ during this life to enjoy the things you may want to enjoy.

It also seems to realize that we can change our spending/behavior. If a terrible set of market returns occur, we can cut back on our spending and not risk going broke.

I'd be interested if any if the 100%ers here are open to this way if thinking. Do you have anything that you could use extra $ for during your lifetime, rather than leaving the $ when you die?

[Lucantes]

I run ours for 95 years old and 100% success.
We will both ER at 50 in 2017 and I plan for it to run at least 45 years from then.
We have a significant flexibility built into our comprehensive budget as well as an additional lump buffer that is not used in computing our 100% (will be used for fun or to fill unexpected gaps if required).
In reality I would expect my wife to live much longer than me (and she is more frugal than I am), as I have treated my body as a temple....but it was a pagan temple which is a lot more fun!

[Ozstache]

My plan assumptions are 100 years old for my wife, 97 for me, 99% firecalc success, expect not to be eligible for aged pension (SS equivalent) by the time I get there, no inheritance, me never work again, wife to only work part time for 4 more years and gift a good chunk of money to my parents. Some of these assumptions are very pessimistic eg. wife is an only child and very likely to receive a pot of gold when her well-off 86 yr old mother passes on, but I don't want to be too aggressive with our spending until a couple of years in to ER on what could be a 52 year glide path for me.

Although I finished work four months ago and have been on leave, my employment only officially terminated yesterday, hence today is my first solo day of ER. Kind of feels like the tandem skydive I did on Sunday just gone: all preparations were made, safety harnesses checked, drills practice and now I've just pushed out the door. I hope I have as great a ride and as safe a landing in ER as I did with my skydive!