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Old 03-08-2012, 08:53 PM   #21
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+1

That Merrill calculator scares the cr*p out of me.
+2 It suggests a 5.4% WR for me. I wish.

Perhaps I should tell them that I'll give them my entire nestegg in exchange for 5% WR inflation adjusted for the next 45 years and they can keep the 0.4%.
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Old 03-08-2012, 09:03 PM   #22
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Seems very conservative, particularly the 67% of SS. What do you get with 90% or 100% of SS? More than 82 I assume.
at 90% I get to 85 before my portfolio is depleted. I use the 67% (actually I looked and I knocked it down to 50%) to hedge risks of retirement age going up another year or two, or SS payments being cut back based upon income, or Medicare costs going up.

Part of me says I can ER within the next year, another part of me says "why risk it". Guess my conservative nature is what has gotten me to the point where I can even THINK about retiring at 50 - not a bad problem to have !
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Old 03-08-2012, 09:38 PM   #23
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In that case, if your spreadsheet is well designed and does not have computational flaws, do not retire unless you can count on large SS or other pension that your spreadhseet does not account for.

I basically am not able to believe that any significant number of retirees will be able to happily watch their portfolios deplete as they themselves age; or that they will be able to calmly accept huge drawdowns after the option of returning to work is clearly closed. The next time you pass a homeless man or woman ask yourself if you would be able to pass this person without feeling personal terror if you were 78 and your spouse is sick and you are down to your last $150,000.

Ha
I don't know if there are similar programs in your state but in Oregon, there are programs that will allow a person to rent a simple apartment on 1/3 of whatever their income is (below a certain income level of course). So, if your income is just SS at $900 a month for example, an apartment can be had for $300 a month. Although not a common approach at this forum since most of us are millionaires (or so it seems) there really are a lot of resources at far lower levels. I think there is a lot more to homelessness than just the $$$.
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Old 03-08-2012, 10:05 PM   #24
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I understand that these calculators are just "tools" but how do you know if you've reached FI with such varying results ?
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Part of me says I can ER within the next year, another part of me says "why risk it". Guess my conservative nature is what has gotten me to the point where I can even THINK about retiring at 50 - not a bad problem to have !
Here's some issues to consider:
1. In general, Monte Carlo simulations are more conservative than the historical data. Of course many people also think that the historical data was an anomaly and that Monte Carlo might more accurately reflect the future.
2. The more detailed the calculator, the better you can understand the assumptions and the recommendations. I'd put more weight on FinancialEngines.com than I would on any other Monte Carlo calculator.
3. Most retirement calculators do not handle variable spending in retirement. If you're getting close to the 4% threshold, then consider Bob Clyatt's 4%/95% variable-spending thumbrule from his "Work Less, Live More" book.
4. Build yourself a barebones budget-- the absolute minimum you're willing to tolerate before becoming a Wal-Mart greeter or a doorman at an apartment complex when you're 82 years old. Make that your 100% success threshold, or annuitize that amount of your portfolio. Treat the rest of your portfolio as money to be spent when there is not a bear market.
5. Use Bud Hebeler's "Analyze Now!" negative-feedback annual-spending review system instead of a calculator.
6. Use Otar's red-light calculator.
7. Use the 4% rule to start your ER, and keep an eye on your portfolio vs annuity costs. If your portfolio declines to the absolute minimum standard of living that you can tolerate then start buying annuities. It's a study discussed in this thread:
New thoughts on the draw down phase

You might want to start spending some time on Wade Pfau's blog. I think he's producing some of today's most innovative and useful retirement research analysis since Milevsky & Bernstein. I suspect that over the next decade he's going to figure out how to mix in variable retirement spending and annuities into a retirement calculator.
Pensions, Retirement Planning, and Economics Blog

Here's some other reading. I write for a military audience, but this is applicable to all ERs:
Retirement planners and calculators (part 1 of 2) | Military Retirement & Financial Independence
Retirement planners and calculators (part 2 of 2) | Military Retirement & Financial Independence
Is the 4% withdrawal rate really safe? | Military Retirement & Financial Independence
Problems with retirement calculators | Military Retirement & Financial Independence
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Old 03-08-2012, 10:25 PM   #25
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I don't know if there are similar programs in your state but in Oregon, there are programs that will allow a person to rent a simple apartment on 1/3 of whatever their income is (below a certain income level of course). So, if your income is just SS at $900 a month for example, an apartment can be had for $300 a month. Although not a common approach at this forum since most of us are millionaires (or so it seems) there really are a lot of resources at far lower levels. I think there is a lot more to homelessness than just the $$$.
I know you are right about these things sometimes being available, but there are plenty of gotchas. I get to know vendors of Real Change, a street newpsaper sold by homeless or recently homeless people. One woman I know recently got an apartment like this. She loves it; but she was on a waiting list for 3 years before she got the call. She is dying from lung cancer that she might be able to get operated on if only she had the energy and oomph to put on the 10 pounds the doctors want before they will consider her for surgery. I know another guy who is one of the sweetest, brightest men I know. He is very appealing to people and has many friends who only buy from him outside of one particular store where he works long days rain or shine. His mother recently died, which freed up a bedroom in his brother's house which he is moving into now. But for many long years before, he lived on cardboard in the entryway to a woman's store out in north city. He kept her sidewalks and parking area free of snow, cleaned up random messes customers and passersby made, and in return she gave him a place to camp out so he didn't have to carry his bedding around all day. It took him 2 bus rides each way to get from his "home" down here to work where there is much more pedestrian traffic and it is easier to sell a liberal/radical newspaper. Today he told me his sciatica is kicking up and it will be a long day for him standing on the pavement. Once a couple years ago during a spell of real cold weather I asked him if he ever considered public housing- "Oh hell yes, but they try to give that first to women with kids, and there are plenty of them to use up all that is available." He also said, "and that is how it should be".

So it isn't as simple as it looks from the outside, or to someone who has never really lost in his life. Likewise the "get a motorhome and go fishing" is mostly and most times a pure fantasy. Fine for young male loner or even a couple, but problem plagued for a woman or many an older person. What if your money troubles coincide with early Alzheimers, or maybe a stroke?

I know there are many homeless people with heavy mental/emotional and/ substance problems, but often there is little or nothing they can do about that either. But a large number of them are tougher and more resiliant than the average salaryman or woman sitting in front of their 50"TV. They just turned some different cards in the Tarot Deck of life.

Physical appearance really counts too. Lose a few teeth and your chances of finding a job on today's market take a dive. And losing a few teeth is very easy to accomplish when you fall out the bottom. In an aside, I was tired of paying dentists a huge sum for teeth cleaning and a most cursory exam, only to have them attempt to sell some restorative program that I often suspected was to help them restore their bank accounts recently depleted by divorces. So I went to a school that trains hygienists. They have staff supervisors, and an incredibly nice and thorough dentist. The hygienists were joking me about being rich, since I had so much gold in my mouth. I told them to relax since that all went with my ex. Anyway, the dentist said "we don't see many mouths this clean here".

We middle class people usually have no idea how other people really live. In general, not as well as we do.

This message is as poplular here as a whore in church, but I feel that if one is at all in doubt, keep working. It will never be easier to increase your security than right now while you still have a job.

Ha
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Old 03-09-2012, 08:43 AM   #26
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Haha-

Reading your comments on being "poor" resonated with me. I had a friend who for a time was very down on his luck and the singular observation he made was that "being poor was a lot of hard work" to survive. Thankfully his situation has turned around...
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Old 03-09-2012, 09:42 AM   #27
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Great, great post! I added a few things, though everyone may know them already.
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4. Build yourself a barebones budget-- the absolute minimum you're willing to tolerate before becoming a Wal-Mart greeter or a doorman at an apartment complex when you're 82 years old. Make that your 100% success threshold, subtract Soc Sec and/or any pension income and then annuitize the remaining amount from your portfolio [example: if you need $40K/yr and you get $20K/yr from Soc Sec, you might consider a SPIA to provide $20K/yr. You would have to allow for COLA/non-COLA also]. Treat the rest of your portfolio as money to be spent when there is not a bear market.
7. Use the 4% rule to start your ER, and keep an eye on your portfolio vs annuity costs. If your portfolio declines to the absolute minimum standard of living that you can tolerate then start buying annuities. It's a study discussed in this thread: That link doesn't work anymore, here's one that still does http://www.schulmerichandassoc.com/M...cumulation.pdf. Like a few others, I've linked to it here several times over the years (and printed it so I never lose it) - it's the best Plan B annuitization article I've ever read.

I have been planning to start a 'Plan B annuitization' thread here for the past week.
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Old 03-09-2012, 09:59 AM   #28
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Thank you haha. Good sensitive post.
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Old 03-09-2012, 11:45 AM   #29
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HaHa - thank you for taking the time to write your post. Very poignant. I was friends with a homeless man many years ago. He lost his business and it was all downhill from there. He ended up dying from alcohol consumption. Very sad.

NORDS and MidPack - can't thank you enough for the details. Lots to learn and study.

NORDS - I had read your articles and loved them. I have heard of AnalyzeNow and Jim Otars calculator and will explore them also. I also bought the PDF of Jim Otar's book so I have lots of reading to do there also.

MidPack - I started to think about Annuitizing for longevity also. I think thats the missing link to giving me peace of mind.

Thanks again everyone. I'll keep you posted on my decision(s)
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