What is ‘good enough’ when it comes to Planner success rates?

[Options]

It's the oddest thing. All calculators say I'm way over 100%, and I've lost track of how many I've run. I'm even deep, deep into Otar's "Green Zone". Yet, here I am typing this from home because I got up this morning and said I just can't go in to work. On one hand, only have about 6 months to go, don't work Mondays (today would have been the last exception), and have every other Friday off. Even more, the work itself has become easier than ever the last few months. With all that, it's not enough, my emotional investment is just gone.

So why am I insisting on staying another 6 months? I think it's that intangible psychological aspect regarding security that's different for each one of us. Some people might say, "you're crazy to be this burned out, have made it financially, and yet still force yourself to work another 6 months." But I don't think it's that easy for any one person. Midpack's point states this perfectly to me:

+1. I needed more than a 100% success rate to have the "confidence to retire." But there is no right answer, each of us has to make the call for ourselves. And some have contingency plans, going back to work or some other income source, while others have to rely on their nest egg alone.

Exactly, and even with 100% success, I have all sorts of contingency plans.

...

When I retired at age 58 I believed the value of the next few years of retirement was far greater than the value of adding to my nest egg by continuing to work. Nine years into retirement I'm even more convinced of that belief. That was reinforced over the 4th of July weekend when my best friend growing up died of a heart attack at age 67. He was still working...

Yea, all online health calculators state I'll live to be about 95. They don't account for my luck, however, and with that included I'll kick the bucket the weekend before I quit working....

 

[NW-Bound]

FIRECalc is a fun program to play with, when you tweak different parameters to see the effects. Recently, when I spent the time to figure out our SS future payouts, I had even more "knobs" to tweak. Here are my results for your entertainment.

First, I entered in my stash, set the porfolio to 50% total stock, 50% long interest. Then, using the "Investigate" tab, asked FIRECalc to look for max spending for a 30 year period. Answer: X dollars/yr.

Then, entered in my wife's SS at 62. Re-investigated. Answer: 1.15X.

Next, added my SS at 70. Answer: 1.35X.

Switched "Portfolio Option" to "Mixed", and used more value stocks. Answer: 1.50X.

Switched spending model to Bernicke's. Answer: 2.19X.

But what we are spending in the last 12 months is only 0.85X. And yes, that even included recent big home repair expenses that should not happen every year.

So, what is our margin? Is it (2.19/0.85-1)X100 = 158% or just (1/0.85-1)X100 = 18%?

Or is it somewhere in between above two numbers? Remember that one of us might croak, and the corresponding SS goes away. If both croak, then it no longer matters.

 

[MooreBonds]

It's the oddest thing. All calculators say I'm way over 100%, and I've lost track of how many I've run. I'm even deep, deep into Otar's "Green Zone". Yet, here I am typing this from home because I got up this morning and said I just can't go in to work. On one hand, only have about 6 months to go, don't work Mondays (today would have been the last exception), and have every other Friday off. Even more, the work itself has become easier than ever the last few months. With all that, it's not enough, my emotional investment is just gone.

While it looks like you have a very strong outlook, with your pension and SS providing a majority of your expenses, I would caution you to look at what discounting you're assuming with your rental properties. Are you assuming a net 95% occupancy, with no/minimal allowances for capital improvements, and/or tenant legal issues? Is your property concentrated to 1 or 2 buildings in the same area?

With such a large % of your portfolio tied up into real estate, it's certainly reasonable to have a healthy discount applied to it.

Having said that, given the relative numbers involved, it looks like you'll be able to have a large travel/fun budget, since your IRA withdrawal, SS and pension should be able to provide all of your necessities, with all cash flow from rental properties giving you your fun budget.

 

[Spanky]

So why am I insisting on staying another 6 months? I think it's that intangible psychological aspect regarding security that's different for each one of us.

How sure will you be after 6 more months?

 

[Live And Learn]

I "plan" on working 6 more months also. I've been counting down for 24 months.

In my case, I think I'm really just waiting for the 20% correction to occur so I can say "WHEW - its a good thing I'm still working. I'll just wait for the market to come back up to where it was before and THEN I'll retire".

With FIRECalc I'm still at 100% even after a 20% correction. ******** gives me 93% after a 20% correction.

My rationale for waiting is flawed, but I can't seem to help myself .... what I really need is a lay off so that its "out of my hands"

 

[NW-Bound]

Maybe you need to help them, by creating some reasons for them to fire you, so that you can FIRE.

 

[Floridatennisplayer]

Wow, you sound like me! I met with my Fidelity Retirement planner last Friday. Like you I upped my expenses and downplayed my income to make myself fail. Nope. He just smiled and said.....you are fine...just enjoy your life! I'm 59. So I'll quit at 62. Play more tennis, golf, and my guitars.

 

[pb4uski]

Firecalc is one where you have to figure out your tax expenditures yourself. Do not forget about tax expenses.......

One of the biggest surprises of retirement is much lower taxes since we are currently living off taxable accounts. If I didn't do capital gain harvesting or Roth conversions my federal tax rate would be 0%. Overestimating taxes in retirement, particularly early in retirement is a common issue. You can get a reasonable idea of your taxes in retirement by taking last year's tax return, stripping out your work earnings and making other appropriate adjustments.

 

[T-Minus]

Senator, I completely understand. I am in your similar position. I analyze and plan. Then repeat x1000. I recheck...daily! Seriously

Every CALCULATOR says 100% with 2x current spending level, no SS, below average returns. Yet, my BRAIN says 90%. It is the UKNOWN that we fear. Especially if you are younger like us. Longer time horizon = greater risk.

But, I also believe in us. Meaning, if things go south, we can adjust our spending to account for unforeseen events. After all, we made it this far!

But, leaving a very high paying job to ER feels like the first time I went skydiving. . . exhilarating but scary as hell!

Long time reader of ER forums - first post here, but this is the thread that finally pulled me in. Between OP's (Senator) original question and Travelwanted's follow-up response, you've characterized my questions almost exactly. At this point, the various publicly-available tools and self-built spreadsheets tell me I'm good-to-go now...but that doesn't fully quell my fears about the "what-if" possibilities. So I continue to plan, save and obsess.

One thing that wasn't mentioned in this thread is the release of tension experienced when all the tools are telling me that I've crossed the finish line (and I start to believe them). Here's an example: I work for a Large Tech Co. that, just recently announced an optional program which would allow employees to "press the eject button" early, with a decent degree of financial compensation. Previously, events such as this would have caused me a certain amount of anxiety, due to my trying to read tea leaves behind the event (i.e. What if they don't get enough "volunteers"? Am I next?). This time, I was comfortable enough to schedule a private chat with my management chain, and started to explore details of said offer. Long story short, the balance of power has slightly shifted, and I think I've come out of said meeting with a promotion! Don't get me wrong - I love what I do and find it incredibly interesting...which is why I stay. But the freedom of knowing that I'm either very close or already there is a calming influence that is removing the stress from work situations fairly effectively. I know that, if the B.S. meter exceeds a certain level, I can just walk. Or, so the tools tell me.

Which is why I am here. Bogleheads helped to get me to where I am, now I'm looking forward to the next step. I'm trying to understand what variables and factors exist for others that may impact my planning. You know, something lurking that I may not have accounted for. And this thread was a powerful magnet. Thanks, OP.

 

[brett]

I was lucky. I got pushed out and I was ready for it. Not sure how long I would have worked. I think I would have fallen victim to the OMY syndrome.

My attitude changed after early retirement. I came to the realization that I was on the 'back 40' so to speak. And of those remaining years, how many of them would be in good health so that we could really make a dent in our bucket list.

So, our lives changed after early retirement, as did our priorities-financial and otherwise. Some of the change is good, some neutral. But we are making the very best of it and doing what we want to do. Gaining a few years of 'doing what we wanted to do' far exceeded the cost of going back to work for a few more years. The surprise...our health/well being and our finances have improved since retirement.

 

[2B]

Maybe you need to help them, by creating some reasons for them to fire you, so that you can FIRE.

I plan on going in Monday, 5 Jan and resigning. After a reasonable transition period of a few weeks, I'm finally retired.

Our business is slowing considerably with the drop in oil prices. None of my group have been let go but everyone isn't on an active project. I've had the evil thought cross my mind that maybe I should wait a short period of time and see if I can get laid off. There's no severance so all I'd get would be unemployment. I've decided the nominal $20k isn't worth screwing with my original plan.

Wow, you sound like me! I met with my Fidelity Retirement planner last Friday. Like you I upped my expenses and downplayed my income to make myself fail. Nope. He just smiled and said.....you are fine...just enjoy your life! I'm 59. So I'll quit at 62. Play more tennis, golf, and my guitars.

I did the same with the Vanguard CFP. I gave him a number about 30% over what I think I could actually spend and 100% over what I would be comfortable living on. I have a 93% probability of having my high spending plan be successful.

To a certain extent, this type of behavior shows an unwillingness to make ER a priority.

 

[mathjak107]

One of the biggest surprises of retirement is much lower taxes since we are currently living off taxable accounts. If I didn't do capital gain harvesting or Roth conversions my federal tax rate would be 0%. Overestimating taxes in retirement, particularly early in retirement is a common issue. You can get a reasonable idea of your taxes in retirement by taking last year's tax return, stripping out your work earnings and making other appropriate adjustments.

so the question is if you are spending taxable money first and i assume leaving the deferred money does that come back to bite you later in rmd's?

we will hit ira money first dwindling down whatever we can pull at tax rates we will never see again once ss kicks in for me at fra and certainly not once rmd's kick in too.

i will pull as much ira money as i can up to 42k or so and pay just 1500 bucks or so . i will then liquidate some taxable account stuff at very low capital gain rates .
once ss and rmds happen we will be 2.5x that

 

[Car-Guy]

I have use Fidelity Retirement Income Planner, FireCalc, Flexible Retirement Planner, Quicken Lifetime Planner, AARP calculator, MarketWatch planner, my own spreadsheets, you name it. I have used literally 100’s of them in the past year. All seem to be 100% success.

I used a bunch of them too and didn't retire until all of them (and my own spreadsheets) indicated I was "good to go" or >100%

Of course I am not calculating into the picture “what if my expiration date is closer than I think” .

The older I get, the more I realize I'm not going to live to be anywhere near 100, as I had financially planned for.

So, when you did your retirement budgeting and planning exercises, what success rate in the planners did you feel was good enough?

I wanted 100% success rate out to 100 years old and at the same spend rate every year. I figured that was plenty of padding. (age and dollars) I now realize I won't live that long and probably won't be spending in my mid to late 80's anywhere near what I'm spending now, even if I'm in a nice long term care facility.

Did you ever wish you would have worked longer as you did not have enough income in retirement? (Not those of you who go back for fun). Or actually had to pick up a minimal wage job because you needed the money?

.

 

[MBAustin]

Long time reader of ER forums - first post here, but this is the thread that finally pulled me in. Between OP's (Senator) original question and Travelwanted's follow-up response, you've characterized my questions almost exactly. At this point, the various publicly-available tools and self-built spreadsheets tell me I'm good-to-go now...but that doesn't fully quell my fears about the "what-if" possibilities. So I continue to plan, save and obsess.

Welcome, T-Minus! Nice first post. How about introducing yourself here Hi, I am... - Early Retirement & Financial Independence Community so we can get to know you. We look forward to hearing more from you - and as you probably know already, feel free to ask questions as nearly everyone here has an opinion on something!

 

[Taxman59]

I started a spreadsheet and it showed that about 56-59 would be comfortable (110%of then current spending). Then I started with a cash flow program at work (I have access to planning software that we use for our clients), and it showed 99.8% chance of success through 95/92 and retiring at 56. Fidelity RIP showed between 56 and 57 was 99% successful, and EMoney software showed a 100% success with a start date of 55. Part of that has been an inheritance that my wife received this year. The interesting thing is that the most likely result is my NW will increase by 250% and I am increasing the spending. I could have gone out this year, but I wanted to stay OMY because I wanted to help my clients and some co-workers (looking back, I think my DW is nervous about anything less than the interest income off of savings which I explain that today's rates mean a net worth in excess of $8.4 million with no cushion!). OMY was my way of dealing with her insecurities. I also check my plan about 10 times a day!

I Think that the FI is he easy part, just set a goal and stick to it. The actual RE is the mental part. My sister is hiking the Appalachian Trail next spring, and she said that the six months of hiking is less than 50% physical, it is when the weather is crappy and tomorrow is a big climb and your feet hurt so you just want to quit that the mental toughness kicks in and you have to decide to stick to the plan. I see the RE as a leap of faith that the plan works, and just accept that the market will rise and fall (remember the projection is wrong, what actually happens will be different) and over time you will adjust to the actual results.


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[Dd852]

This is certainly the key psychological barrier to overcome. I was "helped" by having the decision made for me - accompanied by a huge check. But honestly, I was ready and I just didn't know it. The key is data. And data on the known and not the unknown. I've used quicken and now ibank religiously for years and my greatest comfort is knowing that we currently spend 8% under our five year moving average of annual expenses. And honestly, I don't notice the difference - I don't feel like I am missing anything. I did and I do my planning based on a gross up of the five year average. So I feel like I am continuing to "save" and that helps me psychologically as well as financially. Two years into it, I feel blessed.


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