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Awareness & the Anxiety of ER
Old 03-19-2013, 01:15 AM   #1
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Awareness & the Anxiety of ER

So I am not the anxious type, I am the level headed, cool as the other side of the pillow – kinda guy.

The other day (as I was updating my spreadsheets) I found myself in a fit of panic. I came to the realization that we may not make my ER goal (ER/ESR at 50 with full ER at 60 on a 2% WR). So I re-ran all the numbers, and figured that more than likely (90%+ confidence) we would be ok.

Having said that, we don’t have, nor will we have, massive expenses. We are fairly frugal, and I don’t see that changing. We sock away roughly 25% of my Gross Income. I have a good rein on our investments. SS (if it exists in 30 years) should be kind to me.

Then it hit me.. what about John Q. Public – who according to most websites (cnnmoney, msnmoney, moneymoney..) at my age has saved only a paltry sum for retirement, has a lot of debt & lives a life of consumerism. Yes, I am generalizing – but I do have a not so much younger brother that fits this mold.

Since most things in life are relative - If I don’t make my goal (say I end up at 90%), will it really matter?
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Old 03-19-2013, 05:20 AM   #2
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Some participants to this forum would be ok with 90%. However, I am one of those more conservative investors who won't accept anything less than 100%.
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Since most things in life are relative - If I don’t make my goal (say I end up at 90%), will it really matter?
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Old 03-19-2013, 05:56 AM   #3
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Then it hit me.. what about John Q. Public – who according to most websites (cnnmoney, msnmoney, moneymoney..) at my age has saved only a paltry sum for retirement, has a lot of debt & lives a life of consumerism.
I have more than one relative who fits that description, and several more at work. One relative in particular is, DW and I think, in for a very rude awakening.
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Old 03-19-2013, 06:04 AM   #4
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Is this the 'spendarina' you mentioned in the past ? :-)

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I have more than one relative who fits that description, and several more at work. One relative in particular is, DW and I think, in for a very rude awakening.
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Old 03-19-2013, 06:16 AM   #5
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Is this the 'spendarina' you mentioned in the past ? :-)
Especially her!
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Old 03-19-2013, 07:22 AM   #6
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I think a 2% WR at age 50 is way too conservative assuming a typical AA. 3% would be fine with me. You may be beating yourself up too much.

But I agree with you that there are many people who have not adequately saved for retirement and are in for a rude awakening of trying to live the rest of their lives on SS. While it is sad, they have chosen to ignore what the pundits have advised for years and will pay the piper. So be it.
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Old 03-19-2013, 09:02 AM   #7
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Also, isn't the reason that we check and re-check our spreadsheets before retirement, in order to determine if we are on track to meet our goals or not? So, that is exactly what happened. Let the scare motivate you to do more to get back on track. Imagine how great you will feel if/when you check your spreadsheet and you are back on track.

Whether or not you eventually decide to adjust your conservative goals, still it is helpful to confront the reality of how you are doing every now and then. So, good for you to be keeping up with that.
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Old 03-19-2013, 09:39 AM   #8
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I think a 2% WR at age 50 is way too conservative assuming a typical AA. 3% would be fine with me. You may be beating yourself up too much.
+1. A 2% WR (even at 50) and expecting a higher % success rate is sorta 'double hedging' or a double safety factor.

What is your success rate at 3% WR, often considered an indefinitely sustainable (years/duration) WR based on past history?

But ultimately you have to decide what's right for you. Some people are perfectly happy with a 75% success rate (and they have plan B moves in mind if things go south), and others want a 150-200% success rate (2X the 100% $ portfolio amount).

And don't forget, a 90% success rate means you have a 9 in 10 chance of having more, if not way more than you actually need. Everyone has to be prepared to adjust in retirement, might have to spend less (10% chance), but you might be able to spend more (90% chance)...
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Old 03-19-2013, 10:15 AM   #9
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As I have said before, a 100% success rate in reality is an illusion. There are to many exogenous factors in life that we can't control. However, a 100% success rate with FireCalc is probably a good way to help prepare us to deal with something htat may upset our finely tuned apple cart. Is the difference between 90% certainty and 100% certainty really enough to help one survive an unexpected event that threatens our financial security? I question that myself. What will be needed is the ability to evaluate the situation and adapt. As we get older we often lose the ability, so......

just buy Wellesly and forget about it.
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Old 03-19-2013, 12:18 PM   #10
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I think a 2% WR at age 50 is way too conservative assuming a typical AA. 3% would be fine with me. You may be beating yourself up too much.

But I agree with you that there are many people who have not adequately saved for retirement and are in for a rude awakening of trying to live the rest of their lives on SS. While it is sad, they have chosen to ignore what the pundits have advised for years and will pay the piper. So be it.
Not sure this will necessarily be true. Many of the "haves" will be imposed upon by the "have nots" - even though the latter put themselves in such a precarious position. Aging Boomer parents lacking sufficient retirement funds are already beginning to move in with their grown children, particularly if they are widowed or divorced.
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Old 03-19-2013, 12:25 PM   #11
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Not sure this will necessarily be true. Many of the "haves" will be imposed upon by the "have nots" - even though the latter put themselves in such a precarious position. Aging Boomer parents lacking sufficient retirement funds are already beginning to move in with their grown children, particularly if they are widowed or divorced.
Au contraire. I would say that the embarrassment of being so ill prepared for retirement that you have no choice but to move in with your adult children would be one form of "pay the piper". Not anywhere I would want to go.
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Old 03-19-2013, 12:30 PM   #12
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Au contraire. I would say that the embarrassment of being so ill prepared for retirement that you have no choice but to move in with your adult children would be one form of "pay the piper". Not anywhere I would want to go.
Exactly. Mom, Dad, it's "my house, my rules"!
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Old 03-19-2013, 12:39 PM   #13
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Exactly. Mom, Dad, it's "my house, my rules"!
Wouldn't that be irony at its finest.
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Old 03-19-2013, 12:43 PM   #14
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90% is OK with me (and Bernstein). On the bright side, you probably have a 10% chance of dying young.

2% seems light, even for a 40 year retirement. Are you heavy in bonds?
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Old 03-19-2013, 12:57 PM   #15
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Ed, by "light", do you mean too conservative?
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Old 03-19-2013, 01:41 PM   #16
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2% seems light, even for a 40 year retirement. Are you heavy in bonds?
I am roughly 80% equity, 10% bond, 10% alternative (promissory notes). Is that too heavy?

I am presently 36 YO..
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Old 03-19-2013, 01:54 PM   #17
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Au contraire. I would say that the embarrassment of being so ill prepared for retirement that you have no choice but to move in with your adult children would be one form of "pay the piper". Not anywhere I would want to go.
Perhaps that is part of it for me.. my parents are ill prepared, and I can see the train wreck happening. There are only so many times I can say - "live how you like, just don't end up as a burden to me and my brothers"

To me, ER isn't just an escape from the alarm clock - it's also about not reliving my parent's life/situation. They are not savers, and they are not planners. Both of my brothers fell near the tree, so far I have been able to get one to slowly roll away..
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Old 03-19-2013, 02:43 PM   #18
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90% is OK with me (and Bernstein).
That's not quite what Bernstein meant, but it's misquoted more often than not. He simple noted that history suggests some geopolitical or other major events may override portfolio real returns/success, not that there's no point in a retirement success rate over 80%. A $2M portfolio is going provide better odds than a $1M portfolio with the same AA/IP in any case short of an asteroid strike.
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A wildly optimistic historian might give us another few centuries of economic, political, and military continuity. Back-of-the-envelope, that’s about an 80% survival rate over the next 40 years. Thus, any estimate of long-term financial success greater than about 80% is meaningless.

Mind you, this is not a call for wild abandon. The above table constrains the retiree desiring a theoretical 97% success rate (of portfolio survival) from spending more than 3% per year of the initial real amount of his nest egg. Taking the accident propensity of the species into account would allow him to spend about 4%. But if you believe that we’re about to encounter a bad returns sequence or simply wish to leave a few baubles to your heirs, you’re right back to 3% again.

So live a little, and enjoy your money, for tomorrow we may be consumed by the ghosts of Hitler, Lenin, and Attila the Hun. And at withdrawals of 3% to 4% of your nest egg, don’t spend it all in one place.
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Old 03-19-2013, 03:15 PM   #19
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Perhaps that is part of it for me.. my parents are ill prepared, and I can see the train wreck happening. There are only so many times I can say - "live how you like, just don't end up as a burden to me and my brothers"

To me, ER isn't just an escape from the alarm clock - it's also about not reliving my parent's life/situation. They are not savers, and they are not planners. Both of my brothers fell near the tree, so far I have been able to get one to slowly roll away..
I think there are many in your generation who are seeing the same thing and are resolved not to let it happen to them. In my case, DD and nephew #2 are clearly savers/investors and it is too early to tell for DS and other nieces/nephews but all my siblings are doing ok so I'm hoping that the proverbial apples fall near the tree.
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Old 03-19-2013, 04:28 PM   #20
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But ultimately you have to decide what's right for you.
I agree totally. Life is full of uncertainty and you can never know what will happen. I think you have to make the decision that you feel comfortable with. Some folks would be completely comfortable with an 80% FireCalc success probability, others may be anxious even if it is 100%.
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