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Old 09-11-2008, 09:52 AM   #61
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The problem is for those retiring in their late 30's early 40's and relying on a 4% withdrawal rate. If the market goes sideways for an extended period of time or we get stagflation there will be problems for them moving forward if they put too much trust in Monte Carlo predictions.
ISTR that Firecalc is best for a 30 year projection. If you are around 40, you probably are foregoing your high earning years during your high spending years. Not a good combination.

When I was forty, I had an acreage with a 5000sq.ft house, all the toys, 2 kids in school, four cars and lots of other high expenses. Taking a holiday was a major production and costly. Food expense was a major item.
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Old 09-11-2008, 10:29 AM   #62
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The problem is for those retiring in their late 30's early 40's and relying on a 4% withdrawal rate. If the market goes sideways for an extended period of time or we get stagflation there will be problems for them moving forward if they put too much trust in Monte Carlo predictions.
I fall into the category of "late 30's or early 40's" early retiree (or that's the plan anyway). I tend to agree with your assertion that a 4% SWR with annual CPI inflation adjustments could be problematic over the course of what may be five or six decades.

I personally plan to use a more flexible withdrawal strategy that ties some or all of my withdrawal amount to portfolio value.

And I haven't ruled work in some form out. Based on analysis I have conducted (some of which I have posted on this forum), if you make it through the first 10 to 15 years with your portfolio substantially intact, then you are likely to be ok thereafter. For me, it wouldn't be that hard to get back to working within the first 10 to 15 years. Even a part time job or something that paid little but provided health insurance would drop my withdrawal rate significantly.

It seems like most folks that are ER-ing at 35-45 have some sort of back up plan and/or a flexible withdrawal strategy. I would suggest that the fact that one is able to embark on an ER at age 35-45 is evidence that they are pretty good at planning (or they got really lucky!). If I were to retire at 40 and see my portfolio cut in half by age 45, I would probably not continue to take the annual 4% inflation adjusted withdrawals - I would start implementing plan B.

I don't think you will find anyone here arguing that the 4% rule is a hard and fast adamant rule that is guaranteed to work. It is just a general guideline that established a high degree of certainty based on historical data. Of course a 3% withdrawal rate is safer than a 4% rate, but at what point do you feel secure enough to retire? A "black swan" event could wipe any of us out tomorrow...

I'd also like to point out that FIREcalc, the tool that gives the proverbial "4% SWR", is not a Monte Carlo simulation, but instead a tool based on historical time-series data. Monte Carlo sim doesn't include the time series correlation from year to year. As a result, Monte Carlo produces worse estimates of success. In the FIREcalc data set (going back to 1871??), a series of bad years are typically followed by a series of good years. In Monte Carlo, you could have a long series of years that have below average returns.
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Old 09-11-2008, 10:44 AM   #63
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I think a 4% withdrawal rate going forward is suspect.
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The problem is for those retiring in their late 30's early 40's and relying on a 4% withdrawal rate.
In SWR101 class we learned that the 4% SWR rate is for a 30 year term. If you are 30-something then you may need to plan for a 50-60-70 year retirement. For those retirement durations the 4 % SWR is not valid.

For a retirement that long, at best you could have a SWR in the low 3 percent range. Bernsteins chart (for a stock-bond portfolio) is shown below. Other studies showed similar results.
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Old 09-11-2008, 10:51 AM   #64
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The most vocal ER cheerleaders have COLA pensions, usually taxpayer supplied. That is an cheap viewpoint for them to hold.

My own POV is that a reasonably good job that isn't tearing you up is better than retirement, at least until you are old. I was not a contented worker, I admit it and have no apologies for that. But I also admit that very early ER is an exercise in thin-ice skating, unless one is quite well fixed and has no taste for heavy spending. There are plenty people here who also fit that description.

But people ride motorcycles, climb mountains, sleep with tarts- why not retire early if you want to? Not everyone is extremely risk averse, and the modern job environment can really suck.

ha
I completely agree, and I hope that people who come to this forum to research the possibility of ER will get the chance to read your posts.

On the point of the taxpayer-paid pensions, I didn't realize how common that is until I joined this forum. Maybe I was naive. Still, I can't help but think that these programs are yet another form of welfare and forced wealth redistribution. No wonder our government operates at such a deficit, and no wonder anyone in the private sector has to work so many extra years just to pay in taxes that go to support government pensions.


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You just may be right about the coming apocalyspse. If we move into a few decades of no growth or very slow growth then we are in trouble. Ask me in a few decades and I'll let you know.
You might be confusing me with someone else. I don't believe in any coming apocalypse. On the contrary, I think that the market will rebound within the next 2 years, maybe even sooner barring another 9/11 scenario, and depending on how Europe's economic problems affect us.

As for the ability to safely withdraw 4%, that might be affected by when, during one's retirement, the market downturn happens.

If the downturn happens at the beginning of ER, it might have more of an impact, because the portfolio's income moving forward will be based on a reduced nest-egg. On the other hand, if the market downturn happens towards the middle or end of the ER period, fewer years are affected.
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Old 09-11-2008, 10:52 AM   #65
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There is no change to my assertion that statistical data from a Monte Carlo simulation or Firecalc spreadsheet is accurate over a 40-50 year timeframe. The data is still insufficient for all the reasons I described in my last post. It's just a guess based on past performance. Neither Firecalc, nor any other statistical model can project a 40-50 year time horizon due to data skew and a constant change in the financial regulations affecting the raw data. The longer the horizon the greater the risk. Predicting a 95% success ratio off Firecalc then retiring at 40 with a possible time horizon of 50 years is a great way to go broke between 70-90 years old.

Unless you have a guaranteed pension, bailing in your late 30ís or early 40ís may inhibit your ability to ER in your 50ís. Most people in their 30ís and 40ís underestimate the difficulty of finding a good job as they age once the connection to the work force has been severed. Age bias is still alive. The good job you may abandon at 40 probably wonít be there if you are forced back to work for financial reasons at 50.

I would also like to state again that survivor bias is present in the raw dats whether you use Firecalc or a Monte Carlo simulation. Your returns will be lower than those projected by the simulation.
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Old 09-11-2008, 10:56 AM   #66
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In SWR101 class we learned that the 4% SWR rate is for a 30 year term. If you are 30-something then you may need to plan for a 50-60-70 year retirement. For those retirement durations the 4 % SWR is not valid.

For a retirement that long, at best you could have a SWR in the low 3 percent range. Bernsteins chart (for a stock-bond portfolio) is shown below. Other studies showed similar results.
By the way, Bernstein is on the record as stating that early retirement (30's and 40's) is a good way to be destitute in later years for a variety of reasons that are being covered. Even a 3% withdrawal rate may deplete all the capital over a 40-50 year horizon.
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Old 09-11-2008, 11:01 AM   #67
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I would also like to state again that survivor bias is present in the raw dats whether you use Firecalc or a Monte Carlo simulation. Your returns will be lower than those projected by the simulation.
Can you clarify what exactly you mean by survivor bias? Do you mean the S&P 500 or DJIA or average US treasury returns are overly optimistic because they continue to exist whereas other indexes or treasuries have ceased to exist (pre-ww2 germany maybe?)?

If so, you may have a valid point, by the way.
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Old 09-11-2008, 11:24 AM   #68
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Still here, just letting some discussion flow.

Let me qualify my statement. I think a 4% withdrawal rate going forward is suspect. There are some smart people on this board so I hope they will pick up where my inadequate delivery leaves off.

The problem is for those retiring in their late 30's early 40's and relying on a 4% withdrawal rate. If the market goes sideways for an extended period of time or we get stagflation there will be problems for them moving forward if they put too much trust in Monte Carlo predictions.

Monte Carlo simulations are based on statistical returns over the last 100 years. Going beyond 100 years is a foolís folly as there were not enough stocks in the market to get an accurate projection. There is not enough variance in the date after 100 years to even bother making a statistical model.

Monte Carlo predictions are based on market statistics broken into monthly/weekly/and daily (depending on the model) slots to provide enough variables. Statistically, there is not enough ďusableĒ data. As an investor you need 1 yr, 5yr, and 10 yr distributions to make an accurate model to project distributions into the future. What I am trying to say is, that a Monte Carlo prediction would not merit statistically. It is a financial tool to make estimates.

1 yr distributions only give 100, 1 yr data points (nothing statistically unless you are flipping coins), 5 and 10 year distributions are slightly less. It is statistically wrong to shift the data points by one day to get a second set of variables as returns are historically measured on a yearly basis not a daily basis. Statistically, there is not enough variance to predict future performance. Add on the fact that the stock market has fundamentally changed from 1929, and 1987, due to regulation and market controls the case for Monte Carlo predictions breaks down.

Realistically, Monte Carlo simulation is just a prediction used to aid people who are going into normal retirement and have shorter time horizons. The shorter life spans aid to reduce variance in the models by smoothing the distributions.

As another point, Monte Carlo predictions do not take into account survivor bias. You can guarantee that returns were lower than predicted due to this variance alone.
I think you're mistaking the purpose of using simulations to project outcomes.
Monte Carlo refers to the technique of using a range of possible inputs, randomly selecting data from within this range, and displaying output. This is done thousands of times to simulate a range of outcomes. N

1) The output is only as good as it's input
2) The output is generally given as a range of scenarios of unequal likelihood.
3) Any survivor bias is the result of faulty data. So if you are looking at historical stock returns, make sure the data includes the bankrupt firms. If you improperly use Morningstar databases, then you will have survivorship bias. But most broad historical databases of returns do not.


To your specific points:
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Statistically, there is not enough variance to predict future performance.
Give me 1 data point, and I can make a future prediction. With each extra data point, I think I can make a better prediction. Do you disagree?
Quote:
The shorter life spans aid to reduce variance in the models by smoothing the distributions.
There is no artificial smoothing of distributions. Short time horizons have a smaller range of likely outcomes.
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There is not enough variance in the date after 100 years to even bother making a statistical model.
How much is enough for you?
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What I am trying to say is, that a Monte Carlo prediction would not merit statistically.
This statement is so vague to be devoid of meaning. It's not predicting anything; it's projecting a series of outcomes based on the inputs you choose. If you think 100 years of returns are worthless, you can use 200. If you think the US since 1987 has fundamentally shifted, use this data. Heck, use monthly data if you want. The projections will reflect whatever data you use. If you don't like the outputs, it's not the fault of a statistical tool/method. Get better data.

It seems like you think the US is entering a brand new paradigm. Is this what you believe? Guess what, off the top of my head, the same thing was said in the 1920s (sustained and permanent prosperity), the 1930s (long Depression with no end in sight), the 1960s (economic expansions can be sustained as long as policy does not interfere), and 1970s (the death of equities, stagflation), 1980s (deficits dont matter), 1990s (The New Economy), too.
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Old 09-11-2008, 12:03 PM   #69
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Can you clarify what exactly you mean by survivor bias? Do you mean the S&P 500 or DJIA or average US treasury returns are overly optimistic because they continue to exist whereas other indexes or treasuries have ceased to exist (pre-ww2 germany maybe?)?

If so, you may have a valid point, by the way.
Sure, survivor bias falls into two categories.

First, stocks: Can you list how many stocks are still around from 1901?

Most stocks enter a growth phase and then move through maturity to decline. Somewhere through the spectrum they are either acquired, spun off, or go bankrupt, causing a loss in value and a false elevation of actual market returns.

Secondly, Mutual funds, hedge funds, and ETF's that do not perform are closed down, thus removing their poor performance from the records.

All financial models fail to account for this discrepancy between actual market returns and reported market returns. Reported market returns are always higher than the actual market for this reason.


There is also additional evidence that reported market returns by funds and stocks over extended periods are almost never match the investors returns as most funds and stocks are rotated by investors (even if you only adjust the portfolio to match your asset mix). If you miss the best 10-30 days you miss the fund return.
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Old 09-11-2008, 12:17 PM   #70
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I think you're mistaking the purpose of using simulations to project outcomes.
Monte Carlo refers to the technique of using a range of possible inputs, randomly selecting data from within this range, and displaying output. This is done thousands of times to simulate a range of outcomes. N

1) The output is only as good as it's input
2) The output is generally given as a range of scenarios of unequal likelihood.
3) Any survivor bias is the result of faulty data. So if you are looking at historical stock returns, make sure the data includes the bankrupt firms. If you improperly use Morningstar databases, then you will have survivorship bias. But most broad historical databases of returns do not.



To your specific points:
Give me 1 data point, and I can make a future prediction. With each extra data point, I think I can make a better prediction. Do you disagree?

There is no artificial smoothing of distributions. Short time horizons have a smaller range of likely outcomes.

How much is enough for you?
This statement is so vague to be devoid of meaning. It's not predicting anything; it's projecting a series of outcomes based on the inputs you choose. If you think 100 years of returns are worthless, you can use 200. If you think the US since 1987 has fundamentally shifted, use this data. Heck, use monthly data if you want. The projections will reflect whatever data you use. If you don't like the outputs, it's not the fault of a statistical tool/method. Get better data.

It seems like you think the US is entering a brand new paradigm. Is this what you believe? Guess what, off the top of my head, the same thing was said in the 1920s (sustained and permanent prosperity), the 1930s (long Depression with no end in sight), the 1960s (economic expansions can be sustained as long as policy does not interfere), and 1970s (the death of equities, stagflation), 1980s (deficits dont matter), 1990s (The New Economy), too.

What I am trying to say is the statistical data imputed by the model accounts for a series of data points from A-Z and AB-YZ and on and on, where realistic data points should start from a specific reporting point giving only a series of 100 data points. Do you report your yearly returns daily or at a specific point in the calendar such as the end of the year. Statistical data that reports a one year return that is calculated using daily data is skewed. It creates artificial data points.

As for condensation of time variance, the shorter the span the more likely the historical average variance will match the time horizon. As the time variance increases so do the standard deviations. Most statistical variations plot as a bell curve. So the shorter the curve the more likely the statistical data will match given a reasonable expectation of an outcome
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Old 09-11-2008, 12:57 PM   #71
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What I am trying to say is the statistical data imputed by the model accounts for a series of data points from A-Z and AB-YZ and on and on, where realistic data points should start from a specific reporting point giving only a series of 100 data points. Do you report your yearly returns daily or at a specific point in the calendar such as the end of the year. Statistical data that reports a one year return that is calculated using daily data is skewed. It creates artificial data points.
Do you only make investment decisions on 1 day of the year, or do you make them daily? I don't understand how this is an artificial data point. What is artificial about looking at possible investment returns from March 1, 2006? That seems pretty real to me, and relevant, too.
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As for condensation of time variance, the shorter the span the more likely the historical average variance will match the time horizon. As the time variance increases so do the standard deviations. Most statistical variations plot as a bell curve. So the shorter the curve the more likely the statistical data will match given a reasonable expectation of an outcome
I'm having trouble understanding what you're saying here. What do you mean by "time variance," "shorter curve," and data will "match?" I think it's in reference to your earlier statement:
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The shorter life spans aid to reduce variance in the models by smoothing the distributions.
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Old 09-11-2008, 01:01 PM   #72
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I didn't realize how common that is until I joined this forum. Maybe I was naive. Still, I can't help but think that these programs are yet another form of welfare and forced wealth redistribution."..."just to pay in taxes that go to support government pensions.
I get one of these. BTW would you like to "trade" about 7 years of your life to spend that amount of time in the Far East, Middle East, and SE Asia (some of which you could hear and feel stuff blowing up around you)? We all make our choices and some of us "earned" those "pensions". And I agree with your admission of possibly suffering from being a bit naive but you go on and keep paying those taxes for my "welfare and forced wealth redistribution". Have a nice day -- now where did they hide the "ignore" button.
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Old 09-11-2008, 01:14 PM   #73
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I get one of these. BTW would you like to "trade" about 7 years of your life to spend that amount of time in the Far East, Middle East, and SE Asia (some of which you could hear and feel stuff blowing up around you)? We all make our choices and some of us "earned" those "pensions". And I agree with your admission of possibly suffering from being a bit naive but you go on and keep paying those taxes for my "welfare and forced wealth redistribution". Have a nice day -- now where did they hide the "ignore" button.

I get one of those as well. My war was the Balkans. And I have a few of those exploding things still in my body
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Old 09-11-2008, 01:25 PM   #74
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Have a nice day -- now where did they hide the "ignore" button.
Sick burn.
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Old 09-11-2008, 04:12 PM   #75
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Neither Firecalc, nor any other statistical model can project a 40-50 year time horizon due to data skew and a constant change in the financial regulations affecting the raw data. The longer the horizon the greater the risk. Predicting a 95% success ratio off Firecalc then retiring at 40 with a possible time horizon of 50 years is a great way to go broke between 70-90 years old.
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Unless you have a guaranteed pension, ...
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I get one of those as well. My war was the Balkans. And I have a few of those exploding things still in my body
I don't even have to click on "View Posts" to see that once again the COLA pension recipients get snide comments implying that they've somehow simultaneously cheated the early-retirement system and the taxpayers.

I'm not aware that there are many govt-funded COLA pensions on this board. There's roughly 100 military veterans who are active posters, and the U.S. military's retirement rate is roughly 15%, so it's quite possible that there are fewer than two dozen people posting here with that benefit.

But for those of you whining about COLA pensions, you can go buy your own from Vanguard. Or you could try the alternate approach used by Canadian Grunt and others to earn theirs... although that method has a much different type of "survivor bias".

Or you could continue your whining-- I'm glad that you're feeling frisky with your first-amendment rights. Their free, uninhibited exercise by guys like you make guys like me feel all warm & fuzzy that our service was worth the effort.
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Old 09-12-2008, 12:54 PM   #76
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CG the OP,
The future is unknown so it is risky, nothing is ever guaranteed. There is risk in retirement at any age, especially ER. 4% plus inflation was only for 30 years, not ever suggested as a 40 year SWR. What you are questioning was not in the studies, just extrapolated by sloppy internet postings. Read the original studies by Wm. Bengen and the Trinity study by the Trinity professors. Read about the range and frequency of the ending portfolio balances. The Journal of Financial Planning used to have Bengen's in the free archives. I don't know what the subsciption fee is now. Reading all of Wm. Bernstein's Retirement Calculator articles is good too. Bengen's original is now 16 years old, and he no longer recommends the rigid "percentage plus inflation" SWR with no mid-stream corrections.

4% does tell the general public to have 25 multiples of expenses before starting retirement at age 65. That was new info at that time but it is still valid. Have you seen Gummy's chart of retiree maximum SWR by starting years? It shows who was lucky (early 1950s) and who was unlucky (late 1960's). It ends with 1975 retirees since he wrote it in 2005.
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Old 09-12-2008, 01:34 PM   #77
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CG the OP,
The future is unknown so it is risky, nothing is ever guaranteed. There is risk in retirement at any age, especially ER. 4% plus inflation was only for 30 years, not ever suggested as a 40 year SWR. What you are questioning was not in the studies, just extrapolated by sloppy internet postings. Read the original studies by Wm. Bengen and the Trinity study by the Trinity professors. Read about the range and frequency of the ending portfolio balances. The Journal of Financial Planning used to have Bengen's in the free archives. I don't know what the subsciption fee is now. Reading all of Wm. Bernstein's Retirement Calculator articles is good too. Bengen's original is now 16 years old, and he no longer recommends the rigid "percentage plus inflation" SWR with no mid-stream corrections.

4% does tell the general public to have 25 multiples of expenses before starting retirement at age 65. That was new info at that time but it is still valid. Have you seen Gummy's chart of retiree maximum SWR by starting years? It shows who was lucky (early 1950s) and who was unlucky (late 1960's). It ends with 1975 retirees since he wrote it in 2005.


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To my knowledge there have been no definitive studies on ER at 40. All the studies were based on shorter time horizons of 25-30 years.

A potential time horizon of 50 years + for very early ER's limits this choice to the very wealthy or persons with a guaranteed pension (the military being one of the few recipients of pensions at age 38 + depending on the join date).

My point is, people retiring in their late 30's or early 40's without significant stable funds take a great risk of depleting their investments before death or suffering below the poverty line as a senior.

There are many factors that could contribute to a significant decline in funds such as a prolonged sideways market or a significant injury or disease that causes higher expenses in the future. Granted, these factors could occur if a person retired at 55 but they are closer to Medicare, should have increased funds at their disposal, and don't have the longer timeframe to cover with the investments they do have.

Additionally, very early retirement will diminish the SS available at a later date, thus increasing the individualís likelihood of entering reduced income as a senior.

I am not saying it canít be done but a person better assess the impact of all the statements above before retiring in their 30ís or early 40ís.

Working later on may not be an option if you become disabled in ER.

No study can guarantee a projection forward made up of incomplete data from historical information.
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Old 09-12-2008, 01:59 PM   #78
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I am not saying it canít be done but a person better assess the impact of all the statements above before retiring in their 30ís or early 40ís.

Working later on may not be an option if you become disabled in ER.
I definitely hear what you are saying, and I'll acknowledge that there is more risk in a 50 year ER period than a 30 year ER period.

But at some point you just have to take the plunge. Do your due diligence, complete careful analysis, come up w/ plans B, C and D, etc. Build a spreadsheet. Calculate a barebones budget.

And remember that we are dealing with probabilities here. The risk that one becomes disabled or otherwise unable to work isn't an issue as long as the porfolio stays solvent.

The thing to consider is the cumulative probability of portfolio failure AND disability severe enough to prevent employment. So if my portfolio is structured in such a manner as to have worked in 95% of past cases, then failure is 5%. Not sure what the probability of disability making one unable to work - 10%? So the cumulative probability of portfolio failure and being disabled is a whopping 0.5% (assuming market returns and disability are independent events). Some risks are worth taking.

And 0.5% might actually overstate the actual risk one faces as a dynamic decision-maker. Your disability would have to strike before the time that your portfolio has commenced its failure beyond the ability to recover.

Sometimes you roll the dice, and you win. Or you lose.
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Old 09-12-2008, 02:30 PM   #79
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I definitely hear what you are saying, and I'll acknowledge that there is more risk in a 50 year ER period than a 30 year ER period.

But at some point you just have to take the plunge. Do your due diligence, complete careful analysis, come up w/ plans B, C and D, etc. Build a spreadsheet. Calculate a barebones budget.

And remember that we are dealing with probabilities here. The risk that one becomes disabled or otherwise unable to work isn't an issue as long as the porfolio stays solvent.

The thing to consider is the cumulative probability of portfolio failure AND disability severe enough to prevent employment. So if my portfolio is structured in such a manner as to have worked in 95% of past cases, then failure is 5%. Not sure what the probability of disability making one unable to work - 10%? So the cumulative probability of portfolio failure and being disabled is a whopping 0.5% (assuming market returns and disability are independent events). Some risks are worth taking.

And 0.5% might actually overstate the actual risk one faces as a dynamic decision-maker. Your disability would have to strike before the time that your portfolio has commenced its failure beyond the ability to recover.

Sometimes you roll the dice, and you win. Or you lose.

I think you missed my overall point. I don't think the survival predictions people use for a 50+ year time horizon is accurate. There is a great chance that over that length of time a portfolio will fail.

You will then have two options: Live in poverty or go back to work.

You may not be able to go back to work because of disability, so you are left with the option of poverty.

For persons aged 65 and older 43% of women and 40% of men have disabilities so the chances of working in later years diminish if the ER makes the wrong choice on an ER date and is forced back to work as a senior. Losing in this scenario is something I personally will not chance.

Disability - American FactFinder


Delaying ER until 50 or later will increase the survivability rate of a portfolio and bring the ER closer to actual results from a financial model.
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Old 09-12-2008, 03:12 PM   #80
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Originally Posted by Canadian Grunt View Post
I think you missed my overall point. I don't think the survival predictions people use for a 50+ year time horizon is accurate. There is a great chance that over that length of time a portfolio will fail.

You will then have two options: Live in poverty or go back to work.

You may not be able to go back to work because of disability, so you are left with the option of poverty.

For persons aged 65 and older 43% of women and 40% of men have disabilities so the chances of working in later years diminish if the ER makes the wrong choice on an ER date and is forced back to work as a senior. Losing in this scenario is something I personally will not chance.

Disability - American FactFinder


Delaying ER until 50 or later will increase the survivability rate of a portfolio and bring the ER closer to actual results from a financial model.

I think you missed my overall point.

So ERing at 50 instead of 40 is your suggestion? Add 10 years of earnings and reduce the "retirement period" by 10 years? Obviously it will increase the survivability rate of a portfolio! The question is one of risk-reward. The two must be balanced, no? I'm not particularly risk averse myself. If, by age 40, I have accumulated a portfolio with "belts and suspenders", and I have a few back up plans, I figure I'll be ok. Are you suggesting that one should spend 10 extra years doing something they don't want to do just to increase the likelihood of portfolio survivability by a bit? I'd personally rather enjoy those 10 years doing whatever suits my fancy.

And to say that 40% of men and 43% of women will have some form of disability by age 65 (per your link) means that the cumulative probability of both a husband and a wife being disabled is only 17% (assuming disability of husband and disability of wife are independent events). And out of those 17% of cases, how many are actually debilitating disabilities that would prevent me from doing an office job? Maybe half? So it is only a problem in 8.5% of cases? Right at the 10% guesstimate I put forth earlier.

But if I retire at 40, I would expect to see most portfolio failures, if any, in the first 15 years or so. Otherwise, exponential growth would take over and grow portfolio values to a sufficiently high level as to make portfolio failures after 15 years even more unlikely. So it is really an issue of what is the cumulative probability of disability of husband and wife by age 55 (assuming ER at 40).

Of course you are correct that past historical market returns may not represent future market returns. But realize that there have been some doozies in the historical market record over the last century or so. But I don't have a crystal ball to predict future returns 50 years out (if you do, please share! ).

I don't really know how to respond to "
bring the ER closer to actual results from a financial model" since I have no clue to which financial model you are referring to, and whether the phrase "actual results" refers to the model's predicted results or to the real financial results that we will see over the next 50 years.

The bottom line is that a prospective ER seeking to retire in their late 30's or early 40's should carefully consider their own situation (health, assets, liabilities, expenses, etc) and ensure that they have plans in place to take care of most eventualities that they might face. Once that is done and a substantial nest egg has been accumulated, then pull the trigger. Roll the dice.
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