Bernicke "Reality Retirement Plan"

[2B]

I found in Advanced FireCalc that if I used the Bernicke "Reality Retirement Plan" I could retire today with 115% of the income that I'm currently making (after-SS and savings). If I don't use this, I only would be able to withdraw 80% of the same amount.

Is this effect that dramatic or have I done something wrong?

I'm a believer in the drop off in spending as proposed by Bernicke but I didn't think it was this big of a factor.

When the calculations are done for the Bernicke effect, does FIRECalc inflate the withdraws and then draw the dollar amount down by the age dependent spending or use 2006 dollars for the life of the plan?

[dory36]

Every withdrawal in the standard (and Bernicke) scenario is adjusted for inflation, so your spending ability remains the same.

In the Bernicke paper linked in FIRECalc, he also showed future spending adjusted for inflation.

Then, he reduced the spending a bit each year starting at age 56 and going through age 75, when it winds up being something like half the original spending amount, and staying there.

So FIRECalc does the same. The only difference between the two is that in his paper, Bernicke assumed a standard rate of inflation, and in FIRECalc I use whatever the inflation rate was the year being modeled.

Keep in mind that the difference between success or failure can be as little as a dollar over a 30 uear retirement, and in most cases, retirement scenarios that are reasonable (but not quite successful as you might like) are generally failing in the last few years -- when the Bernicke model has you taking just half of what you originally started with.

Look at the chart on the right in the standard display and you'll see how many of the cycles ended up just a bit below zero. A spending reduction that cuts your later term spending in half can have a big effect.

[MJ]

I was going to fire off a letter of frustration with FireCalc cause the data using the Bernicke option that I previously saved several weeks ago was failing. But after reviewing the display, I found the bug. Apparently, when I go to my saved data, the Bernicke option is selected but the displayed age is protected. The program apparently thinks that the Bernicke option has not been selected, so I have to uncheck it and than recheck it to activate it again.
Glad I caught this.

[dory36]

Hmmm -- I'll look into fixing that. Thanks for finding it!