Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Bernicke "Reality Retirement Plan"
Old 05-21-2006, 04:19 PM   #1
Thinks s/he gets paid by the post
2B's Avatar
 
Join Date: Mar 2006
Location: Houston
Posts: 4,330
Bernicke "Reality Retirement Plan"

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?
__________________

__________________
The object of life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane -- Marcus Aurelius
2B is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Re: Bernicke "Reality Retirement Plan"
Old 05-21-2006, 04:45 PM   #2
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: Bernicke "Reality Retirement Plan"

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.

__________________

__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Re: Bernicke "Reality Retirement Plan"
Old 05-21-2006, 06:02 PM   #3
Thinks s/he gets paid by the post
 
Join Date: Mar 2004
Posts: 2,083
Re: Bernicke "Reality Retirement Plan"

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.
__________________
I look to the present moment because that's where I live my life.
MJ is offline   Reply With Quote
Re: Bernicke "Reality Retirement Plan"
Old 05-21-2006, 06:10 PM   #4
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: Bernicke "Reality Retirement Plan"

Hmmm -- I'll look into fixing that. Thanks for finding it!
__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Tax Policy Promotes "Early" Retirement REWahoo FIRE and Money 19 07-21-2017 03:10 PM
Many ARE saving enough for retirement REWahoo FIRE and Money 49 09-09-2006 12:03 PM
Vanguard Adding More Target Retirement Funds Lusitan FIRE and Money 23 03-21-2006 07:17 PM
Scott Burns: Stay safe on retirement spending PL FIRE and Money 49 12-22-2004 11:59 AM

 

 
All times are GMT -6. The time now is 10:32 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.