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Old 01-02-2017, 03:43 PM   #41
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I guess if you don't like cat food nor have no backup plan in the event of market downturns, then you shouldn't retire at that point. I think many of us that allow for 80% success rate recognize that adjustments along the way can overcome the potential bad market years. In my case, it's simply turning down the spending rate which is easy for us to do. Keep in mind that Firecalc runs the calculation under the assumption that no adjustments are made in the input you've given it. In my case, we can / will dramatically cut expenses if needed. In others I've read here, they would plan to take on part time work (for example). But each person needs to decide what they are comfortable with and how badly they would like to retire.
So doesn't that constitute actually planning for a success rate higher than 80%?

I don't live extravagantly now, and I don't expect to in retirement. But neither do I intend to go hardcore frugal just to retire. For one thing, DW wouldn't stand for it. For another, it would be inconsistent with my vision of retirement, which is about freedom to do a bunch of stuff without a lot of external limitations like cost. I probably won't eat a lot of Wagyu or truffles, but I at least want the option. That's what success will mean for me. If I have to make a bunch of adjustments midway through, it suggests I didn't plan right.
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Old 01-02-2017, 04:20 PM   #42
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So doesn't that constitute actually planning for a success rate higher than 80%? ....... If I have to make a bunch of adjustments midway through, it suggests I didn't plan right.
Our actual financial plan....the one based on our yearly runs of Firecalc...allows for us to spend up to the maximum amount Firecalc suggests is ok for the chosen probability of success. So yes, we are actually planning for that success rate. In fact this December, we looked at the budget and chose to make some very large one time expenditures because we were within the maximum expenditure allowed.

But we recognize FireCalc limits. Even if our calculation says we'd have 100% success, we would be prepared to make modifications in case past history (which FireCalc is based on) doesn't represent the future well. It's worth noting that some of the smart folks in this forum feel pretty strongly that the current very low interest rate environment and long term bull market is atypical. Some suggest one might want to put less faith in the historically based FireCalc probability of success. I respect that position but don't feel the concern level they do. No matter what the calculated probability of success, we will have modifications we can do to keep ourselves going.
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Old 01-02-2017, 04:30 PM   #43
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For me, the % needed varies with age. When I was 5 years away from retirement, 80-90% was good enough. When I was about to pull the plug, 95+% was borderline. I ran FIRECalc for my son, we were happy that he was over 50%. At 25 yo, there are so many variables that just getting a reasonable target is important. As you approach the end of your w*rk life, a higher % is warranted. This is when OMY kicks in. When I finally pulled the plug, I wanted over 95%(I had 100%) so that there was no question about the decision (at least not a $$ question). Now, I will be happy with anything over about 80% success since the decision is irrevocable and I now look at the mortality factor covering the last few percentage points (between SSI, an annuity, and a good LTC policy, I figure we can live for a long time if the other funds don't last).
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Old 01-02-2017, 06:41 PM   #44
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I don't live extravagantly now, and I don't expect to in retirement.
Yep, that's the situation we're in. We live a simple life on a basic income. There will be significant work related deductions when retire, but there's not a lot of fluff in our spending. It's mostly bills and living expenses that will only increase over time. We won't have a lot of extra to cut back on if things get tight.

So even though FireCalc estimates 100% success, money-in doesn't equal money-out if we retired when it says we could. For me, FireCalc is more of a "second opinion" offering a bit of a confirmation that my own estimates aren't too far off.

I would rather err on the cautious side and be pleasantly surprised if things work out better, than push things to the edge and regret it later.
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Old 01-02-2017, 07:37 PM   #45
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I use a different withdrawal method. % of remaining portfolio won't run out of money for withdrawal rates ~4%, but you might have your real income cut in a bit more than half at some point. If you have a lot of discretionary expenses, that's survivable. And even with the worst 30 year historic run, you would still have 56% of your portfolio left in real terms.
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Old 01-02-2017, 11:10 PM   #46
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A 1 in 5 chance of eating cat food and I'm supposed to sleep at night?
His point, as I read him, is that you have at least a 1 in 5 chance of eating cat food regardless of what FIREcalc says.
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Old 01-02-2017, 11:50 PM   #47
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His point, as I read him, is that you have at least a 1 in 5 chance of eating cat food regardless of what FIREcalc says.
Yes.

I read the article by Bernstein long ago, and forgot what he wrote despite Midpack's post pointing this out again.

As Bernstein wrote

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So live a little, and enjoy your money, for tomorrow we may be consumed by the ghosts of Hitler, Lenin, and Attila the Hun.
It is not really about the retiree eating cat food, but rather everybody including non-retirees has a 1-in-5 chance of having to eat his own cat.
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Old 01-03-2017, 12:15 AM   #48
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The above said, if things go really bad, like the proverbial REWahoo's asteroid strike, we are all in the same boat. In war, it's luck and resourcefulness that one needs to survive.

Knowing that, I still like to have a decent sized stash than not. In the 4-in-5 chance that everything is normal, I would hate to have to eat cat food while my neighbors do not.
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Old 01-03-2017, 09:23 AM   #49
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The above said, if things go really bad, like the proverbial REWahoo's asteroid strike, we are all in the same boat. In war, it's luck and resourcefulness that one needs to survive.

Knowing that, I still like to have a decent sized stash than not. In the 4-in-5 chance that everything is normal, I would hate to have to eat cat food while my neighbors do not.
Exactly. I just don't get the concept that since there are things we can't plan against, that we shouldn't plan at all? Makes no sense to me. You captured it, with a 4/5 chance that there isn't some outside catastrophe, I want to be comfortable. Seems stupid not to.

I can't think of anyone in the past couple generations that I know of that wasn't helped by having some money. There wasn't any world-wide or nation-wide catastrophe that hurt them regardless of their financials. Sure, some had health problems, and in most cases money helped (better care, more comfort, etc).

It just seems like rationalization to me. If someone is really in a position where they can't reach a 100% success, but wants/needs to retire anyhow, I think they would be better off by lowering their costs. Or maybe play the odds that the future economics won't be so bad, take a 5 - 6% WR, but have some kind of fallback plan to reduce spending drastically if things don't go well (SS + pension + small withdraws). That makes more sense than trying to say we have a 20% chance of money being useless anyhow. I sure don;t see that.

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Old 01-03-2017, 09:53 AM   #50
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There are variable withdrawal rate plans that help us to spend less when we have significant down years and spend more when things go very well. The whole idea is to ride out the ups and downs so that we neither run out of money early, nor deny ourselves many pleasures in life only to leave a huge pile of cash on the table at the time of death. The big negative of these plans is that at 'the end' one's heirs often get less than they would under a more simple withdrawal plan.

In effect they mechanize what most of us would do anyway, spend a bit more when times are good to enjoy some extras, spend a bit less when times are bad to protect our asset base. Supposedly, the structure of the variable withdrawal methods allows this to happen in a way that increases total spending while simultaneously preserving, if not improving, the chances of our portfolio's survival.
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Old 01-03-2017, 10:27 AM   #51
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Since all estimates of this kind rely on math and our real-life events and financial returns rely on historical data relative to our own accounts, this entire process is no more than a guess. We should never assume that any financial projection will actually mirror our own results.


A good guess is worth calculating.
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Old 03-11-2017, 11:26 AM   #52
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Love all these comments. I'm still hesitant to say I'm "retired" , but my last day of work was January 6th. FIRECALC has me at a 97.1% success rate and if market goes down 20% tomorrow it goes to 94.1% so I feel pretty comfortable, but I didn't input crazy expenses so I don't feel like I have a huge buffer. Here is what concerns me---Cfiresim has me at 91% success rate , but it goes to 75% with a 20% market drop.

Edit:Schwab has me at 94% success rate and 82% success rate if market drops 20%
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Old 03-11-2017, 12:11 PM   #53
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I sometimes use 95% in FIRECalc, sometimes 100%. I don't think I ever seriously looked at percentages of 90% or below. My risk tolerance is pretty low.
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Old 04-07-2017, 08:43 AM   #54
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One consideration here is what fraction of your retirement income stream is annuitized? If you have substantial SS, pension(s), and annuities you are in better shape variance-wise than someone drawing 100% off of a portfolio - so you could more comfortably go with a lower success rate. You would have a floor of income giving you a little more leeway on your portfolio draw. But do keep inflation in mind.

In my case I only have SS* so I target 100%, primarily to have a cushion for the next bear market. If that bear pushes me into the 90-something percent band I'm good with it. Like others, I'm a little leery of the current stock and bond market valuations.

*P.S., I know the arguments for annuities but can't see locking in today's low rates for decades; maybe later.
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