The Young and the Reckless

[tozz]

I've been grinding out FIREcalc numbers for an early retirement in September, and often end up feeling a bit queazy.  My pension is fat by most standards, but doesn't go far in a high cost of living area.  So I tried a different approach, pitting 47 year old tozz against the future 62 year old tozz.  It increased my comfort level, but I am hoping someone can blow some holes in my assumptions. 

Assumptions: 

• Based upon what I see in my parents and their friends, expenses decrease with age. The urge to travel lessens;  there is less of an urge to accumulate "stuff."  Those in their 80's generally choose to live on less than those in their 70's, 70's less than their 60's, 60's less than their 50's, etc.
• If you have a COLA'd pension (that you could survive on) in addition to your savings, 95% safe rate is way too conservative.  70-80% with close monitoring would be a worthwhile gamble
• If things go bust quickly, I can always return to work for a contractor for a couple of years.
• Medical expenses are not a factor.

This is an extreme example, but it helps my comfort level.  Can anyone blow holes in it? ------------------------------------------

FIRECalc Results

You have proposed a withdrawal of 70.00% of your starting portfolio.

We looked at the 116 possible 15 year periods from 1871 until 2002, and the 15 partial periods from 1987 until 2002, starting with a portfolio of $100,000 and taking out $70,000 the first year, and the same amount after adjustments for inflation (PPI) each year except as follows:

Pension
Starting in year 1, the withdrawal was decreased by $46,000 (adjusted for inflation).

Move to temporary ex-pat life in either Southeast Asia, Central America
Starting in year 2, the withdrawal was decreased by $50,000 (adjusted for inflation).

Move back to New England
Starting in year 5, the withdrawal was increased by $50,000 (adjusted for inflation).

Sell home
In year 1, the portfolio was increased by a single (inflation-adjusted) $250,000 addition (as from the sale of a house).

Rent, RV.

Buy smaller home outright
In year 10, the portfolio was decreased by a single (inflation-adjusted) $250,000 reduction (as for a major purchase).

Your Success Rate is 76.5%

 

[JRB]

How can you decrease withdrawal in year two by 50,000?

You started with a 70K withdrawal then decresed it by 46K in year 1 leaving a net of 24K.

Decreasing it again by 50K doesn't make sense (unless you are adding to the protfolio).

 

[tozz]

Hi JRB,

I just cut and pasted the FIREcalc printout--I probably should have edited for clarity.

The first 46K decrease is due to my 46K pension.

The second 50K decrease approximates the cost of living in Thailand or wherever from years 2-5 (70K - 50K = 20K).  Yes, I would be adding to my portfolio during the period.

Has anyone else intentionally short-shrifted themselves in the future based upon their observations of (and discussions with) the previous generation?

tozz

 

[Cut-Throat]

Has anyone else intentionally short-shrifted themselves in the future based upon their observations of (and discussions with) the previous generation?

What I am doing is allowing myself an extra $20K per year for travel for about 20 years. At age 80, I'll either be dead or have been everywhere I want to go, so I stop the expenditure.

I won't be buying a lot of cars and furniture at this age also. So, I'll have plenty of time and money to visit the strip clubs.

I have also budgeted for a very expensive rocking chair at this stage ($1000 in todays dollars)