Are my conclusions correct?

[testtubes]

I have been working with FIRECALC on a goal monthly income from my investments once I am retired. Several people have told me 4 or 5 percent max.
I will be taking a $900k lump sum at retirement and rolling it into an IRA account that I will be drawing from on a monthly basis under the rules of 72T.
I would like to draw $54k annually from this account which would be 6%. When I plug these numbers into FIRECALC, I get less than a 90% chance of success. The thing is that FIRECALC has a default 3% inflation adjustment built in.
If I put the numbers back in FIRECALC and set the inflation adjustment to zero, my success rate jumps to 98.1%.
If I understand the rules of 72T, you have to commit to set monthly amount that cannot be adjusted for inflation and you are locked in to this amount for 5 years or 59 1/2, whichever takes longer.
My focus here is bridging the gap to 59 1/2, and then SS.

Does this sound like I'm making sense?

 

[cute fuzzy bunny]

It does.

What the calculator is basically telling you is that you would have run out of money had you done your plan during the great depression or during the drop and side-slide the market did between 1965 and 1974. So in a very bad market situation, your plan would have failed if you didnt cut spending or find another way to raise an income, like take on a part time job.

And yes, removing inflation makes things look really good.

Have you plugged in the appearance of social security into and gotten the 90% rate or did you use the basic one and leave out the appearance of the other numbers?

Because the inclusion of SS "appearing" should increase your current SWR and reduce your failure rate.

 

[testtubes]

Back to the drawing board

I see my mistake. Firecalc is showing the success percentage for 30 years with no adjustment for inflation. I need to enter the numbers so that adjustments for inflation start after the five year span of 72T.

Can you hear the air leaking from my ballon?

 

[sgeeeee]

testtubes,

FIRECalc offers a lot of options and I'm not sure which ones you are using. Unless there have been recent changes in the program, the simulator does not use a default 3% inflation rate. It uses the historical inflation rate for each year. You can choose to use a fixed inflation rate instead of the historical rate, but you don't have to.

Also, you can specify a fixed withdrawal for X number of years that is not adjusted for inflation if you want to simulate how a fixed 72T withdrawal would affect your historical SWR.

 

[jdw_fire]

I have been working with FIRECALC on a goal monthly income from my investments once I am retired. Several people have told me 4 or 5 percent max.
I will be taking a $900k lump sum at retirement and rolling it into an IRA account that I will be drawing from on a monthly basis under the rules of 72T.
I would like to draw $54k annually from this account which would be 6%. When I plug these numbers into FIRECALC, I get less than a 90% chance of success. The thing is that FIRECALC has a default 3% inflation adjustment built in.
If I put the numbers back in FIRECALC and set the inflation adjustment to zero, my success rate jumps to 98.1%.
If I understand the rules of 72T, you have to commit to set monthly amount that cannot be adjusted for inflation and you are locked in to this amount for 5 years or 59 1/2, whichever takes longer.
My focus here is bridging the gap to 59 1/2, and then SS.

Does this sound like I'm making sense?

No, to me what you are doing doesn't make sense from a "planning for retirement" perspective. If all you are concerned about is the time from now to age 59.5, and you are willing to let your standard of living drop over those years then FIRECalc is not the right tool for you to use, just use the 72T calculator and see if that number meets your needs.

That being said, if that is what you are doing it is a very risky way to plan your retrement. What happens after 59.5? Do you really want to let your standard of living drop? FIRECalc should be used to plan you whole retirement not just the next 5 years and using the options page I think you can get closer to your actual life.

What I am thinking is that after you put all your assets into FIRECalc you go to the options page an put in that you are going to retire the year you turn 59.5. On the next line "How much will you add to your portfolio until then, per year?" you put in the 72T amount with a negative sign in front of it. Then on the line "Inflation Rate:" use CPI. You should use a 40 year time frame for your plan as you are 54yo (this also has its problems ashas been stated in other threads so you should also run it for 30 and compare)

 

[SteveR]

Agree that you should break up your planning into segments.

You need to see how much $$ you will NEED until you are at the various points in the future...i.e., 59.5...62..70.5

These are critical ages in retirement planning and you need to understand what you can and can't do on and after these ages.

The amount of $$ you need from your expected ER date and age 59.5 will determine how big an IRA you will need to fund those expenses using the 72t calculator. You don't have to tie up your whole IRA for a 72t, you can set up a number of IRAs and draw only from the one that has enough in it to fund your withdrawls over that period of time. Once you reach the max. of age 59.5 ( or 5 years whichever is longer) you can then use another IRA to withdraw what ever you want without restriction.

You might even set up another one to fund your expenses after SS.

You have a lot of choices in this.

 

[cute fuzzy bunny]

One other suggestion...after doing your firecalc run, you'll see in the upper right hand corner a "link to results". If you cut and paste this into a thread, anyone can click on it and see exactly what you did and how the results were obtained.