COcheesehead
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Playing devils' advocate, would you want a tool to be the opposite?
FIRECalc Success Rate & RE
- Thread starter tb001
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Playing devils' advocate, would you want a tool to be the opposite?
USGrant1962
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Excellent point Perrinva and I agree with you completely! And it's not just choosing Fido's "significantly below average" option. It's not taking the trouble to understand the test you're running and the descriptive statistics of the output data.
It is sooooo important when testing scenarios to fully understand the paraments being used. You know, historical data vs. average returns/inflation vs Monte Carlo, etc. Possibly, some folks are losing track of this.
Many here tend to be belt + suspender + duct tape types. Grossly exaggerate expenses. Underestimate income streams or omit some (like SS) entirely. Then pick a test model which assumes draconian financial circumstances. Apparently, they enjoy working and will do most anything to show they need OMY and then OMY and then OMY.......
+1
To each his/her own regarding ones finances, but sometimes if feels like those folks are actively "discouraging" ER - on the Early-Retirement.org forum
GravitySucks
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Like I said, I like the tool. Just pointing out what it gives as a 10% chance of happening probably only happens 3 or so percent of the time.
tmm99
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And from what I can gather, FIDO drops your asset down a lot in the first year of retirement, and I consider that a good test - because a drop in your asset at the beginning of your retirement is more detrimental than a drop later on in your retirement.
SnowBound
Recycles dryer sheets
tb001: My DW and I'm good with 80% success rate. Will adjust if the bottom drops out.
If market does well, will not adjust.
Enjoy not w*rking any more. 
If market does well, will not adjust. Enjoy not w*rking any more. Dtail
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Well if you find value in the success ratio percentages, then "Below Average/"Average" are only 70%/50% success rates respectively.
Keeping aside that Monte Carlo simulations are more conservative in nature than Historical simulations, would you be fine with 70% and 50% success rates in Firecalc?
robnplunder
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This thought occurred to me just yesterday as I was trimming a front yard tree that was about to invade our 2nd story window. It took an hour of hard labor (sawing branches off while standing on top end of a tall ladder, using left (off) hand b/c of weird angle to get at the branch) to do the job. I also removed plants/grass growing in my rain gutters, again standing on top end of a tall ladder. And as I were doing these chores, I wondered how long I can do these myself. It would have taken hundreds of dollars for either chore. Ditto for working on my car.
Katsmeow
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I am usually good with 95%. DH says he is OK with 80%. But I can manipulate what I get depending on length of time and what spending I select. I have been doing it for years and always use 30 years. I have toyed with changing it since DH is 71 and I am about to be 65. So I have thought about switching it to 28 but it doesn't make a huge difference so I haven't.
Depending on how I do spending I can sometimes end at 100% or at 95% or even lower. I run it with different spending assumptions to get a range.
Depending on how I do spending I can sometimes end at 100% or at 95% or even lower. I run it with different spending assumptions to get a range.
I don’t place any value on percentage success really. I only look at absolute numbers. In Firecalc, I look for 4 or less failures. The failures come 25+ years out, so plenty of time to “ react”. I am not really an RE investor like so many here, retiring at 61. I discovered this school of thought too late to make much difference, as I had already committed to a private industry where the pension income was designed to cover the majority of income. In FIDO, I look at remaining portfolio amount for the 3 return scenarios and judge from there. I place more credence in “below” average than “average” or “significantly below average”. With retirement this year at 61, but full pay+ pension through this & most of 2020, my first year of retirement withdrawals doesn’t even come until 2021, when I am 63. My pensions & SS (~ $110k/yr) cover all my expenses plus some discretionary, so income from my $1M+ investment portfolio is for pure discretionary items and black swan/LTC etc events. 63 thru 70 withdrawals will be for back door Roth conversions, but I will still have significant pretax even after conversions (>$500k) causing RMDs. I am mostly interested in the calculators because they predict the amounts based on inflation adjusted income using my COLA and non COLA incomes accordingly. I have plenty of cushion built it that I can adjust my income draw to circumstances as needed. The ballpark of $4-5k/mo of discretionary is plenty, for us. As mentioned by many, unused “allowed income” above RMDs will just stay invested pre or after tax. Until I have a few years under my retirement belt, I know I will refrain from the BTD attitude. We already travel Business or better twice year overseas, so we are not depriving ourselves of anything.
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Ahh, that is the first I’ve heard that. Thank you. In that case, I am SO ready to enjoy retirement as even significantly below average returns shows an easy success with tons of cushion. 45 days to go, w/ only 30 actual show up days left. For me FIRECALC & FIDO match quite well. IORP is even more optimistic.
ncbill
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Anything over 80% really doesn't matter, as one of the online financial advisors notes...there are simply too many factors outside of one's control for there to be any meaningful difference.
robnplunder
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As I understand FIRECalc, I don't think the result is what you think it means. I think it means, if you increase your sample years beyond 25 years, there is a likelihood of failure within the years you specified.
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dd564
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Not sure if something like this has been posted before, but essentially this graph shows success rates in firecalc based on your total investments and your projected withdrawal amount per year over a 40 year retirement period.
Grey column on the left is simply your investment amount withdrawal using a 3.5% rule (instead of 4% rule).
Blue column is total investment amount.
Green column across the top is desired income entered in firecalc. Below that is the % of scenarios successful. (Your firecalc percentage).
Seems like this would be a handy rule of thumb based on firecalc.
Grey column on the left is simply your investment amount withdrawal using a 3.5% rule (instead of 4% rule).
Blue column is total investment amount.
Green column across the top is desired income entered in firecalc. Below that is the % of scenarios successful. (Your firecalc percentage).
Seems like this would be a handy rule of thumb based on firecalc.
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A. Here is a great article that references above with the most thorough SWR article I found.
https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/
B. How did you figure out how to post a pic?
dd564
Recycles dryer sheets
A few thoughts
#1)100% on FireCalc etal does not mean a 100 % probability of a not running out of money.
Black swan events ( war, revolution, pandemic, asteroid impact, etc) will occur at some point in the
future. The question is will a black swan occur during your retirement.
#2) Financial projections ignore mortality risk. A 50 yr old male has about a 30 yr life expectancy.
A 60 year old male has about a 22year life expectancy. Financial success is running out of time before you run out of money. A significant fraction of us will die before 30 years
Nothing is 100% safe or certain. The decision to retire is more: Value 1 year time≥ Value 1 year additional money
#1)100% on FireCalc etal does not mean a 100 % probability of a not running out of money.
Black swan events ( war, revolution, pandemic, asteroid impact, etc) will occur at some point in the
future. The question is will a black swan occur during your retirement.
#2) Financial projections ignore mortality risk. A 50 yr old male has about a 30 yr life expectancy.
A 60 year old male has about a 22year life expectancy. Financial success is running out of time before you run out of money. A significant fraction of us will die before 30 years
Nothing is 100% safe or certain. The decision to retire is more: Value 1 year time≥ Value 1 year additional money
Frisco Kid
Confused about dryer sheets
Retirement Calculators
All these are just simulations. Just because they might give you the numbers you want to see in no way would make me confident enough to pull the plug based just on that. IMHO there is no substitute for crunching the numbers old school. Seriously, during the next downturn quite likely you will get anxious regardless of what success rate % a calculator gave you. Having a decent grasp of your expenses and being flexible to me are the keys. You have to play this game as the cards are dealt and everything is in a constant state of change.
All these are just simulations. Just because they might give you the numbers you want to see in no way would make me confident enough to pull the plug based just on that. IMHO there is no substitute for crunching the numbers old school. Seriously, during the next downturn quite likely you will get anxious regardless of what success rate % a calculator gave you. Having a decent grasp of your expenses and being flexible to me are the keys. You have to play this game as the cards are dealt and everything is in a constant state of change.
dd564
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Seems like you are saying that people who become expert savers (or experts at accumulating wealth) who retire early, somehow will modify their spending or wealth accumulation even after they retire to help compensate for good or bad financial unpredicted occurrences.
COcheesehead
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When you reply, click on the paper clip icon. A box opens and you can attach a photo or file from there.
SnowBound
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Also doesn't include dying today from a lighting bolt in a snow storm. TIME > $ (or success rate)
Dtail
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The calculators are not a guarantee, but it does provide a decent basis of reference based on historical sequences.
One could have an excellent grip on their expenses and be flexible, which could effectively mean that there is cushion built into the expenses in order to be flexible in the first place.
Well if you take away those cushioned expenses and plug it into a retirement calculator, it will likely spit out a very high success rate.......
When I say failures occur 25+ out, I mean that with a 30 year timeline, which would be to age 93, the first line (of 3, for instance) showing zero left of the portfolio is at my age 88. But since none of my non-discretionary income comes from the portfolio, that is very much more than an acceptable risk.
I'm at 98% including money for taxes. I live in a new house and budget for paint, new roof/ driveway and our boiler should last forever.
Some of it depends how much flex you have in your budget. I have a CC membership so I could cut $20k out of our budget. I also have $1.35mm set aside for three kids 9, 8, 6 for education.
I feel like at 47, if these gains are real, I could retire, and this is constant spending model. I don't think I'll need $250k when the kids are out of the house..
Some of it depends how much flex you have in your budget. I have a CC membership so I could cut $20k out of our budget. I also have $1.35mm set aside for three kids 9, 8, 6 for education.
I feel like at 47, if these gains are real, I could retire, and this is constant spending model. I don't think I'll need $250k when the kids are out of the house..
Our FA does not believe in the 3-4% withdrawal strategy at all. He said it is more complicated than that and has to do with your expenses.
He has us just withdrawing from our IRA's and Taxable account once hubby stops working, until age 70 1/2 (for hubby that will be in 4 years) at which time he will start SS and mandatory RMD's and I will be behind hi 2 years later to collect mine.
We would withdraw what we need to live on to meet our expenses. That is what we have to do period. And pay the taxes on it.
He wants us to do some Roth conversions in the meantime also and stay under a certain income to minimize taxes.
I must admit I am nervous as all hell and when the time comes I am going to need a bit of hand holding by the FA until I can feel comfortable with this. If I ever do!
He has us just withdrawing from our IRA's and Taxable account once hubby stops working, until age 70 1/2 (for hubby that will be in 4 years) at which time he will start SS and mandatory RMD's and I will be behind hi 2 years later to collect mine.
We would withdraw what we need to live on to meet our expenses. That is what we have to do period. And pay the taxes on it.
He wants us to do some Roth conversions in the meantime also and stay under a certain income to minimize taxes.
I must admit I am nervous as all hell and when the time comes I am going to need a bit of hand holding by the FA until I can feel comfortable with this. If I ever do!
HI Bill
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Meleana - IMHO, either you're misrepresenting what your FA said, or he should be fired. Many FAs who are paid a % of assets under management want you to take the smallest distribution possible, so that their fees remain as high as possible, as long as possible. If you 'only' take enough out to pay expenses, you will likely die with a lot of $ left over....or if you're under-funded, then you may run out of $. The purpose of the 3-4% 'rule' is to help ensure that you know how much you can safely spend without a significant likelihood of running out of $. Assuming your investments and asset allocation are reasonable, a 3.5% withdrawal rate is not out of line, and is a good place to start. But it also depends on your final goal. Are you trying to leave a large bequest? If so, then by all means, spend as little as possible. But by no means should you plant to spend more than 5% of assets indefinitely, as you'll likely run out of money.
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