What Success % do you use?

[CRLLS]

A lot of talk here about less than 100% is good enough. That's OK for them. And a 100% success virtually guarantees that you will die leaving money behind. That is a given, not a possibility, assuming the calculators were right, the market does vary from past performances and we follow the "plan" throughout retirement. For me (us) 100% up to age 100 are the plan. Even then, we have padded our expenses a bit higher than we will actually spend. It is not a goal to spend our last dime. I can't imagine how horrible life would be when/if we reach 90+ yrs and have no money left to spend on a "good home".

Further, I don't understand why Bernstein "seriously backpedaled" from his earlier recommendation based on some people's decision to vary from their plan during the last downturn. That is on the individual person, not Bernstein's recommendation.

 

[wmc1000]

Like many here we use 100% including SS haircut and longevity to 95.

 

[mrfeh]

I've always used 100% success.

I use both historical and monte carlo, but prefer historical.

 

[ERD50]

....

Further, I don't understand why Bernstein "seriously backpedaled" from his earlier recommendation based on some people's decision to vary from their plan during the last downturn. That is on the individual person, not Bernstein's recommendation.

Agreed. While we should not ignore the emotional aspect, we should recognize that it is separate from what the numbers say.

Like my analogy - a fear of flying doesn't change the fact that flying is safer than driving. But if flying is going to make you miserable, maybe you should drive instead. But don't fiddle with the statistics to justify your personal preference, just acknowledge it.

-ERD50

 

[tb001]

Agreed. While we should not ignore the emotional aspect, we should recognize that it is separate from what the numbers say.

Like my analogy - a fear of flying doesn't change the fact that flying is safer than driving. But if flying is going to make you miserable, maybe you should drive instead. But don't fiddle with the statistics to justify your personal preference, just acknowledge it.

-ERD50

FWIW, I really appreciate your number based approach and it’s helped balance the emotional component I see often in people’s posts. We have no interest in living on an ultra low withdrawal rate, so it helps me balance their true risk vs perceived risk. As a relative newbie to thinking about all of this, understanding the numbers behind the failures, and the market dynamics behind cycles that failed, has changed my perspective a lot. My traditional ‘conservative’ approach was always property or cash. I still tend to keep too much in cash, but at least I understand the implications!

 

[big-papa]

If by success, you mean not running out of money before I die, I will use 100% because my withdrawal method (a version of VPW) guarantees it, unless I am Methusehla.

 

[gstillson]

100% success is a bit silly though. Imagine if you were confident in your 100% success rate as you sat in your villa in Germany in 1920.

Examining such a long period of 30 to 50 years, you should be looking at a couple thousand years of data and even that would not get you anywhere near a 100% prediction rate.

 

[Al18]

In the decade before retirement, I thought 80% was sufficient. When I was nearing retirement, I thought 100% was acceptable. Now that I'm retiring next month, 120% is the number I settled on.

 

[Dtail]

100% success is a bit silly though. Imagine if you were confident in your 100% success rate as you sat in your villa in Germany in 1920.

Examining such a long period of 30 to 50 years, you should be looking at a couple thousand years of data and even that would not get you anywhere near a 100% prediction rate.

I hear ya, but I guess psychologically for me, it tells me that the future has to be worse than anything we have ever experienced so far and that just makes me feel better. Yes we can have the Japan 1989 long lasting scenario......

 

[ERD50]

100% success is a bit silly though. Imagine if you were confident in your 100% success rate as you sat in your villa in Germany in 1920.

Examining such a long period of 30 to 50 years, you should be looking at a couple thousand years of data and even that would not get you anywhere near a 100% prediction rate.

It's not silly, not even a bit. It's a choice.

I don't think of 100% as an 'absolute'. I think of it as 'it will succeed where 80% fails'. And that is a fact. It's a relative thing.

We can't predict the future of course. But that's no reason to ignore the past. Personally, I just did not feel that I should retire early with a plan that has been known to fail in the past. Sure, still no guarantee, but there never is.

So if we don't face anything like 1920's Germany, but do face a challenging market like 10% of the profiles ( a 90% success rate), how will I feel if I run out of money in my early 90's, after scrimping with a diminished quality of life throughout my 80's, trying to stretch my dwindling portfolio?

If that 10-20% is acceptable to you, fine. But what is your plan B?

-ERD50

 

[tb001]

In the decade before retirement, I thought 80% was sufficient. When I was nearing retirement, I thought 100% was acceptable. Now that I'm retiring next month, 120% is the number I settled on.

Ha! I think this may be us, to a point. I think you’ve found the origin of omy syndrome!

 

[razztazz]

It's not silly, not even a bit. It's a choice.

I don't think of 100% as an 'absolute'. I think of it as 'it will succeed where 80% fails'. And that is a fact. It's a relative thing.

We can't predict the future of course. But that's no reason to ignore the past. Personally, I just did not feel that I should retire early with a plan that has been known to fail in the past. Sure, still no guarantee, but there never is.

So if we don't face anything like 1920's Germany, but do face a challenging market like 10% of the profiles ( a 90% success rate), how will I feel if I run out of money in my early 90's, after scrimping with a diminished quality of life throughout my 80's, trying to stretch my dwindling portfolio?

If that 10-20% is acceptable to you, fine. But what is your plan B?

-ERD50

Exactly! I always use 100% even though real-life implies 99% on a "Just-Because" basis. There's always something out there. But as far as that 1920 Alpine Villa scenario and other Bernsteinian forecasts, I always ask myself: What if those things don't happen? And if, all put together, they have a 20% chance of happening, odds are overwhelming that they won't. The last thing I need is to kick myself in my own 90 yr old groin by running out of money based on a 20% chance of one of multiple catastrophes happening.

 

[T-Minus]

I use five tools, each at 100%, then subtract 5% from the lowest allowable value: ((min(a1:a5))*.95) as my withdrawal limit. After the first year, the 5% subtraction becomes 4%...and so on. When I reach 0%, I will then be early SS eligible (age 62) - just in case everything goes sideways. You know, belt and suspenders.

 

[Spock]

There is enough fudge factors and hidden assumptions in these calculators that one almost HAS to use 100% success with pessimistic bias (overstate expenses/inflation), understate income, long life spans) to get a safe answer. Health care, LTC, inflation, black swans, etc are impossible to predict over a 30 year retirement.



When I first started, I used 5 different calculator tools from big name firms and got 3 different answers. 2 said I would be eating out of garbage cans in 10 years. 2 said I would die with more money than I started with. And one goldilocks tool had me spending my last dime the last year of my projected life span. Dang tough to make a decision with that sort of feed back.


Over time I dug into about 12 tools (ignore all of the 5 line inputs with slider bars) and eventually they started to give "similar" results... if "similar" = 100% ranges in allowable annual spend rates. Financial Engines seems to be an outlier on the high side at 2x some of the others.



I eventually created a massive spreadsheet that used 2 different methods (FV/PMT formulas vs. brute force line by line math that included SS, etc) that finally gave answers I could have a little confidence in. (This is a math problem and I'm an engineer, so there must be a right answer!)



What I would really like is that the Monte Carlo tools would spit out a list of scenarios that I failed so I could judge for myself if I wanted to worry about surviving that particular combo.


The really telling thing out of the exercise was observing just how many hoops and twists I was willing to adjust variables just to make it "work" as a gauge of how desperate I was to quit work. Am I really going to inherit X or is that wishful thinking? Am I really going to drop to one car, sell the motorcycles, and halt the life insurance at age 65 (I was 50 at the time) to cut expenses? etc.


Even 2 years into (involuntary) retirement, I still spend several hours a week massaging my spreadsheets to sanity check my assumptions and I still can't bring myself to throw out my reference books that "might help me get/keep another job" should I have to go back to work.

 

[OldShooter]

... This is a math problem ...

Unfortunately, predicting the future is not a math problem.

 

[Spock]

Unfortunately, predicting the future is not a math problem.

It really is. Probability and Statistics. All the variables are known. But the relationships between those variables are not well defined.
"Lies, damn lies, and statistics"

 

[omni550]

It really is. Probability and Statistics. All the variables are known. But the relationships between those variables are not well defined.
"Lies, damn lies, and statistics"

You know your (and if married, spouse's) expiration date? How many calculators, and which ones, did you use?

omni

 

[GravitySucks]

Examining such a long period of 30 to 50 years, you should be looking at a couple thousand years of data and even that would not get you anywhere near a 100% prediction rate.

This would result in an asset allocation of 60% Bronze / 40% Cattle

 

[Spock]

You know your (and if married, spouse's) expiration date? How many calculators, and which ones, did you use?

omni

At 57(.5) I have a higher probability of reaching 58 and a lower probability of reaching 100.



I observed my parents in their early 80's and decided that's not really living, so I plan for 85 to have a little cushion.

 

[Spock]

This would result in an asset allocation of 60% Bronze / 40% Cattle

this needs to be on reddit so I can "up vote" it!

 

[TwoByFour]

I have to admit I am now a little confused about the OP question. I never thought of the success rate as the free variable, I always thought the free variable was the withdrawal rate, and from that you see what your success probability is.

Are you all saying that you adjust your WR up to the success rate you choose?

Personally, we chose a WR based on a budget estimate, which is pretty liberal, and then found that the success for that WR was 100%, and did nothing further.

We are spending less than our WR, so I cannot imagine increasing our WR to a success rate of, say, 95%.

 

[youbet]

So if we don't face anything like 1920's Germany, but do face a challenging market like 10% of the profiles ( a 90% success rate), how will I feel if I run out of money in my early 90's, after scrimping with a diminished quality of life throughout my 80's, trying to stretch my dwindling portfolio?

Actually you're double counting the bad stuff.......

If you are "scrimping with a diminished quality of life throughout your 80's," then the 90% success rate would improve somewhat. To just consider a 90% success rate, you have to assume you live full bore every year until you run out of money.

 

[OldShooter]

It really is. Probability and Statistics. All the variables are known. But the relationships between those variables are not well defined. ...

Well, I guess we'll have to differ on that. Even if the names of all the variables are known, which they can never be, the distribution, and even the range of future values, is not known. Black swans happen.

A typical failure of inductive reasoning:

“When anyone asks me how I can best describe my experience in nearly forty years at sea, I merely say, uneventful. Of course there have been winter gales, and storms and fog and the like. But in all my experience, I have never been in any accident... or any sort worth speaking about. I have seen but one vessel in distress in all my years at sea. I never saw a wreck and never have been wrecked nor was I ever in any predicament that threatened to end in disaster of any sort.”

--- Said, as you might guess, by the captain of the Titanic, E.J. Smith in 1907.His inductive confidence was dashed in 1912, when he drowned in the sinking.
​

If you are at all interested in this stuff, and it seems you are, I recommend Nassim Taleb's "Fooled by Randomness" and "The Black Swan." He can be kind of a lunatic but he is also very insightful.

 

[mickeyd]

I have always used 100% and have yet to fail.


Life is good to me.

 

[ERD50]

Originally Posted by ERD50
So if we don't face anything like 1920's Germany, but do face a challenging market like 10% of the profiles ( a 90% success rate), how will I feel if I run out of money in my early 90's, after scrimping with a diminished quality of life throughout my 80's, trying to stretch my dwindling portfolio?

Actually you're double counting the bad stuff.......

If you are "scrimping with a diminished quality of life throughout your 80's," then the 90% success rate would improve somewhat. To just consider a 90% success rate, you have to assume you live full bore every year until you run out of money.

Not necessarily. I'm pretty confident that there are some 10% failure lines that would have you failing in your mid 80's (age, not % if that was confusing). And scrimping through your 80's would help, but might still leave you running out in your early 90's.

By 'scrimping', say cutting back withdrawals by 1/3rd? From what I've seen, a decade of 33% cuts doesn't change the outcome all that much.

-ERD50