Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-03-2016, 10:05 AM   #81
Recycles dryer sheets
Earl E Retyre's Avatar
 
Join Date: Jan 2010
Posts: 356
Quote:
Originally Posted by pb4uski View Post
...
For example, if you plug in Firecalc with a $1m starting portfolio at age 60 and living to age 100 and 4% WR ($40k in first year) and a 60/40 portfolio (and leave all other inputs as default) then you get:

Here is how your portfolio would have fared in each of the 106 cycles. The lowest and highest portfolio balance at the end of your retirement was $-925,081 to $7,802,709, with an average at the end of $1,520,715.

For our purposes, failure means the portfolio was depleted before the end of the 40 years. FIRECalc found that 21 cycles failed, for a success rate of 80.2%.
Being conservative, I would not feel good about the 80% chance since there is a scenario of -$925k.

So, I just checked what the $1M initial investment would need to be bumped up to in order to get no failures (assuming my expenses were still going to be $40k/year 1st year. If I use $1.2M, $40k initial year, and the 60/40 portfolio, it shows me no failures:

"Here is how your portfolio would have fared in each of the 106 cycles. The lowest and highest portfolio balance at the end of your retirement was $80,389 to $10,690,401, with an average at the end of $2,822,976."

Being ultra conservative, I then took it a step further, and looked at what my initial investment would need to be bumped to in order to lower my market risk but still have no failures. Assuming a 20/80 portfolio, assuming the same $40k initial year expenses, and an initial investment of $1.5M, it shows me no failures:

"Here is how your portfolio would have fared in each of the 106 cycles. The lowest and highest portfolio balance at the end of your retirement was $40,845 to $7,182,720, with an average at the end of $1,625,269."

For people who happen to be
(a) working and in a high earning/low spending situation where they are able to save $100k/year and
(b) worried about future market fluctuations but want the historic models to indicate no failures

they may find it worthwhile to work “just 5 more years”.

I know many on this site would disagree with working 5 more years. And even more would disagree with a 20/80 AA. And of course many are not in the situation to save $100k a year, so 5 years could be more like 10 years. But figured I would throw it out there for whatever it is worth.

Of course you could play with different AA models in between - I was just trying to show the extremes.
Earl E Retyre is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-03-2016, 11:18 AM   #82
Thinks s/he gets paid by the post
 
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,071
Quote:
Originally Posted by braumeister View Post
I'm expecting my letter any day now telling me exactly that. Have been on the IRMAA program for the last couple of years, but it should revert to normal for 2017. Fingers crossed!
Be sure to let us know when you find out.
Hermit is offline   Reply With Quote
Old 12-03-2016, 01:51 PM   #83
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 45,263
Quote:
Originally Posted by Hermit View Post
Be sure to let us know when you find out.
+1
Hermit and Braumeister and NW-Bound, you three have made my day. It looks like maybe I didn't mess up nearly as badly as I had thought.
__________________
Happily retired since 2009, at age 61.
W2R is offline   Reply With Quote
Old 12-03-2016, 02:21 PM   #84
Thinks s/he gets paid by the post
Lakewood90712's Avatar
 
Join Date: Jul 2005
Posts: 2,210
Question for the OP. Is this to include end of life and long term care costs?

In our family I spent over $600k in 8 years on one parent.

With one late uncle, add in a BK too over medical and care costs.

Exclude those costs, and it's not too hard for most on the board to die rich. IMO
Lakewood90712 is offline   Reply With Quote
Old 12-03-2016, 03:20 PM   #85
Full time employment: Posting here.
 
Join Date: Mar 2011
Location: North TX
Posts: 793
Quote:
Originally Posted by NW-Bound View Post
Y'all think it is absurd? You have not seen anything yet. As I said, the number varies from place to place. If a cliff of $19,536 is bad, look at what I found in Anchorage. The following is for a couple of the age of 60.

Joint MAGI = $80,079, annual premium for Silver plan = $6,558 + $6,000 deductible
Joint MAGI = $80,080, annual premium for the same = $44,808 + $6,000 deductible

One dollar more in income, and you pay an additional $38,250 for insurance!

That's the law on the book, my friends. Go to healthcare.gov, and try Zip code 99501 to see for yourself. You do not see this in the media, because ignorant reporters have employer insurance and do not know about all this stuff.

To tie back to this thread topic, yes, a lot of people will die rich, because they do not dare spend it. Spend $1 more, and it sets you back close to $40K a year, or 1/2 of your gross income.
I have a hard time believing that the standard, public market is this much more than here in Dallas. DW is 52 and pays $343/mo (just increased by 24% this year). ACA seems to have inflated prices on people who don't do their homework and just want a subsidy.

I just changed to the employer's plan as it just made sense this year...
Surewhitey is offline   Reply With Quote
Old 12-03-2016, 03:35 PM   #86
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
street's Avatar
 
Join Date: Nov 2016
Posts: 5,067
Quote:
Originally Posted by Lakewood90712 View Post
Question for the OP. Is this to include end of life and long term care costs?

In our family I spent over $600k in 8 years on one parent.

With one late uncle, add in a BK too over medical and care costs.

Exclude those costs, and it's not too hard for most on the board to die rich. IMO
Good question. I guess it isn't included for nursing home care. I have LTCI and pay for two of us 134.00 a month. This is lifetime LTCI with unlimited time. I also seen my parents go in to NH and it took all they had saved. I have LTCI because of it. My pays 5800.00 a month if I have to use it for life. I thought it was worth having it at that cost. My half is 67.00 and will pay 16000 in premiums in 20 years. I would use 16000 in a few months in a nursing home.

Thanks for all the posts very interesting where people compare.
street is offline   Reply With Quote
Old 12-03-2016, 03:46 PM   #87
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 29,850
Quote:
Originally Posted by street View Post
...I have LTCI and pay for two of us 134.00 a month. This is lifetime LTCI with unlimited time...
I have no LTCI and have not shopped for one, but if you will excuse me, your deal sounds too good to be true.
__________________
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is offline   Reply With Quote
Old 12-03-2016, 08:16 PM   #88
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
street's Avatar
 
Join Date: Nov 2016
Posts: 5,067
Quote:
Originally Posted by NW-Bound View Post
I have no LTCI and have not shopped for one, but if you will excuse me, your deal sounds too good to be true.
Yes it does seem to good to be true. Lol It is with AFLAC and they don't offer it anymore. I know a few other people that got the policy before they stopped offering it. My parents had policies with them also and I dealt with this company when each of them had to enter the home. They were top notch company with absolutely no problems. So just before I turned 50 my wife and I both took a policy and costs were down under age 50 then things started to go high after that age. That is the gests of the policy and I haven't had an increase yet in premiums. Time will tell and I hope I don't have to use it.
street is offline   Reply With Quote
Old 12-03-2016, 09:47 PM   #89
Thinks s/he gets paid by the post
growing_older's Avatar
 
Join Date: Jun 2007
Posts: 2,657
Quote:
I have LTCI and pay for two of us 134.00 a month. This is lifetime LTCI with unlimited time.
I never saw any deal like that any of the times I looked at LTCI. What I always found was limits on time (up to so many years) and a formula that limited the size of the nursing home fees. On the other hand, the premiums were never guaranteed and could be increased without limit as long as the policy was in force. Now, I'm sorry I didn't look harder to find this deal. I'm not surprised to find it is no longer offered.
growing_older is offline   Reply With Quote
Old 12-03-2016, 10:12 PM   #90
Thinks s/he gets paid by the post
Lakewood90712's Avatar
 
Join Date: Jul 2005
Posts: 2,210
Just had another thought. How many of us are worth more Dead, if Life Insurance is factored in
Lakewood90712 is offline   Reply With Quote
Old 12-03-2016, 10:20 PM   #91
Thinks s/he gets paid by the post
Lakewood90712's Avatar
 
Join Date: Jul 2005
Posts: 2,210
Quote:
Originally Posted by growing_older View Post
I never saw any deal like that any of the times I looked at LTCI. What I always found was limits on time (up to so many years) and a formula that limited the size of the nursing home fees. On the other hand, the premiums were never guaranteed and could be increased without limit as long as the policy was in force. Now, I'm sorry I didn't look harder to find this deal. I'm not surprised to find it is no longer offered.
When insurers were first pushing LTC policy's many years ago, rates were low, and few were near filing claims. Then the claims started rolling in .

Kind of like the insurers offering earthquake insurance for under $200 a year in California. Then the Northridge quake hit Los Angeles in the early 1990's.Not even a large quake. Everyone withdrew from the market, and 20th Century was about insolvent from quake claims, they withdrew from California on all insurance for a few years.
Lakewood90712 is offline   Reply With Quote
Old 12-04-2016, 07:16 PM   #92
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Car-Guy's Avatar
 
Join Date: Aug 2013
Location: Citizen of Texas
Posts: 6,321
Quote:
Originally Posted by Lakewood90712 View Post
Just had another thought. How many of us are worth more Dead, if Life Insurance is factored in
Everyone with a life insurance policy.
Car-Guy is offline   Reply With Quote
Old 12-05-2016, 06:54 PM   #93
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 30,446
Quote:
Originally Posted by NW-Bound View Post
The 3% WR may scrimp your lifestyle quite a bit compared to 4.25%, yet during bad years, you are not helped that much. Looks how you do not go broke with either 4.25% or 3%, but with the 3% you are always spending less, in good times and also in bad times.

Unless I find something wrong with the data, I would vote for 4.25% of remaining portfolio.
It turns out that this is not completely true. While this is generally true on the way down and at the bottom of a bad run, with a lower withdrawal rate, the portfolio recovers more quickly from the bad times. So the income will increase more quickly with a lower withdrawal rate, and it can surpass the higher rate income in $ terms. You’d have to look at specific runs and compare rates to see how this works.

It also turns out that I didn’t quite have the worst years in my prior tables. While it’s true that the worst year after 1916 is 1966 dropping to the lowest portfolio in 16 years, there is a cluster of several cases from 1892 to 1916 with worse performance than 1966. [Probably no coincidence that the Federal Reserve was founded at the end of 1913.]

For the cases under 4% withdrawal rate, the 1906 run reaches the lowest portfolio of all runs at year 15 before recovering. For the cases 4% and higher, the 1899 run contains the lowest portfolio of all runs at year 22, before recovering. For the 6% case, the 1892 run is the worst at year 29. It took quite a bit of staring at charts and experimenting to tease out the exact years, but I needed to figure it out so I could see the actual run and get the value of the lowest portfolio year during any run.

So I have updated my tables with these worse scenarios. These lowest portfolio values are around 5% lower than the 1966 case.

Inputs - % remaining portfolio, 30 year run, 50/50 total stock market and 5 year treasury. Runs from 1871. All other values are default.

I added a few more withdrawal rates to see how things behave. 4.35% is pretty close to the “break even” which could be inferred by the average ending portfolio value of 100% and a few other results. This also happens to have a worst ending portfolio of around 50% of the starting portfolio. As you go much above 4.35%, more and more bad runs show up in the later years indicating that the portfolio is eroding more than recovering in more cases. A 6% rate ends up with 30% of the starting portfolio in the worst case after 30 years.

% withdrawal remaining portfolioaverage ending portfolio reallowest ending portfolio realhighest ending portfolio realWorst case real income reduction (1906, 1899 or 1892 run)starting year for worst case run
      
6.00%$60,000$16,248$593,418$35,605$298,371
5.00%$50,000$17,294$815,142$40,757$409,854
4.50%$45,000$17,470$954,171$42,938$479,758
4.35%$43,500$17,481$1,000,171$43,507$512,306
4.25%$42,500$17,476$1,032,020$43,861$518,901
4.00%$40,000$17,419$1,115,994$44,640$561,123
3.50%$35,000$16,593$1,304,200$45,647$655,754
3.33%$33,300$16,210$1,374,917$45,785$691,310
3.25%$32,500$16,018$1,409,464$45,808$708,681
3.00%$30,000$15,369$1,522,919$45,688$765,726

%remaining portfolio is a pretty robust scheme and recovers well, but over many years income could possibly (although not likely) drop as much as 50% (real), even with a modest withdrawal rate of 3%. So you’d have to figure out how to deal with that income variation. On the other hand, portfolio drop didn't get worse than 40%, unless you start going above 4.35%. Higher withdrawal rates caused smaller remaining portfolios as expected.

And here is a specific example using the $1M portfolio where you can compare the income from each of the starting and lowest year cases. I included a couple more columns - income from lowest ending portfolio and average ending portfolios - that illustrate how the higher rates can eventually cause lower income as they shrink the remaining portfolio more aggressively and that can overcome the higher income at some point.

% withdrawal remaining portfolio$1M starting portfolio income$1M starting portfolio lowest incomeaverage ending portfolioincome from average ending portfoliolowest ending portfolioincome from lowest ending portfolio
       
6.00%$60,000$16,248$593,418$35,605$298,371$17,902
5.00%$50,000$17,294$815,142$40,757$409,854$20,493
4.50%$45,000$17,470$954,171$42,938$479,758$21,589
4.35%$43,500$17,481$1,000,171$43,507$512,306$22,285
4.25%$42,500$17,476$1,032,020$43,861$518,901$22,053
4.00%$40,000$17,419$1,115,994$44,640$561,123$22,445
3.50%$35,000$16,593$1,304,200$45,647$655,754$22,951
3.33%$33,300$16,210$1,374,917$45,785$691,310$23,021
3.25%$32,500$16,018$1,409,464$45,808$708,681$23,032
3.00%$30,000$15,369$1,522,919$45,688$765,726$22,972

Lowest income peaks for the 4.35% case, then starts to drop off. For the lowest portfolio value after 30 years, the highest income wouldn't come from the higher withdrawals, but actually from the lower withdrawals, illustrating that these lower rates recovered so much more than the higher rates they were producing higher income. In the average ending case we see the same thing. For some reason 3.25% happens to beat the higher withdrawal rates in both cases.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 12-05-2016, 09:22 PM   #94
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 29,850
I observe that the lowest income (3rd column) does not change much for a 2:1 change in WR percentage (3 to 6%). What one pays for with a high WR percentage is a lower ending portfolio (6th column), plus also a lower spending at the end (last column).

In view of that, perhaps a high WR percentage is not all that bad. You get to spend more early in your retirement, when you can make better use of that money.

And if you have SS coming online later, that will help maintain your spending when your portfolio sags.

The only problem left to figure out is how to do that while maintaining a low MAGI to avoid getting a big ACA haircut. That is highly dependent on an individual specific distribution of his stash among after-tax, before-tax, and Roth accounts.
__________________
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is offline   Reply With Quote
Old 12-05-2016, 09:56 PM   #95
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 30,446
Quote:
Originally Posted by NW-Bound View Post
I observe that the lowest income (3rd column) does not change much for a 2:1 change in WR percentage (3 to 6%). What one pays for with a high WR percentage is a lower ending portfolio (6th column), plus also a lower spending at the end (last column).

In view of that, perhaps a high WR percentage is not all that bad. You get to spend more early in your retirement, when you can make better use of that money.
But as time goes on your income will shrink, because you are drawing down your portfolio faster. At some point your income will drop under that of a lower withdrawal rate.

But if you have other income coming online later maybe that's OK.
__________________
Retired since summer 1999.
audreyh1 is offline   Reply With Quote
Old 12-05-2016, 10:01 PM   #96
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 29,850
Quote:
Originally Posted by audreyh1 View Post
But as time goes on your income will shrink, because you are drawing down your portfolio faster. At some point your income will drop under that of a lower withdrawal rate...
At 5%, the worst-case ending income is $20.5K, vs. $23K for the 3% case. Not a lot of difference, considering how much fun 5% gives you at the start compared to 3%. And note how low the incomes drop in the middle years, the values of $15,369 and $17,294. Those are a lot tougher to survive on.

It is interesting to see these numbers, but nobody will stick to a WR percentage or any method rigidly. As for myself, I do not worry about running out of money as much as trying to balance the joy of spending money vs. counting it.
__________________
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is offline   Reply With Quote
Old 12-06-2016, 02:17 AM   #97
Thinks s/he gets paid by the post
 
Join Date: Dec 2009
Location: Alberta/Ontario/ Arizona
Posts: 3,393
Quote:
Originally Posted by NW-Bound View Post
As for myself, I do not worry about running out of money as much as trying to balance the joy of spending money vs. counting it.
Well put and reflects my thinking as well.
Danmar is offline   Reply With Quote
Old 12-06-2016, 10:04 AM   #98
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
kcowan's Avatar
 
Join Date: Jul 2006
Location: Pacific latitude 20/49
Posts: 7,451
Send a message via Skype™ to kcowan
When I switched from Monthly Portfolio updates to semi-annual, I knew that I had enough!
__________________
For the fun of it...Keith
kcowan is offline   Reply With Quote
Old 12-06-2016, 12:07 PM   #99
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
NW-Bound's Avatar
 
Join Date: Jul 2008
Posts: 29,850
Being an active investor, even if I had 10 times the money I do now, I would still look at my stash daily.

I do not trade daily, but I need to know what my stocks are doing.
__________________
"Those Who Can Make You Believe Absurdities Can Make You Commit Atrocities" - Voltaire (1694-1778)
NW-Bound is offline   Reply With Quote
Old 12-06-2016, 12:21 PM   #100
Moderator Emeritus
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 45,263
Quote:
Originally Posted by NW-Bound View Post
Being an active investor, even if I had 10 times the money I do now, I would still look at my stash daily.

I do not trade daily, but I need to know what my stocks are doing.
I have always looked at my portfolio daily until this year. At present, my intent is still to look at it daily, but I find myself only looking about every second day. I need to "get my act together" I guess.
__________________
Happily retired since 2009, at age 61.
W2R is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
I'm worth more than Bill Gates ls99 Other topics 1 06-15-2016 06:20 AM
46% of American retirees have no more than $10,000 in savings at the end of life. bondi688 FIRE and Money 8 09-01-2012 02:57 PM
This is worse than service being dead cute fuzzy bunny Other topics 34 05-09-2005 12:03 PM

» Quick Links

 
All times are GMT -6. The time now is 12:51 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.