Factoring

[FireAspire]

With 25 working days left until I roll out my Johnny Paycheck imitation, I find myself factoring. For instance, in my Excel calculations, I have factors built in for:

• Portolio value - I usually factor my portfolio down by 10%, worrying that the market is overblown
• Social Security - how much will the government steal from me when the time comes ... 20%, 25%,?
• Withdrawal Rate - Firecalc says 3.56% has survived every historical sequence, but what if the future is worse than the past ... and how much worse? Is 3% safe?

You get the picture. My overly conservative nature has me factoring to the point that I wonder if should just work another year, which I really don't want to do. If I run the numbers without factors in FireCalc, I can spend 16% more than my budget ... which, you guessed it, is also factored on the high side. If I run the factored numbers, I'm still OK, but with only a 2% cushion.
2 questions:

1. Does anyone else suffer from factor-itis?
2. Is there a cure?

 

[pb4uski]

....Social Security - how much will the government steal from me when the time comes ... 20%, 25%,?...

I'm sure this will come as a surprise, but legally the government doesn't owe you anything for social security (there are court cases that confirm that) so since they legally don't owe you anything then they can't steal anything from you.

Feel better?

 

[Gumby]

I'm sure this will come as a surprise, but legally the government doesn't owe you anything for social security (there are court cases that confirm that) so since they legally don't owe you anything then they can't steal anything from you.

Feel better?

Flemming v. Nestor, 363 U.S. 603, 608-611 (1960)

We must conclude that a person covered by the Act
has not such a right in benefit payments as would make
every defeasance of "accrued" interests violative of the
Due Process Clause of the Fifth Amendment.

https://tile.loc.gov/storage-services/service/ll/usrep/usrep363/usrep363603/usrep363603.pdf

 

[Bigdawg]

2 questions:

1. Does anyone else suffer from factor-itis?
2. Is there a cure?

Yes to #1.

Is there a cure? My cure is to have plan B, C, D, E, F, G, etc... Example: Ramp up my sports officiating, ramp down vacations or level of travel from business class to economy, keep vehicles an extra year or two, more fishing and hunting vice buying meat and seafood at the store (we live on Chesapeake Bay), take SS earlier than planned. Basically we have a ton of variables in the budget.

 

[Ole Red 29]

I think factor-itis is pretty common. At least I know I do it a lot. I have a spreadsheet that projects out all of my financial streams, including expenses for life. I can adjust what I use for inflation and growth just slightly and the swing in outcome is astonishing. My final two columns are my total portfolio value over the rest of my life with and without social security. I figure the real numbers are somewhere between those two curves.

 

[2017ish]

***
2 questions:

1. Does anyone else suffer from factor-itis?
2. Is there a cure?

I think most people "suffer" from it, but don't know that it is necessarily a bad thing. DW joked that I said "5 more years" for at least 5 years." Kept adding additional margins of safety into the planning. She was shocked when I said 3 more years, and even more so when we decided it was ok to give our 2 years notice....

A cure? For me, it has been some seasoning time (not a lot, mind you) in retirement. For now, I am content to look at only the bad case scenarios that I already examined. (I.E., no social security, what if we are reliving 1989 Japan, etc. etc.)

 

[Gumby]

If you search the forum for "OMY", you'll find that many people have felt the same way you do now. And they all eventually got over it. Only you can tell when you feel confident enough to step out of the plane and see if your parachute works.

 

[pb4uski]

I don't really do much factoring at all. For my deterministic plan I haircut nominal investment rates of return a bit to be conservative. My base case is that I'll receive 100% of SS but I also look at a what-if of the impact of 100% through 2034 and 75% thereafter.

 

[Stormy Kromer]

#1, yes. I just consider it normal.


#2, everyone needs a release. I fish.


Remember when Johnny Paycheck sang that song he was only working in that factory for now on 15 years. I'll bet you've worked longer.

 

[CindyBlue]

I was all excited that this was going to be a discussion of math...as in, the factors of X^2+5X+6 are (X+2)(X+3) (grin!)

That said, I was a OMY type. I tried every single factorization of my finances I could think of over the four years before we retired. There wasn't a retirement calculator that I didn't find and plug my numbers into. I asked a million questions here on the FIRE Forum (thanks, everyone!)

I agree with Bigdawg - what helped me a lot was to plan for as many different scenarios as I could, and try to figure out what I could do to make it through the bad times.

 

[LiveBelowMeans]

As most of us on the site are planners, I would venture that most add factors of safeties to their calculations. I also believe most could retire earlier than they do and that we end up with way more money than expected. I’ll bet many have more money now than when they retired. Our heirs will be happy. Jmho

 

[DawgMan]

With 25 working days left until I roll out my Johnny Paycheck imitation, I find myself factoring. For instance, in my Excel calculations, I have factors built in for:

• Portolio value - I usually factor my portfolio down by 10%, worrying that the market is overblown
• Social Security - how much will the government steal from me when the time comes ... 20%, 25%,?
• Withdrawal Rate - Firecalc says 3.56% has survived every historical sequence, but what if the future is worse than the past ... and how much worse? Is 3% safe?

You get the picture. My overly conservative nature has me factoring to the point that I wonder if should just work another year, which I really don't want to do. If I run the numbers without factors in FireCalc, I can spend 16% more than my budget ... which, you guessed it, is also factored on the high side. If I run the factored numbers, I'm still OK, but with only a 2% cushion.
2 questions:

1. Does anyone else suffer from factor-itis?
2. Is there a cure?

I suffered from "analysis/paralysis" underwriting the most (perhaps, ridiculous) conservative assumptions (i.e. 75% of SS benefit, 25% steady effective tax rate in RE, big steady spend growing every year with inflation). Once I started really running real calculators on my withdrawals I realized how overfunded I really was, which of course makes me sleep that much easier at night. None the less, perhaps running all those models so conservatively during my accumulation days, kept me focused on "plowing the fields"!

 

[H2ODude]

I've outgrown it. Especially since Covid. No eating out, travel, etc. Living quite well on about what FIDO calculator says is 1/3 of what we can spend. So the safety valve of cutting back in case of catastrophe appears quite viable. After almost 10 years of retirement portfolio has grown ~40%, and just now taking full SS. No way we can spend what we can. We try, because we know the road does not go on forever, despite what Robert Earl Keen says. The party, in fact, could end at any time.

 

[razztazz]

Does anyone else suffer from factor-itis?
Is there a cure?

1 -- Yes

2-- The cure is a few years of retirement. When you realize you're not starving nor are you going to. Nor will the house/car/boat/other fun stuff be repoed. Nobody is coming for you. They don't even know whom you are. If you're smart enough to get there you're smart enough to stay there. It'll take a whole lot of Force Majeure to change the fundamentals.

 

[38Chevy454]

Being an engineer, I am inherently logical the way I look at things. So yes I do have some safety built in. But as far as letting it become a dominant factor (catch that pun??) in my plans, no it doesn't. I do think that starting out with a comfortable safety cushion makes it easier to just roll with it, along with time since now being approx 3.5 years out since retirement. I can only react to things out of my control, so have confidence in your plans and the math. I can make adjustments to things under my control if required.


I know there will be market actions that are not favorable to my plan. There are also market actions that are more favorable than expected. I guess it comes down to being able to look at the larger perspective, and not getting caught up too much in the details. I do not have strict budgets, or low level strategies. Just high level overall plan and some periodic review to check status and progress.

 

[stepford]

Building in a margin, padding, factor-itis - call it what you want, most us do it in one way or another. It's not bad to plan for various scenarios, but excessive worrying leading to OMY (or 2MY in my case) is something to avoid if possible. YOLO.

 

[USGrant1962]

I did similar in my models, and called them conservatisms. I kept (keep) a plan and even put (+) marks next to each conservatism.

But I think you are looking at the issue backwards. Each of those factors adds buffer/wiggle room to your model for when you are retired. Having a bunch of factors should encourage you to retire earlier - not keep grinding away. If you had no factors you might consider OMY. But, if I read you right you have cleared 100% in FIRECalc even with all your conservatisms.

You are good to go!

 

[SecondCor521]

Here's my theory; try it on for size.

I think you feel unsafe. You're afraid, for whatever reason, that you don't have enough money.

But the numbers are telling you that you have it pretty good. Perhaps they are telling you that you have enough money.

Since the numbers on the paper don't match your feelings, this creates dissonance. You feel compelled to make the numbers and feelings match.

One way to do this is to change the numbers to match your feelings and show that you are unsafe. Factoring, as you call it, is one way to do this. (There are others.)

What I am trying to do now is the opposite: Change my feelings to match the numbers and accept that I am very likely safe. This is harder to do emotionally, but I think it ends up in a healthier place.

Good luck.

 

[MRG]

I can relate. My career took me into a lot of datacenters when they were experiencing opportunities for improvement. I did everything you have, it's OK. I found having multiple backups in play was helpful for the mental accounting I insisted on doing..

 

[Bigdawg]

Here's my theory; try it on for size.

I think you feel unsafe. You're afraid, for whatever reason, that you don't have enough money.

But the numbers are telling you that you have it pretty good. Perhaps they are telling you that you have enough money.

Since the numbers on the paper don't match your feelings, this creates dissonance. You feel compelled to make the numbers and feelings match.

One way to do this is to change the numbers to match your feelings and show that you are unsafe. Factoring, as you call it, is one way to do this. (There are others.)

What I am trying to do now is the opposite: Change my feelings to match the numbers and accept that I am very likely safe. This is harder to do emotionally, but I think it ends up in a healthier place.

Good luck.

Always make me think about the war movies when the guys are in a fire fight and they say "we're running low on ammo". Military guys will tell you that there is no such thing as TOO MUCH ammo. Is there a plan that is too safe? Probably. We hear anecdotal stories all the time of folks who either drop dead at work or within a few months of retiring. They probably were saying they had too much right there at the end.

 

[RetireBy90]

As said by others, I think it is common and also a good thing, ar least in my case
I figured only 3% return in projections although since I started tracking my progress in about 2008 I have seen 6-8%. I have money coming from retirement check to savings of $800 per month that wasn’t counted, and about 2 years of spending in cash that doesn’t get counted.
This gives me breathing room for things like cost of Medicare, trips not in budget, and most important for any errors I made in my plan. It also lets me live without undue monetary concerns.
I would recommend keeping some factors but also would recommend mend not letting them get out of hand. I’m sure we will get something from SS so I didn’t keep working to pad out enough to live without it. It is a crutch, so use it knowing you have surplus in case something changes.
And congrats on your progress or achievement as it were !

 

[Dtail]

If you search the forum for "OMY", you'll find that many people have felt the same way you do now. And they all eventually got over it. Only you can tell when you feel confident enough to step out of the plane and see if your parachute works.

+1
Overall, the forum is a more conservative group with spending habits, but keep in mind time>valuable than money after a certain point.

Try to find many threads where the OP wishes they had retired later.

 

[Montecfo]

Having some flex in your plans helps. Then you know you can cut back if you have to.

Of course, no one is safe from unforeseen risks.

But that is the definition of unforeseen risks.

I think it comes down to very simple math. Life is finite. Every year working reduces your retirement by exactly one year. Nothing can change that.

 

[FireAspire]

Thanks for the encouragement. I'm glad I'm not alone. I realize that I tend to factor in all of the negative possibilities, but none of the positives. I'm still healthy and can figure out a way to generate income without misery if needed. I can definitely cut back on expenses. And I trust God to provide. It's ironic that my feet get colder the closer I get to FIRE.

 

[retire48in2018]

I am more nerdy with numbers and mathematical analysis than my DW. But, she has a HUGE security gland.

Our factor-itis - is how much more we have than we need in $.
We can safely retire per Firecalc with $2M is 87% - we have capability reduce expenses, etc. So really higher chance than 87%

So, our "agreed" target is $4M. AND, to then have 3-4 years in cash.

Way conservative, but total financial peace.

Perhaps a PhD in factor-itis