How long do you really plan to live?

[JustCurious]

I know that most of us on this board are conservative financially, and we usually plan for the worst case scenario when planning for retirement. Therefore, I think that many assume that you will live to be 85 or 90 or 100 or longer, and you build that assumption into your SWR and the amount of money that you need to retire. But let's get real here folks, how long do you realistically expect to live?

According to the most recent figures I could find, if you were born in 1950, your average life expectancy at birth (average of males and females of all races) was 68 years. Now if you are lucky enough to live to age 65, you will beat the odds of all those people who died before reaching that age, and your remaining life expectancy is then 18 years, which would mean you would then expect to live until about 83. If you are then fortunate enough to make it to age 75, your life expectancy is then about 12 more years to age 87.

http://www.cdc.gov/nchs/data/hus/hus06.pdf#027

So the statistics reveal that most people on this board will die on or before the ages of 68 and 87, with an average somewhere in the neighborhood of 78. Does it really make sense to deprive yourself of retiring so that you can save enough money to live beyond say age 80, since that is unlikely? I know that some people will beat the odds, you don't have to tell me that, but don't you think that money spent in your 50's or 60's will mean a heck of alot more to you quality of life than money that you have in your 80s or 90s, assuming you are even fortunate to make it that far.

Therefore, I have decided not to forego retirement for the sake of having a SWR past the age of 80. It just doesn't seem to make sense to me, especially since I will probably sitting in a rocking chair all day at that age, and, I will always have some social security. (Please don't turn this into a political discussion about social security)

 

[d]

It just doesn't seem to make sense to me, especially since I will probably sitting in a rocking chair all day at that age

... what will you be eating? dumpster diving isn't easy at that age, particularly when sitting in a rocking chair.

 

[runchman]

I tend to agree with you.

Plus who knows what the future will bring as far as market returns and a zillion other variables - if Firecalc says you are safe with 4% to age 80 with an $xxxx portfolio, vs. 4% to age 95 with a $yyyy portfolio, do you really have confidence that your future 30 or 40 years are going to play out so close to your assumptions that you are safe with the one to 95, but will be eating catfood with the one to 80?

That being said, of course I'm going to build to a zillion dollars before i have the guts to pull the plug

- John

 

[Bikerdude]

So the statistics reveal that most people on this board will die on or before the ages of 68 and 87, with an average somewhere in the neighborhood of 78.

Most people on this board will have "richest person in the graveyard" status.

 

[unclemick]

84.6 + or - 0.1 - I forgot the IRS table I pulled the number from - they're the govenment and they would know - Right

heh heh heh heh - SS, small pension, and Norwegian widow dividends - not to reignite a debate but I might even finance my wheelchair if it was a real sporty model. , :.

 

[haha]

Most people on this board will have "richest person in the graveyard" status.

We hope!

ha

 

[Lusitan]

A slightly different tact on the same basic idea, I read somewhere an argument that shooting for anything above an 80% success rate on your SWR wasn't worth it for some statistical reason, the details of which escape me at the moment ...

I think the general reaction among those on this board will be to plan to live until 100. But for younger workers who don't have the benefit of a pension, that's much more difficult. I haven't nailed down exactly what lifespan to plan for when it comes to retirement.

The irony is that the younger I retire, the greater my chances are of living a longer, healthier life. Talk about a Catch-22.

 

[peggy]

And speaking of Catch-22 -- I plan to live forever or die trying.

Seriously, I have a history of longevity on both sides of my family, in many cases passing 90 in reasonably good health.

So, yeah, I'm using the 105-year-plan.

 

[kramer]

When I do my own Monte Carlo SWR calculations, I model life expectancy as a Random Variable with an average and a variance. So the withdrawal period varies in each of thousands of runs that are used to compute the survival percentage. This captures much of the uncertainty in life expectancy as it relates to SWR.

Kramer

 

[haha]

When I do my own Monte Carlo SWR calculations, I model life expectancy as a Random Variable with an average and a variance. So the withdrawal period varies in each of thousands of runs that are used to compute the survival percentage. This captures much of the uncertainty in life expectancy as it relates to SWR.
Kramer

This seems actuarially sound. Do you have a Monte Carlo Excel Add-In? Is it general purpose, or directed to SWR calculations? I have been hunting around for a general purpose Monte Carlo Add-In, but I haven't found anything that I am sure I could figure out since I am not much of a software jock.

ha

 

[lazygood4nothinbum]

i don't smoke. i don't drink. i exercise regularly. i don't eat meat. i don't drink soda. i never took life all that seriously and i retired at 48 so i've pretty much got the stress level of a well fed puppy. i have numerous relatives on mom's side who lived to their mid 90s. now that i am learning of my father's side, i already found two cousins in their mid to high 80s, one still working in movies and one an active chairman of his family biz. so unless i start treating my body badly, i don't see that i have much of a choice but to plan for a long & happy life.

"live long and prosper."~~spock

 

[W2R]

I know that most of us on this board are conservative financially, and we usually plan for the worst case scenario when planning for retirement. Therefore, I think that many assume that you will live to be 85 or 90 or 100 or longer, and you build that assumption into your SWR and the amount of money that you need to retire. But let's get real here folks, how long do you realistically expect to live?

My mother is 97, alert, and still going strong. She doesn't sit in a rocking chair all day, but goes to bridge games, concerts, exercise classes, and such in her continuous care facility. She is wheelchair bound, but she has arranged for a helper to wheel her around, and is transferred from the wheelchair to and from her bed with a special hoist mechanism. She is dressed and bathed by helpers, and she is monitored by nurses as needed. I am sure none of this is cheap. She still goes out now and then, to go shopping and such, but not as often as in the past. Basically life still has a lot to offer her, and she has a ball.

Her grandfather did not die until 104, and several other relatives of mine lived to be quite old. On the other hand, I do have other relatives that died in their 80's, and my father even died at 70. Perplexing, isn't it? What to do?

I decided that since my mother never expected or planned to be 97+ years old, living to be that old is a possibility for me. Certainly it is not probable, but it is possible.

Given that it is possible, and given that elderly people are often relatively helpless and vulnerable, and given that nursing home care for the destitute is a fate to which I would not want to condemn a dog, and given that I do not have any convenient relatives to sponge off of (nor the desire to do so), the only rational approach is to assume that I will live to be quite old.

For retirement planning purposes, I am assuming that I will live to 102-105. For me, anything else would just be responding to the pervasive American urge for immediate gratification rather than facing the very real possibility that I could live to be considerably older.

For other purposes (such as idle speculation, appreciation of what days I have left, and such), I would imagine that I might live to be 85 or so.

In other words, my two cents are that we should plan for what is possible, not what is probable.

 

[runchman]

Do you have a Monte Carlo Excel Add-In?

ha

I've used this one, easy once you've figured it out:

http://www.cse.csiro.au/poptools/

It has a monte-carlo section as well as a bunch of other stuff which I've never even looked at.

- John

 

[haha]

Thank you John-

Ha

 

[kcowan]

I have used several life expectancy calculators and have concluded that I need to plan for 97, although the earliest showed a 10% chance of dying by 84 and the latest was a 10% chance of living to 104.

 

[Peaceful_Warrior]

I assume I'm going to live to be 100, but for purposes of FIRE I assume I will live indefinitely.

My goal is to live off interest alone and never dig into principal....




Of course, reality and the walks of life may have something different to say about that. But it's my goal!

 

[MasterBlaster]

I read somewhere an argument that shooting for anything above an 80% success rate on your SWR wasn't worth it for some statistical reason

The reason is that human activity cannot be explicitly modeled. Maybe we will have another world war and the US population and finacial markets will be decimated. Maybe an asteroid will strike the earth. Maybe some germs will infect us all (birdflu or 1918 pandemic)

- you get the idea. Therefore fine tuning your SWR ratio to the 3rd decimal point based on the relatively recent past history is not all that logical.

 

[Gone4Good]

but don't you think that money spent in your 50's or 60's will mean a heck of alot more to you quality of life than money that you have in your 80s or 90s.

That sounds like something you'd expect a 50-60 year old to say. I'd be surprised if that sentiment is widely shared by those in their 80's or 90's.

I also suspect that the old saw about how "no one on their death bed ever wished they spent more time at the office" doesn't apply to the early retiree who ran out of money.

Personally, I'm arranging my finances as if I'll live to 100. But there is a risk/reward trade off that is specific to each persons own situation. If planning on living to 100 meant I had to work until I was 75, I'd likely choose another path.

 

[Gone4Good]

The reason is that human activity cannot be explicitly modeled. Maybe we will have another world war and the US population and finacial markets will be decimated. Maybe an asteroid will strike the earth. Maybe some germs will infect us all (birdflu or 1918 pandemic)

- you get the idea. Therefore fine tuning your SWR ratio to the 3rd decimal point based on the relatively recent past history is not all that logical.

Not sure I agree. Systemic risks (like an asteroid strike) can't be mitigated regardless of what you do. But other risks (like financially surviving the 1970's) can be entirely mitigated. I disagree with the logic that says because I can't prevent an asteroid strike it makes no sense to guard against other risks that I can prevent. So while Bernstein may be right in suggesting that 80% success is the best anyone can hope for, that doesn't mean a plan that survives 80% of historic periods is the same as one that survives 100%. Both have the same amount of systemic risk, but one has a whole lot less financial risk.

 

[Tracker]

I am planning on living to be 100. This would be beating the life expectancy on both sides of my family by several decades. Someone in my family has got to break the pattern, right? Might as well be me...

As long as I have some quality of life (can take a nap on a sunny day, read the paper) I want to be alive.

I'm not one of those folks that is afraid to get older. I worked at a nursing home during high school and college. Getting old is not a bad gig. Beats the alternative

 

[dumpster56]

120.. Yes I will be alive in 2076 forthe tricentenial.

Then I will be on Good Morning america as the oldest person alive then drop dead on camera!

 

[Khan]

I'm not one of those folks that is afraid to get older. I worked at a nursing home during high school and college. Getting old is not a bad gig. Beats the alternative Wink

I keep hearing this.

I do not understand it.

How could not being be worse than being severely decrepit?

 

[Gone4Good]

How could not being be worse than being severely decrepit?

Don't knock it until you try it.

I'm pretty sure when I was 16 I thought I'd rather be dead than 40.

 

[yakers]

i don't smoke. i don't drink. i exercise regularly. i don't eat meat. i don't drink soda. i never took life all that seriously and i retired at 48 so i've pretty much got the stress level of a well fed puppy. i have numerous relatives on mom's side who lived to their mid 90s. now that i am learning of my father's side, i already found two cousins in their mid to high 80s, one still working in movies and one an active chairman of his family biz. so unless i start treating my body badly, i don't see that i have much of a choice but to plan for a long & happy life.

Do you drive? I saw some calculation that if our bodies lasted indefinitely there would still be mortality from accidents often enough to have a population turnover over 300 years.

 

[GLM]

Quote from: Lusitan on Today at 03:38:29 PM
I read somewhere an argument that shooting for anything above an 80% success rate on your SWR wasn't worth it for some statistical reason



Perhaps what you read was this. I saw it and saved the quote long ago and refer to it when I start to get to anxious about if 90 , 95 or 99% probability is needed --

Regarding withdrawal & probability -

William J. Bernstein (author of The Efficient Asset Allocator and The Four Pillars) points out that aiming for a portfolio survivablity of more than 80% (based on Monte Carlo analysis) really doesn'’t improve your overall safety. In his article The Retirement Calculator from Hell, Part III: Eat, Drink, and Be Merry Bernstein says this:
"“The historically naïve investor (or academic) might consider reducing his monthly withdrawals to a very low level to maximize his chances of success. But history teaches us that depriving ourselves to boost our 40-year success probability much beyond 80% is a fool’s errand, since all you are doing is increasing the probability of failure for political, economic, and military reasons relative to the failure of banal financial planning."”