Need a Longer Plan? Living to 100?

[Tekward]

“You have to worry about getting unlucky and living to 100,” said Richard Thaler, a Nobel Prize winner in economics, during a Brookings Institution event Thursday."

"How long you’ll live and how much money you’ll need in retirement are unknown, he noted. “There’s nothing like ‘age 65,’” Thaler said. “You may know when you retire that you are in poor health and cash out and live it up, but no one knows that they are a high risk to live to 100.”

https://www.marketwatch.com/story/n...-getting-unlucky-and-living-to-100-2019-04-18?

 

[pacergal]

Every retirement calculator I run, I put in for age 100 (or 99 if some don't allow for 100).

 

[ERD50]

The good news is, if you conservatively plan for a 40 year span (ER @ 60, plan for age 100), you are likely good "forever". It's pretty much a diminishing returns thing, and the calculators seem to level off at that point, and the portfolio will withstand the draw-downs "forever".

-ERD50

 

[bingybear]

RIP will go higher. I've tested up the the end of RMDs (115)

The real wild card... how long should you plan for and how much will be left on the table.

I think most of us plan beyond the mean life expectancy, but not up to 99.9%.

 

[flintnational]

A 60 yo woman has about a 3.9% probability of making it to 100. If she has a 25% chance her money will not last (75% success rate to 100), she only has a .975% chance of both reaching 100 and being broke (3.9% x 25% = .975%)

ETA: Corrected error in original post.

 

[joeea]

A 60 yo woman has about a 2% probability of making it to 100. If she has a 25% chance her money will not last (75% success rate to 100), she only has a .5% chance of both reaching 100 and being broke (2% x 25% = .5%)

Where do you see 2% ?
The chart seems to indicate that the correct number is 3.9%

And of course that is just for the average woman. Women of means will have a higher percentage of survivors at every age.

If you are trying to concoct a number to justify not bothering to be prepared financially for a long life, then you can certainly do it. But remember that none of these numbers are actuals, that they are averages or estimates, and that multiplying these numbers makes accuracy even less likely.

My planning goes to age 100. I don't want my wife or I to run out of money and have to depend on others. I'd rather do that than depend on dying before 100.

 

[flintnational]

Where do you see 2% ?
The chart seems to indicate that the correct number is 3.9%

You are correct. My vision missed it. I will correct my post to reflect. 3.9%. Thanks.

 

[street]

I beleive it is something that may need to be planned for (100 yo) but that is something I'm not even concerned about. If I run out then I do, but I doubt it will ever happen.

 

[Dtail]

Current plans only go to 92 y.o. Will tweak it along the way if living status appears to warrant as such.

 

[GravitySucks]

Last year I spent a month in Myrtle and there was a very healthy active 90 year old man I played mini golf with three days a week. He lived well. Golf once a month, lunch out once a week, dinner out once a week, 10 year old Lexus with low miles.
He said he gets a small pension and SS but lives on less than the SS and gifts his young (60s) daughter the rest to help them out.
Pretty sure I'll be fine with just SS at 99, or will be unable to tell if I am. Hope I can convince myself to blow the dough in my 60s and early 70s instead.

 

[joeea]

I beleive it is something that may need to be planned for (100 yo) but that is something I'm not even concerned about. If I run out I do but I doubt it will ever happen.

So you have concluded that you don't really need to plan for it. I guess "if I run out I do" is a plan.

 

[joeea]

Current plans only go to 92 y.o. Will tweak it along the way if living status appears to warrant as such.

Interesting. How did you decide on 92? Seems like an odd ending point. How old are you now?

 

[flintnational]

If you are trying to concoct a number to justify not bothering to be prepared financially for a long life, then you can certainly do it. But remember that none of these numbers are actuals, that they are averages or estimates, and that multiplying these numbers makes accuracy even less likely.

Not sure if "concoct" was directed at me. In this case, we are concerned about the probability of two events simultaneously happening, living to 100 and funds being exhausted. So, the correct way to calculate the numerical risk is to multiply the individual probabilities. I don't think I made any recommendations or gave any advice on what to do with the resulting number. I simply posted the math. Use as you deem appropriate.

 

[Andre1969]

I plan my retirement out to the age of 100, using FireCalc. However, I'm only 49, so that's just limiting me to historical 51 year time periods, the most recent of which would be 1967-2018, I guess?


So, just for a sanity check, I'll run it for a few shorter time periods as well, just to see if there are any more recent scenarios that might have crashed. I think one recent scenario, that I would have had trouble recovering from, would be if I retired in 1999. I got hit kinda hard in the 2000-2002 timeframe, and then in 2008 I lost about 50% from peak to trough. I got through it just fine, because I was still working. But, if I was retired and had to draw on that money, it would have been dicey.

 

[Dtail]

Interesting. How did you decide on 92? Seems like an odd ending point. How old are you now?

59 male/58 female.
Some of the standard calculators use 92 as a reference point. She is on disability due to back issues, but otherwise okay. I am reasonably healthy.

Was thinking a bit of playing around with 95 y.o.

 

[street]

So you have concluded that you don't really need to plan for it. I guess "if I run out I do" is a plan.

Exactly

 

[Teacher Terry]

My mom loved to travel but quit around 84 but it was too exhausted. She had a small pension and SS and she did everything she wanted to do on a weekly basis. She outlived her money but she was fine. Us kids would have paid for a vacation with us but she was done by then. Her nice lifestyle stayed the same until she died 5 years later.

 

[ejman]

My mom loved to travel but quit around 84 but it was too exhausted. She had a small pension and SS and she did everything she wanted to do on a weekly basis. She outlived her money but she was fine. Us kids would have paid for a vacation with us but she was done by then. Her nice lifestyle stayed the same until she died 5 years later.

Could you please elaborate on "She outlived her money but she was fine" does this mean she was fine on a reduced income after she ran out of saved investment money other than SS and the small pension or perhaps you and or others in the family contributed to her support?

 

[Teacher Terry]

Once her savings was gone she could pay all her bills and still had money for fun stuff every week. She could pay for car repairs, medical co-pays etc on her small pension and SS. None of us had to help her. By that time she didn’t want to travel. Too much of a hassle.

 

[daylatedollarshort]

Our plan is to live off <= (SS + pensions + TIPS interest (or equivalent)) so per our spreadsheets and cross checked with the Fidelity planner we should have about the same net worth whatever age we live to as we have today. Not all the pension money is inflation indexed, but we have a fixed rate mortgage now that will be paid off eventually so our fixed expenses will decrease once that is paid off.

 

[GrayHare]

Long age is the one thing that tempts me to purchase a "longevity insurance" type of annuity. I was surprised how inexpensive they can be if paid into before age 60, and if payouts don't start until 80 or 85.

 

[MarieIG]

I put in 100 in Fire Calc, it's easy enough. However, after my 16 hour work day yesterday, I feel as if I'm already there.

 

[joeea]

Not sure if "concoct" was directed at me. In this case, we are concerned about the probability of two events simultaneously happening, living to 100 and funds being exhausted. So, the correct way to calculate the numerical risk is to multiply the individual probabilities. I don't think I made any recommendations or gave any advice on what to do with the resulting number. I simply posted the math. Use as you deem appropriate.

Fair enough.

For others - when you multiply one guess by another guess, your guess is as good as mine.

 

[flintnational]

Fair enough.

For others - when you multiply one guess by another guess, your guess is as good as mine.

I have suggested mortality tables and SWRs as a way to calculate the joint probability of running out of money and living to 100*, the topic raised by the article author. What method do you propose? Are you suggesting we should ignore SWRs and/or mortality tables because they are not 100% accurate?

While helpful, SWRs alone are not adequate for this analysis. They have no bearing on life expectancy. At age 60, a 40 year 100% SWR does not mean you will live to age 100. However, joint probability corrects this issue and addresses the topic raised by the article author, that you need to plan on the possibility of living to 100.

*IIRC, this method was illustrated by William Bernstein, Author, Neurologist and Financial Planner.

 

[joeea]

I have suggested mortality tables and SWRs as a way to calculate the joint probability of running out of money and living to 100*, the topic raised by the article author. What method do you propose? Are you suggesting we should ignore SWRs and/or mortality tables because they are not 100% accurate?

No.

If calculating a joint probability by multiplying two guesses together leads you to conclude that you don't need to plan for living to 100, then good for you.

I'm just suggesting that there is no proven validity to such multiplication, and that you are still guessing what the resulting numbers means to you. Is 7 the magic number? Is 0.5 too much? And so on...

While helpful, SWRs alone are not adequate for this analysis.

That depends on the SWR itself.

At age 60, a 40 year 100% SWR does not mean you will live to age 100.

I have no idea what you mean by a "100% SWR". You are correct that no SWR will increase your lifespan. That seems obvious.

However, joint probability corrects this issue and addresses the topic raised by the article author, that you need to plan on the possibility of living to 100.

I wouldn't use the term "corrects" in this context.