No Heirs - FireCalc Success Rate Comfort Level

[Vincenzo Corleone]

DW and I will have no heirs when we decide to check out. Every time I use FIRECalc, I look for a 100% success rate. Of course, we would hate to run out of money before we go. But we'd also hate to leave a lot of money on the table, and I would think aiming for a 100% success rate increases that possibility.

Knowing there are no guarantees either way, I was wondering if those of you who are in the same situation (no heirs) would feel OK with a FIRECalc success rate < 100%, and if so, what would be the minimum success rate you'd be comfortable with?

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[Edit]

Rephrasing my question as I think I see the fallacy in my thoughts about success rate:

For those of you who are OK with a < 100% success rate, what is the minimum you're OK with (regardless of how much money you might end up leaving on the table)? I'm sure there's a poll that exists but I couldn't find it.

 

[razztazz]

That's not the way to do it. All it does is bake in the cake a less-than-100% success rate. You always want (or maybe I should say ideally one would wish for) a 100% success rate. If you don't want to leave a pile on the table simply reassess your net worth and estimated remaining time horizon /life span every year or so. If, as we've done recently you find yourself with "too much" , take a trip to Switzerland or buy a Corvette. If not... you are not currently needing to worry about having too much money.

Personally I use 99% success rate because no matter how sure of anything you are in this world there's always a chance it won't work. As far as not wanting to leave too much unspent, I just do that intuitively as I see myself with more and more money.

But I am so cheap and except for a totally soundproof environment which is unattainable anyway, I find it hard to spend money.

 

[audreyh1]

Even though we don’t have kids, we have heirs, but I would prefer to give as much as we can while we are still alive.

I use the %remaining portfolio withdrawal method and as we get older I’ll probab start to rais our withdrawal rate.

 

[Dtail]

Heirs aside and not answering your question directly, I am reading various blogs on the historical 4% rule (Firecalc ~3.60% for 100% success), usually does leave much money on the table. Been looking at various % of portfolio/Variable WR scenarios to see if more monies can be used without losing sleep.

 

[Vincenzo Corleone]

That's not the way to do it. All it does is bake in the cake a less-than-100% success rate. You always want (or maybe I should say ideally one would wish for) a 100% success rate...

OK, I can see that. But then what's the point of FIRECalc allowing you to specify a success rate under the "Investigate" tab?

 

[audreyh1]

OK, I can see that. But then what's the point of FIRECalc allowing you to specify a success rate under the "Investigate" tab?

I think its OK to to go with a lower success rate as long as you come up with contingency plans (like lowering spending) if it looks like you’ve run into a bad scenario.

 

[razztazz]

OK, I can see that. But then what's the point of FIRECalc allowing you to specify a success rate under the "Investigate" tab?

I don't know what FireCalc's point is or might have been. Pure versatility would be one possibility. The ability to play "What if" scenarios

 

[Vincenzo Corleone]

Rephrasing my question as I think I see the fallacy in my thoughts about success rate:

For those of you who are OK with a < 100% success rate, what is the minimum you're OK with (regardless of how much money you might end up leaving on the table)? I'm sure there's a poll that exists but I couldn't find it.

 

[Ready]

I don't know what FireCalc's point is or might have been. Pure versatility would be one possibility. The ability to play "What if" scenarios

Firecalc's 100% success rate is only based on historical returns. So if you get a 100% success rate given a certain spending level it tells you that this level of spending would have survived even the worst case scenario we have had to date.

However, it obviously can't tell you whether the future will be worse than the past, so even though it says 100%, it only means 100% based on past history, not future returns.

 

[Ready]

Back to the original question, yes I worry about leaving too much money on the table, because we have absolutely no heirs to give our money to when we pass.

But I also worry about running out of money if we live a long time. So I guess I'm destined to worry about it no matter what. Or just enjoy life and try not to think about it too much. Just depends what day it is.

 

[meierlde]

Back to the original question, yes I worry about leaving too much money on the table, because we have absolutely no heirs to give our money to when we pass.

But I also worry about running out of money if we live a long time. So I guess I'm destined to worry about it no matter what. Or just enjoy life and try not to think about it too much. Just depends what day it is.

Do you mean you have no second cousins or further relations? If you look at the way things work, they are also heirs in the intestate succession laws.

 

[Ready]

Do you mean you have no second cousins or further relations? If you look at the way things work, they are also heirs in the intestate succession laws.

None that I have any relationship with nor any desire to leave money to.

 

[bobandsherry]

Even with no heirs there's plenty of causes that one could leave their money to. As long as you aren't hurting yourself now on spending cash just plan ahead as to what charities and other organizations you would feel good about leaving money to. Heck, you could be taking that 6 foot under slumber tomorrow, so plan accordingly.

 

[razztazz]

Rephrasing my question as I think I see the fallacy in my thoughts about success rate:

For those of you who are OK with a < 100% success rate, what is the minimum you're OK with (regardless of how much money you might end up leaving on the table)? I'm sure there's a poll that exists but I couldn't find it.

So it doesn't get lost in the shuffle: I use 99% and darn the torpedoes

 

[audreyh1]

I think 100% will give someone a false sense of security. You need to have contingency plans in place regardless. So you need to monitor how you are doing overall.

Personally I prefer to use the % remaining portfolio method because it leaves less behind on average and it responds quickly to downturns in fortune. Yet if you run into a series of good market years, you get nice raises quickly.

You just have to decide how you want to handle the variable income.

In terms of heirs we have siblings and nephews. But with siblings we don’t want them to have to wait until we expire. So if things keep growing we’ll gift increasingly to family as we age.

 

[meierlde]

None that I have any relationship with nor any desire to leave money to.

Then as suggested give to your favorite charity(es). You would need a will for this otherwise your second or further cousins will inherit under the intestate provisions. (or you can set up a trust with the charity as beneficiary that gives you income for life and the remainder goes to the charities)

 

[Vincenzo Corleone]

...Personally I prefer to use the % remaining portfolio method...

Is that the same as variable percentage withdrawal as described here?

 

[audreyh1]

Is that the same as variable percentage withdrawal as described here?

No, because it doesn’t vary. Same % each year. FIRECALC does model this method.

Now if I do start increasing the percent with age I’ll have to decide how best to do that, and VPW is one method, and some folks modify it further. Another possible method is the simple RMD tables.

 

[FANOFJESUS]

Maybe run FireCalc every five years. Try to see if you can up the spending.

 

[SecondCor521]

I happen to have heirs, so I keep my money in regular investments and aim for 100% in Firecalc. (I'm way above 100% though. My net WR is currently 1.47%.)

If I had no heirs, though, I think I would probably be much more likely to annuitize a large portion of my investments. Live on the annuity and then use the remaining portfolio for splurges, large purchases, or whatever. In this case I'd have to figure out some way of addressing inflation.

 

[Major Tom]

But we'd also hate to leave a lot of money on the table, and I would think aiming for a 100% success rate increases that possibility.

I may well have no-one who I keenly want to leave to money to. However, I have no problem whatsoever with leaving lots of money on the table. Not to put too fine a point on it, but I'll be dead, so I can't see it bothering me too much

I'd much rather feel comfortable that, no matter how long I live, I'll most likely be able to afford my lifestyle. For that reason, I'm sticking with the 2% WR - at least for the time being. I can always find someone to leave to the money to. The local cat rescue would make good use of it. They do wonderful work with stray, shy, and under-socialized kitties, many of whom would otherwise not find homes.

 

[Meadbh]

My impression is that many people want a number that they can calculate once and rely on indefinitely. In reality, things change, and unpredictably. So I think monitoring is key, particularly in the early years of ER, when the risk of sequence of returns is highest. Otar demonstrates this point with examples in his book “Unveiling the retirement myth”.

 

[Human]

I've been thinking a lot about this topic lately. My current thinking: targeting a 100% success rate is likely erroring on the overly cautious side - especially for those of us without the worries of providing for heirs.

Anyway, here's an interesting take on it by Bernstein:

"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."

Here's the source article with more context:
The Retirement Calculator from Hell, Part III

 

[teejayevans]

Rephrasing my question as I think I see the fallacy in my thoughts about success rate:

For those of you who are OK with a < 100% success rate, what is the minimum you're OK with (regardless of how much money you might end up leaving on the table)? I'm sure there's a poll that exists but I couldn't find it.

I use 90% because I figure if times get tough my spending will go down. I would rerun your scenario with a minimum budget and see what that gives you.

 

[Dtail]

In general, I think I have generally seen 90% and above as the comfort level with the standard "past might not represent the future" caveat for historical calculations.
I remember seeing a post that if you "only use" 95%, then you are not "covering" the worst times to retire in history whether the Great Depression, 1965/1966, etc.
In the end, monitoring your situation as it unfolds would of course be prudent.