What Success % do you use?

[audreyh1]

When I first used FIRECalc we were at around 80% success rate (portfolio survival). That seemed adequate at the time - I had already quit working, we were living off the portfolio and I had no desire to go back to work. Last year it hit 100%, and now it's down a bit to around 95% or so, as we've increased our travel spending.

My guess is my longevity calculator will fail long before the portfolio calculator.

Bernstein had a series of articles called "The Retirement Calculator from Hell" where he postulated that 80% success rate was good enough, because anything could happen wreaking however carefully modeled a retirement might be. This is in Part III of The Retirement Calculator from Hell.

Now, let’s return to the above table. 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.

Mind you, this is not a call for wild abandon. The above table constrains the retiree desiring a theoretical 97% success rate (of portfolio survival) from spending more than 3% per year of the initial real amount of his nest egg. Taking the accident propensity of the species into account would allow him to spend about 4%. But if you believe that we’re about to encounter a bad returns sequence or simply wish to leave a few baubles to your heirs, you’re right back to 3% again.

The Retirement Calculator from Hell, Part III

Now about 9 years later, Bernstein seriously backpedals on his advice about AA oriented retirement investments in general, because he discovered that a large number of his clients were spooked out of the market in 2008/2009 and never got back in. Thereby ruining their chances of recovery.

Instead, he now recommends covering at least 20 years of (after pension, SS) income needs with high quality low-volatility investments - CDs, short-term bonds, TIPs, SPIAs and only when that was covered should you invest additional money in equities.
https://www.whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/

 

[footenote]

Expect we who are likely to die millionaires get
OUTSIZED gratification from:

1) Sleeping well
2) Being able to weather downturns
3) Knowing we can withstand rather severe misfortunes
4) Enjoying itty-bitty "splurges" (like this foot massager I got this week and let me tell you it is so awesome)

I accept that others may not value these benefits as much as I do. (And I'm WAY on the low-end of these folks portfolio-wise-speaking.) Vade in pace

 

[audreyh1]

I have often wondered the same thing. It seems like the majority of people on this forum are very likely to die millionaires. To me that just means they worked several years too long.

Yet that can easily happen with just a series of good market runs after one retires. Something that absolutely cannot be determined in advance of retiring.

The alternative is not pleasant - not quite enough and then experiencing a series of bad market runs right after retiring.

You've got to do the best you can when you retire. Because you are truly rolling the dice. You don't really get a do over. You can go back to work - but it's not going to be the same - it may be hopeless returning to the same type of job and income when you left a couple of years earlier. The longer time passes, the tougher it's going to be.

 

[footenote]

Yet that can easily happen with just a series of good market runs after one retires. Something that absolutely cannot be determined in advance of retiring.

The alternative is not pleasant - not quite enough and then experiencing a series of bad market runs right after retiring.

You've got to do the best you can when you retire. Because you are truly rolling the dice. You don't really get a do over. You can go back to work - but it's not going to be the same.

I really wish this infrastructure had a "like" button. Because that would save me a hogshead of time.

 

[RunningBum]

I can't even remember what it was but it was probably 100% to 95 or 100. I like the buffer. It not only protects against a bad market, but also unexpected expenses. I'm pretty sure I will die with a lot of money, but I would've absolutely hated going back to work if things started off badly, a lot more than milking the last few years of part-time income. 80% is probably good enough, but not good enough for me to sleep well. I probably was at at least 80% in late 2007, and I'd have been sweating bullets for a few years if I'd have pulled the trigger then.

 

[footenote]

I can't even remember what it was but it was probably 100% to 95 or 100. I like the buffer. It not only protects against a bad market, but also unexpected expenses. I'm pretty sure I will die with a lot of money, but I would've absolutely hated going back to work if things started off badly, a lot more than milking the last few years of part-time income. 80% is probably good enough, but not good enough for me to sleep well. I probably was at at least 80% in late 2007, and I'd have been sweating bullets for a few years if I'd have pulled the trigger then.

Honestly did not expect most respondents to vote "100%!"
but this is exactly why I set this as my goal.

Sleeping well is the best medicine.

 

[TwoByFour]

If you have used retirement calculators, what success percentage are you comfortable using / targeting?

Do you prefer historical (firecalc, ********) or Monte Carlo?

I prefer historical and I use my own RIP tool that I developed.

Our withdrawal amount is low enough that the success rate is 100%.

 

[youbet]

Third, by nature they cannot be validated. In the case of FireCalc there would have to be a statistically significant number (1,000?) of forum users dead and reporting their results before you could evaluate the accuracy of its predictions.

:

I think Nate Silver would approve of the FireCalc methodology. It doesn't try to make predictions and emphatically says so in the instructions. It's just back-testing and needs to be taken strictly in that light. On this forum, we used to talk a lot about "if the future has no worse investment returns and inflation rates than the past" FireCalc output should be useful. Lately, however, that isn't mentioned as frequently.

But, again, FireCalc makes no predictions and there is nothing to validate. It's simply a back testing algorithm and data base.

 

[gcgang]

About 85%.

 

[calmloki]

My whole life I've done Eeyore probability. On Firecalc I figure a 95 year lifespan, inflation at 3.25%, portfolio at 3%, annual expenditures at about double what we are spending, selling all rentals right now and being left with 70% of the value the tax man calls "True Cash" value.
This while looking at my 69th birthday, NOT having sold the rentals, and having our net worth grow by about double the inflation rate. For unknown reasons I'm just happier pretending like I'm close to the edge.

 

[youbet]

Yet that can easily happen with just a series of good market runs after one retires. Something that absolutely cannot be determined in advance of retiring.

The alternative is not pleasant - not quite enough and then experiencing a series of bad market runs right after retiring.

You've got to do the best you can when you retire. Because you are truly rolling the dice. You don't really get a do over. You can go back to work - but it's not going to be the same - it may be hopeless returning to the same type of job and income when you left a couple of years earlier. The longer time passes, the tougher it's going to be.

It's a matter of degree. What aaron879 and I are talking about are folks who go far beyond safety by vastly overstating desired spending and vastly understating sources of income while whining about being miserable at their jobs.

For example, in the past week or so I came across a post where the poster said he/she could live nicely on either a low WR from their FIRE portfolio or from their pension and SS. Either/or. Currently, he/she is retired and still saving because pensions and SS exceed spending. To me, that would be OK as long as time spent in the last few years of employment was enjoyable. But if that person was one of the folks who claim to be miserable while working......... well, what a waste of our most precious resource.

IOW, if you're truly miserable on the job and you're calculations include excessive padding of the numbers, you ought to consider that time is running through the hour glass...........

Or, as I suspect, these folks aren't as miserable working as they sound. They like to sound off about tough jobs, bad bosses, stress, etc., etc., but in fact that's just their nature and time spent in the harness suits them pretty well.

 

[RunningBum]

It's a matter of degree. What aaron879 and I are talking about are folks who go far beyond safety by vastly overstating desired spending and vastly understating sources of income while whining about being miserable at their jobs.

For example, in the past week or so I came across a post where the poster said he/she could live nicely on either a low WR from their FIRE portfolio or from their pension and SS. Either/or. Currently, he/she is retired and still saving because pensions and SS exceed spending. To me, that would be OK as long as time spent in the last few years of employment was enjoyable. But if that person was one of the folks who claim to be miserable while working......... well, what a waste of our most precious resource.

IOW, if you're truly miserable on the job and you're calculations include excessive padding of the numbers, you ought to consider that time is running through the hour glass...........

Or, as I suspect, these folks aren't as miserable working as they sound. They like to sound off about tough jobs, bad bosses, stress, etc., etc., but in fact that's just their nature and time spent in the harness suits them pretty well.

Well, your example wasn't actually a valid example, so I'm not sure those people really exist.

 

[footenote]

My whole life I've done Eeyore probability. On Firecalc I figure a 95 year lifespan, inflation at 3.25%, portfolio at 3%, annual expenditures at about double what we are spending, selling all rentals right now and being left with 70% of the value the tax man calls "True Cash" value.
This while looking at my 69th birthday, NOT having sold the rentals, and having our net worth grow by about double the inflation rate. For unknown reasons I'm just happier pretending like I'm close to the edge.

Loving Eeyore - you go!

 

[audreyh1]

It's a matter of degree. What aaron879 and I are talking about are folks who go far beyond safety by vastly overstating desired spending and vastly understating sources of income while whining about being miserable at their jobs.

For example, in the past week or so I came across a post where the poster said he/she could live nicely on either a low WR from their FIRE portfolio or from their pension and SS. Either/or. Currently, he/she is retired and still saving because pensions and SS exceed spending. To me, that would be OK as long as time spent in the last few years of employment was enjoyable. But if that person was one of the folks who claim to be miserable while working......... well, what a waste of our most precious resource.

IOW, if you're truly miserable on the job and you're calculations include excessive padding of the numbers, you ought to consider that time is running through the hour glass...........

Or, as I suspect, these folks aren't as miserable working as they sound. They like to sound off about tough jobs, bad bosses, stress, etc., etc., but in fact that's just their nature and time spent in the harness suits them pretty well.

Aaron simply stated that a lot of folks here will likely die millionaires and thus they have worked to long.

I simply pointed out that there is no way to know at retirement time whether you've worked too long or not as you have no way to anticipate market events once you retire, so of course folks are going to err somewhat on the side of caution.

Your example is far more extreme - ultra low WR.

Once retired and experiencing a positive market situation for several years - you can't go back and retire earlier. But you can adjust your withdrawals up.

 

[USGrant1962]

>100% on FIRECalc to age 95, with a few conservative assumptions like 25% haircut on SS and ignoring inheritances.

Be careful with Monte Carlo simulators - the edge cases in those represent 30 or 40 years of declining markets. Essentially impossible in an economy that simply keeps up with inflation and population growth. In Monte Carlo I am fine with 90%+.

 

[Dtail]

Yet that can easily happen with just a series of good market runs after one retires. Something that absolutely cannot be determined in advance of retiring.

The alternative is not pleasant - not quite enough and then experiencing a series of bad market runs right after retiring.

You've got to do the best you can when you retire. Because you are truly rolling the dice. You don't really get a do over. You can go back to work - but it's not going to be the same - it may be hopeless returning to the same type of job and income when you left a couple of years earlier. The longer time passes, the tougher it's going to be.

Bolded - for many/some of us, including me, going back to any resemblance of our old jobs/careers is just not a possibility and that includes consulting.
Thus though or because I don't pad any numbers for the retirement calculators, I do wish for 100% success rate if possible.

 

[youbet]

Your example is far more extreme - ultra low WR.

Yep, as I said, it's a matter of degree.

 

[Beer-man]

I use 80% but most likely that is because I’m still in my 30’s and I like the idea of getting to that “don’t have to work” number sooner. The oxymoron is that because of my age the idea of not working also seems boring and non-stimulating.
I’ve observed that bogleheads seems to be a 150-200% group, this forum is a 100-120% group, and mustache group is a <100% group.

 

[USGrant1962]

I’ve observed that bogleheads seems to be a 150-200% group, this forum is a 100-120% group, and mustache group is a <100% group.

Astute observation, and I tend to agree. "This group," of course, is correct!

Serious comment: the "chicken little" mentality that is rampant on BH and shows up here sometimes is an anathema to the fundamental concept of early retirement. If you believe that the next 10 years will be worse than both the Great Depression and the Great Inflation, good for you - don't ER!

 

[RunningBum]

In the days of yore and pensions with COLA, people didn't need much savings. You lived on what you had coming in with pension+SS, maybe saved a little extra for emergencies and vacations, so you didn't die with much no matter if you went at 70 or 95.

Now, with little or no pension and more uncertainty about SS, we have to build up a nest egg. Unless you buy a bunch of annuities, it's hard to know how much is enough. Some of us will die as millionaires not just because we padded our accounts, but also because probably nothing resembling a bad case we planned to handle happened. You could avoid it by cutting it very thin and planning to find ways to supplement income if a bad case happened, or live very frugally so you don't need much to begin with. Returning to work is an absolute no for me. Living frugally is something I would've considered, but it turned out I had some good fortune and was willing to trade a few years to live better. I'd rather have 40 years of retirement and live very comfortably than 50 years having to watch every penny. If I'd have had to change that 40 number to 25 I'd probably think differently.

 

[Jerry1]

Bolded - for many/some of us, including me, going back to any resemblance of our old jobs/careers is just not a possibility and that includes consulting.
Thus though or because I don't pad any numbers for the retirement calculators, I do wish for 100% success rate if possible.

Plus, how likely are you to figure out you didn’t save enough soon enough to go back to work? If you retire at say 55, you may not know you screwed up until your 70. In that time, you’ll tell yourself that the market will come back up (feeling comfortable that ups and downs were certainly in your plan). You’ll believe that once Medicare hits, you’ll be better off having some of your medical expenses for health insurance covered. Same with SS. Point is, it’s likely to take a long time and while you may be able to go back to work, you’re not even going to have a chance at anything like you had. You’re old, the world and your field has changed and you won’t even be considered. So, you’re greeting me as I walk into Walmart, but that’s just one more strategy to take some of the financial pain away. By the time you figure out that you screwed up, you’re screwed (IMHO).

So yes, I’d rather be over conservative, work a few more years and die a millionaire. That scenario leaves money to my family. A much better outcome than the alternative.

 

[donheff]

I used 100% with several calculators when planning for retirement. I found Firecalc shortly after I retired but before DW retired and adopted it as my only calculator. We saved enough to drop way below 4% using the traditional SWR approach and 14 years in have switched to the % remaining portfolio method since we remain way below 4%. At this point, unless there is a financial catastrophe beyond anything we have seen, DW and I have won the game and are focused on living a comfortable life and leaving a good estate to the kids.

For planning purposes I would still recommend that people use the traditional approach with a starting % and annual inflation adjustments to see if you are in the ballpark. 4% may still be reasonable for planning if you have room to fall back in your budget. 3% would be a better level for someone who wants to avoid a stretch. Once you get older your options will widen.

 

[kcowan]

My odds of surviving to 85 are 50% and our plan took us to 95 before the latest activity.
I will look again when things settle down.

 

[Car-Guy]

When I retired (6+ years ago) my calculator/calculations said I was 100+% out to 100. I soon realized, after retiring, that living to 100 was extremely improbably and most likely, undesirable. Even 90 would be surprising but remotely possible. Early to mid 80's seem more reasonable/probable for both me and the DW.



So now with my current perspective (realization), I'm blowing that dough while I can enjoy it.

 

[MichaelB]

Bernstein had a series of articles called "The Retirement Calculator from Hell" where he postulated that 80% success rate was good enough, because anything could happen wreaking however carefully modeled a retirement might be. This is in Part III of The Retirement Calculator from Hell.


The Retirement Calculator from Hell, Part III

Now about 9 years later, Bernstein seriously backpedals on his advice about AA oriented retirement investments in general, because he discovered that a large number of his clients were spooked out of the market in 2008/2009 and never got back in. Thereby ruining their chances of recovery.

Instead, he now recommends covering at least 20 years of (after pension, SS) income needs with high quality low-volatility investments - CDs, short-term bonds, TIPs, SPIAs and only when that was covered should you invest additional money in equities.
https://www.whitecoatinvestor.com/bernstein-says-stop-when-you-win-the-game/

The problem with calculators, and retirement formulas / algorithms in general, is they cannot factor investor behavioural responses into forecasts. It is safe to assume there will be considerable volatility in asset markets and that volatility will negatively affect returns. Portfolio survival rate calculations are only as good as the investor making the decisions.