What Success % do you use?

[GravitySucks]

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Originally Posted by HNL Bill Being better off than 80% of fellow Americans is irrelevant, as my wife always tells me, even when I'm talking about the 95 percentile. (The lesson is that comparing yourself to others is not what's important). The question is, are you comfortable with the standard of living the asset level you're talking about will provide? Does it afford you the ability to do the things you want to do? $300K at 4% is $12K annual spend. There's not much cusion for emergencies, and even a couple of dental crowns could wipe out some of that, or an expensive hospital stay, or a new house roof. If that's all you need on top of SS, then you're good, except the whole Medicare/LTC thing, and the lack of budget for contingencies. Maybe a reverse mortgage would be in order. BTW, my 81 year-old dad's girlfriend's father is 94 and is still driving. He just bought a new car last year! Of course, a $30K car in relation to his $3M+ in assets is pretty insignificant!

Better off than 80% has relevance. I do not see 80% of seniors doing poorly. The upper half seems to be doing pretty good.

Why would you be looking at 4% withdraw? I doubt I'll live last 85 but planning to 92. That leaves 22 years. That would be a 5% + SWR. $15 k on top of SS would be fun money.

I befriended a 90 year old gent last winter. He still went to lunch out once a week. Dinner out once a week. Enjoyed minigolf. Drives his 15 year old Lexus. He said he pretty much spends nothing anymore.
Reality check shows my driving after 85 will not be a real good idea.

Not saying $300k is ideal, but if I get to 70 and I'm there I'll consider it a win. SUCCESS!
(I also have a 65 year old success level. Medicare and local tax relief are big deals for me. Also had a 59.5 year old success level.)

[HI Bill]

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Originally Posted by GravitySucks Not saying $300k is ideal, but if I get to 70 and I'm there I'll consider it a win. SUCCESS! (I also have a 65 year old success level. Medicare and local tax relief are big deals for me. Also had a 59.5 year old success level.)

With your $15K spend, SOR risks are real, if you were to live past 90 (~20 years out), depending on your AA. But you're right, most do live with less than your assets at 70; it's about budget and cash flow, so it looks like you'll probably be successful!

[GravitySucks]

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Originally Posted by HNL Bill With your $15K spend, SOR risks are real, if you were to live past 90 (~20 years out), depending on your AA. But you're right, most do live with less than your assets at 70; it's about budget and cash flow, so it looks like you'll probably be successful!

I think I got my point lost in minutiae.

My point is there can be other measures of success.

And in reality I'm struggling to spend my super safe budget of the first 5 years.

[big-papa]

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Originally Posted by Retch The Grate The three posts starting here: https://earlyretirementnow.com/2017/...uyton-klinger/ cover it (post 9-11 of the series). Basically, no. If you are going to rely on cutting withdrawals in down markets to make the plan work you run the risk of extended periods of significantly reduced withdrawals.

For those of us who use or plan on using a variable withdrawal method, that's actually a "yes". If the definition of success is that the portfolio survives, then variable withdrawal methods can meet that definition. That's the tradeoff to be made with a variable withdrawal method - one must be able to survive a possible extended period of reduced withdrawals for a higher likelihood of portfolio survivability. Not everybody can, but many can, especially if they have a steady floor of income (SS, Pension, Rental income, etc.). And depending on the size of the income floor, one may choose to go more conservative in the AA which will most likely reduce the depth of the reduced withdrawals.

[kcowan]

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Originally Posted by ERD50 That is not what FIRECalc does! It reports every 30 year period in its history (age has nothing to do with it). That's way, way different, and far more useful. (ooops, cross posted with MB)

I agree that I stated it badly.

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Originally Posted by ERD50 Not sure what you mean by "the current generation". But many retirees and some considering retiring lived through the inflation of the 80's (I had a 17% mortgage, adjustable, so it ended well). At any rate, anyone running FIRECalc will be tested against that 80's inflation. 1966 is one of the 'killer' starting years, largely due to the 80's inflation....-ERD50

I was referring to my kids who never appreciated 20+% interest rates. And yes the starting year makes a huge difference. My 30 year look-back started in 1972. I am ok but mostly because of higher equity holdings and significant LBYM due to spending 6 months in Mexico. Neither of these could have been forecast in 2002.

[HaveEnough]

I look at how much I can spend and still hit 95% until 95 years old. The number is over 5 times what we currently spend. I'm not concerned unless I pick up some expensive arm candy in the future.

[ychuck46]

100%. And I like Monte Carlo

[W2R]

Nine pages and I haven't weighed in yet? OOPS Well, here goes:

I generally use 95% - 100%. Right now, I have saved the results of 5 runs done over the past year. Three of these were done using 95%, and two were done using 100%.

Of these runs, two were done to age 95, one was done to age 100, and two were done to age 117, which I mistakenly thought was the age of the oldest living human. But I was wrong. Wikipedia says

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Since the death of 117-year-old Chiyo Miyako of Japan on 22 July 2018, 115-year-old Kane Tanaka, also of Japan, born 2 January 1903, is the oldest living person in the world whose age has been documented.

So, 115 is the age of the oldest living human now that Chiyo Miyako has passed away.

Right now my purpose in running FIRECalc is to persuade myself to loosen the purse strings and spend a bit more. Even with these inputs, FIRECalc says I can spend more and that is what I wanted to know. My guess is that I have the chance of a snowball in h*ll of living to 115, but the point is, even if I did, I'd still have plenty of money at that age, even if I started spending more than I am presently spending.

Inputs to models are best chosen by thinking about your intended usage for the model.

[TwoByFour]

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Originally Posted by Beer-man Anyone know how much cutting spending during down markets increases your % of success? Could a 10% decrease in spending during a bear bump you from 70% to 100%?

I wrote my own RIP tool so it is easy for me to program into it questions like yours. I did that and here is what I found:

With a starting asset level of $1M and a withdrawal rate of 5.4% the success rate is close to 70% for a 30 year life expectancy. That is a SWR type of withdrawal - inflation adjust a fixed dollar amount of $54k every year.

If I program in what you said, that you lower the withdrawal rate by 10% if the market is bear (i.e., current S&P 500 is at least 20% off of the high) then the success rate only goes up to 74%.

If I program in that you lower the withdrawal amount to $44k if the market is corrected (i.e., current S&P 500 is at least 10% off the high) then the success rate goes up to 95%.

I didn't experiment any further than that. But you can see the trend - you can indeed improve your success rate but you will have to be a lot more aggressive in how much you cut your WR and the extent of the "down" market that triggers your cut.

[RobLJ]

Thanks to the geeks on the blog, who reminded me again that you could use FireCalc to "solve" for spending level, based on the historic data, so I finally did it.

At a 99% success level (with 1/4 of the portfolio always available), FireCalc indicates I could spend approximately 40% more than what I planned. (And we're not spending that amount this year after DW's retirement).

It's 55% more if I'm willing to spend down the portfolio completely.

[pb4uski]

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Originally Posted by footenote If you have used retirement calculators, what success percentage are you comfortable using / targeting? Do you prefer historical (firecalc, ********) or Monte Carlo? (Being ridiculously conservative, I always go for 100% success.)

95% or better is as good as 100%. Used a number of them.

[ERD50]

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Originally Posted by pb4uski 95% or better is as good as 100%. Used a number of them.

I don't agree with this at all. Per FIRECalc:

A 40 year profile and a 1M portfolio, a 100% historical safe WR starts at $33,413.
A 40 year profile and a 1M portfolio, a x95% historical safe WR starts at $36,582.

If being able to spend 10% more was just as good, why wouldn't we all do it?

Of course spending less will help any portfolio. How can that be denied?

Sure, we can't know the variability of the future, A 95% success rate may succeed the future. Heck, a 50% success rate succeeds half the time! ( ). But we can know that no matter what, the person spending less will be able to hold on longer if things are worse than the worst of the past.

-ERD50

[pb4uski]

My point was that there is enough wiggle room in the data and process that a 95% success rate is for all intents not very different from a 100% success rate.... so if you are at 95% there is no real need to continue to work until you get to 100%.... or put another way, 100% is belts and suspenders compared to 95%.

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Those with a mathematical bent can find endless fascination in these effects, but unless you just enjoy the math, keep in mind that when the issue is how close to the edge one can get over the 30-50 years of a retirement, the mathematician might measure with a micrometer, but the retiree will be cutting with an axe.

[ERD50]

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Originally Posted by pb4uski My point was that there is enough wiggle room in the data and process that a 95% success rate is for all intents not very different from a 100% success rate.... so if you are at 95% there is no real need to continue to work until you get to 100%.... or put another way, 100% is belts and suspenders compared to 95%. Quote: Those with a mathematical bent can find endless fascination in these effects, but unless you just enjoy the math, keep in mind that when the issue is how close to the edge one can get over the 30-50 years of a retirement, the mathematician might measure with a micrometer, but the retiree will be cutting with an axe.

I still don't agree that any of that is useful.

The 'argument' is one of absolute accuracy, versus relative accuracy. And I agree that things like FIRECalc don't give us much in the way of absolute accuracy, but that is no reason to dismiss the relative accuracy that it provides.

An analogy to illustrate:

I have two ropes, one 95' long, one 100' long. Without something to measure them with, you'd be hard pressed to tell me how long each is with any accuracy. But if you lay them side by side, you could easily tell me which one is longer, and by approximately how much ( 5' is easier to estimate than 100').

Now say we are on a boat, and you fall overboard, and drift ~ 100' away before I can grab one of those ropes and tie it to a life preserver. Now are you going to tell me it makes no difference if I chose the 95' rope or the 100' rope? It may not make a difference, depending, but clearly, the 100' rope is the safest choice, and it could make the difference between life and death. For safety, you choose the 100' long rope, every time.

-ERD50

[pb4uski]

I guess we'll have to agree to disagree. By the way, the rope analogy was really silly.

[ERD50]

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Originally Posted by pb4uski I guess we'll have to agree to disagree. By the way, the rope analogy was really silly.

OK, but why do you say the rope analogy is silly? I think it's a pretty good one. Safer is safer, even if you cannot say exactly what that safety factor is.

-ERD50

[RunningBum]

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Originally Posted by ERD50 OK, but why do you say the rope analogy is silly? I think it's a pretty good one. Safer is safer, even if you cannot say exactly what that safety factor is. -ERD50

I agree.

You can say that 95% probably covers every case and you can adjust if it does not; and 100% is no guarantee to cover 100% of the times in the future. But these are not independent situations. Being 100% covers every single case of being 95%, and then some. More buffer, if nothing else.

95% may be good enough for anyone and there's no real sense in going one more year, but in no way is it the same as 100%, statistically or otherwise.

[Dtail]

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Originally Posted by RunningBum I agree. You can say that 95% probably covers every case and you can adjust if it does not; and 100% is no guarantee to cover 100% of the times in the future. But these are not independent situations. Being 100% covers every single case of being 95%, and then some. More buffer, if nothing else. 95% may be good enough for anyone and there's no real sense in going one more year, but in no way is it the same as 100%, statistically or otherwise.

Bolded - isn't this effectively the point of @pb4uski?

[pb4uski]

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Originally Posted by RunningBum .... 95% may be good enough for anyone and there's no real sense in going one more year, but in no way is it the same as 100%, statistically or otherwise.

So if you have a belt that holds your pants up, do you put on suspenders too?

[ERD50]

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Originally Posted by pb4uski So if you have a belt that holds your pants up, do you put on suspenders too?

If history says the belt only held up those pants 95% of the time, you sure might want to consider suspenders too!

Thanks for making my point!


-ERD50