Is 95% Success Rate Good Enough?

[cyber888]

I guess it's good to know that if I retire at 56 yrs old at the beginning of 2020 (or 1 year and 3 months from now), and I live up to 92 years old, Firecalc says I'm 100% successful with a starting yearly budget of $60,000.

If I extend my retirement to 95 years old, my success rate is 99.1%.
I suppose if that failure happens, I could sell my house or get a reverse mortgage LOL.

But I'm really planning to retire 2021 when I hit 57 or 57.5 yrs old. I just wanted to see if retiring at 56 works. I should be FI in 10 months.

 

[Gumby]

My plan is 200%. That is, I still get 100% from FIRECalc if I double the spending. <8 months to go.

 

[HI Bill]

My plan is 200%. That is, I still get 100% from FIRECalc if I double the spending. <8 months to go.

While that's certainly safe, I'm guessing you gave up a lot of year w#$king to get to that point! If I were you, I'd double my spending to ensure I didn't leave much on the table!

 

[HI Bill]

Since my budget inlcudes 50% for travel, 95% is good enough for me! In down times, I can always defer travel, and just do more local stuff (dive, surf, hike, fly the drone, etc.).

 

[daylatedollarshort]

I do 100% to over age 100 using matching strategies. We can live pretty well with the current plan so don't feel a need to spend more.

 

[griffithee]

We feel the same way. Half of our pensions/ VA compensation covers our comfortable lifestyle and is COLA adjusted. The other half goes into savings bucket.

 

[cyber888]

I saw this from Business Insiders ..
"If you are an 80 year old man, your long-term odds are not great. There is a 30% chance of making it to your 90th birthday, and only about 14 in 1,000 will see 100."

Striving for 100% is fine, but there's always that 1% - 5% probability of the inevitable happening. I still hope we all get 100%

 

[W2R]

I want to throw a question to the forum - aside from how you feel about 95% - 100% success rate, what is your favorite length of retirement - 30 years, 35 years, 40 years, or more. I use 34 - 39 years (assuming I retire at 56) and that gets me to 90-95 years old. I feel confident about a 99% success factor, with 1% chance of failure. I suppose 100% success is the ideal factor, but don't know if you can really survive 40 years of retirement. So, 100% for 35 years of retirement is ok, and 99% for 40 years of retirement works for me.

(emphasis mine)

I'm retired now, and retired at age 61. When I was planning for retirement, I ran FIRECalc for a 34 year retirement, ending at age 95. I required 95% at some times, or 100% at other times when running FIRECalc.

If still alive at 80 then my intention was to re-plan my retirement for a longer lifespan. I figured that I'd plan a 25 year retirement starting at age 80, maybe buying an SPIA annuity to get me through those last few years if necessary. Shouldn't be too expensive at that age.

But now, at age 70, with a long term bull market, things have been looking pretty rosy. Probably I won't have to re-plan my retirement after all.

 

[brainsagolfer]

I find this discussion interesting. A LOT of discussion on SWR on this site - most seem to think 4% is too high- but then many people on this thread think 95% is pretty safe!
To get to 95% i have to have 5.78% SWR on a 30 year retirement. This is due to SS and My house being paid off along the way.
So, it would seem to me that just picking a "SAFE" SWR - say 4% is probably way conservative for most people.
If i use the same retirement parameters and start retirement with 4% SWR, my lowest "ending balance" in my retirement is 100% of my starting amount- i would have effectively spent 0 dollars to retire........so...why am i still working?

 

[audreyh1]

You start with 5.78% until you start SS and then your withdrawal rate drops, I assume.

 

[bingybear]

brainsagolfer, If you are RE, then a 30 year retirement may be a risk.. you may want to plan for a longer retirement. As audreyh1 alluded to, your SS is not really part of your withdraw rate, it is an income stream that reduces your need for taking as large of a withdraw. As audreyh1 noted that you might use a short term higher WR until SS kicks in.

Some people have 0% WR since they may live on SS + pensions.

 

[HI Bill]

what is your favorite length of retirement - 30 years, 35 years, 40 years, or more.

My favorite length of retirement would be however long I can maintain my health, dive, see clearly, take and edit photographs, and maintain my mental acuity. Anything after that has to go!

All joking aside, I use the year my better half (who is younger than me) turns 100...should be something like 53 years.

Side note: Just read an article about the world's oldest scuba divers...getting into the Guiness Book of World Records by diving together at 87 in Bonaire.

 

[foxfirev5]

Most of us commoners merely look at what we have each year and withdraw accordingly. Expenses and Taxes are also evaluated. SWR is a myth based on history. Any other evaluation is still based on history.

 

[gcgang]

95% to me means I'm either taking too much risk, not living up to the lifestyle I could afford, or leaving behind a bigger legacy than what I intend, or of course, WORKING LONGER THAN YOU HAVE TO! 85% works for me.

 

[ERD50]

I find this discussion interesting. A LOT of discussion on SWR on this site - most seem to think 4% is too high- but then many people on this thread think 95% is pretty safe!
To get to 95% i have to have 5.78% SWR on a 30 year retirement. This is due to SS and My house being paid off along the way.
So, it would seem to me that just picking a "SAFE" SWR - say 4% is probably way conservative for most people.
If i use the same retirement parameters and start retirement with 4% SWR, my lowest "ending balance" in my retirement is 100% of my starting amount- i would have effectively spent 0 dollars to retire........so...why am i still working?

You are not applying the numbers correctly (and IIRC, FIRECalc is partially to blame for this).

"To get to 95% i have to have 5.78% SWR on a 30 year retirement. This is due to SS and My house being paid off along the way."
​

The above does not compute. The 5.78% in your case is not a withdraw rate, it is a spending rate. Big difference.

To illustrate, using the "investigate" tab "adjust spending level for 100% success", and others at defaults, I get:

This spending level is 3.59% of your starting portfolio. (Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)
​

A portfolio has survived a 3.59% inflation adjusted withdraw 100 % of past cycles. Regardless of SS, pension, etc - that is the withdraw from the portfolio. If you get, say, 2% from SS/COLA-pension, then you can spend 5.59%. But the SWR from the portfolio is still 3.59%.

To make an extreme case, say I estimated $50,000 annual spend, and I had $60,000 from SS/COLA-pension, and $25,000 portfolio (which I don't need to withdraw a penny from). Would it be helpful to say my Safe Withdraw Rate is 200%, when I'm not withdrawing anything at all? Would you say I'm not conservative, even though I spend less than my income, and have a $25,000 buffer that will increase by >$10,000 every year?

Bottom line, you can't compare your 5.78% with someone's 3.59%, or 4% or whatever. It's not apples-apples. You might be far more conservative at 5.78% than someone else at 4%.

What I do, and encourage others to do, is to enter your numbers into FIRECalc, and then report the WR that matches that time period and your % success rate with the defaults (no SS/pension/adjustments). That tells you what the withdraw from the portfolio is, and is closer to something that is comparable to others (not exact due to timing, etc, but closer).

-ERD50

 

[ERD50]

Most of us commoners merely look at what we have each year and withdraw accordingly. Expenses and Taxes are also evaluated. SWR is a myth based on history. Any other evaluation is still based on history.

How can you speak for "Most of us"?

I don't do that, and I have no idea what "most of us" do, if there is even anything that "most of us" do (it could be split such that no one plan is done by > 50%, and I'd guess that's the most likely). I know "some" do that.

And no self-selected poll tells us this either.

-ERD50

 

[SnowBound]

My work 401K offers something like firecalc. Choice between 90% and 80% success rate. I use 80%. I'm flexible, will adjust if need be. Another 2 cents worth...

 

[tb001]

Not ER’d yet, but I run scenarios from 85-95% to see how it impacts our spend. We have a fair amount of discretionary spend in our budget we could cut, so my guess is, when we’re ready, we’ll pull the plug as long as we’re somewhere in that range. That said, I can easily see us managing withdraw rate down, especially in the early years, to hit 100% just because we both tend to be naturally conservative.

 

[ERD50]

My work 401K offers something like firecalc. Choice between 90% and 80% success rate. I use 80%. I'm flexible, will adjust if need be. Another 2 cents worth...

And how do you determine when and how much to adjust?

As I've pointed out before, a 50% drop in a portfolio won't be affected much by cutting withdraws from 4% to 3%.

Try for your self. Run FIRECalc with an 80% success rate, and then play with the spending adjustments to see what it takes to survive with adjustments. Please report back, I think it will be educational.

-ERD50

 

[brainsagolfer]

brainsagolfer, If you are RE, then a 30 year retirement may be a risk.. you may want to plan for a longer retirement. As audreyh1 alluded to, your SS is not really part of your withdraw rate, it is an income stream that reduces your need for taking as large of a withdraw. As audreyh1 noted that you might use a short term higher WR until SS kicks in.

Some people have 0% WR since they may live on SS + pensions.

i am not married, no kids- i love peanut butter, have 857 golf balls and 19 putters. I can get by if i make it past 30 years of retirement.