Is 95% Success Rate Good Enough?

[ivanl3]

That is the number I am using as my acceptable risk threshold. Curious what others think.

Thanks.

 

[REWahoo]

95% is reasonable. It's a crap-shoot anyhow.

 

[MichaelB]

95% is higher than the one I had when I retired, so yes, good enough (for me). Besides, to piggyback on REWahoo's post, it is a number that reflects portfolio survival. You may not survuve, and other things may happen, such as natural disaster or armed conflict. Life.

 

[samclem]

It's at least worth considering the data set we are using to compute the risk. 95% sounds good enough, but maybe not if it is already "cherry picked" since it represents the performance within the very best performing economy among hundreds on the planet. If we correct for the possibility that won't continue, maybe 95% isn't what it appears to be. But--how to do that correction/adjustment?

 

[marko]

From what I've been reading here of late, a 95% success rate would, in a normal/historical environment mean that you'd likely depart this earth with considerably more than what you started with.

My view is that if the absolute worst were to happen, a whole lot of other people will be worse off than the folks on this forum. Ok, so your portfolio cratered by 80% (!). Aside from presenting an awesome buying opportunity, I suspect that one would still be in better shape than the average Joe. The multimillionaires would then be just millionaires and the $50K middle class curve would drop to maybe $30K.

 

[W2R]

I think 95% is perfectly fine.

I used 100% for a while, but decided that was overdoing.

 

[Fermion]

Considering there is a better than 5% chance you won't even live long enough to enjoy retirement, I think 95% is fine.

 

[Aerides]

If you're looking at 95% and you're 38, ehh... but if you're 58, better.

 

[ncbill]

On another forum (bogleheads?) it's been pointed out there's little difference above 80%.

IIRC, because other factors beyond your control come into play.

 

[Mdlerth]

My brain says it's good enough. My blather says it's good enough...

...but my actions say that I'm holding out for 100%. Plus a cushion for a few unforeseen luxuries. Sorry to be such a wuss. Please don't hate me.

 

[travelover]

If the stuff hits the fan, I'm gonna dial back my spending, anyway. I'd go with 95%.

 

[foxfirev5]

95% should be fine. As others have stated there are many things that could happen. However look at the bright side. With every passing year you're closer to realizing that you were OK.

 

[razztazz]

95% should be fine. As others have stated there are many things that could happen. However look at the bright side. With every passing year you're closer to realizing that you were OK.

I don't look at it that way. I don't give a hoot about some theoretical "20% chance of plague or Zombies." I look at it as: the last thing I want to be holding the bag for is running out of money. Ergo, what if I don't die early from that 20% chance of something/whatever? So I always calculate to 100% knowing that it's probably roundable to 99% because the financial and economic future cannot effectively be a clone of the past.

I do like that aspect of getting older though. I don't have to cover 50 or 60 years. Just what's left.

 

[Senator]

If you are down to the wire and have 95%, it is NOT good enough. If you are 45 years old and 95%, it is risky.

 

[daylatedollarshort]

We plan for 100% to over age 100, using a matching strategy, plus a safety margin and money for extended LTC. I don't want to be 90 and have to worry about running out of money.

 

[SecondCor521]

If you are down to the wire and have 95%, it is NOT good enough. If you are 45 years old and 95%, it is risky.

I claim my small contribution to the SWR literature was to point out about 20 years ago on another internet forum that independent of the probability of one's portfolio lasting 30-40 years, one has to consider the probability of dying before running out of money. I think intercst from retireearlyhomepage.com picked up on this idea and extended it here:

Combining Safe Withdrawal Rates and Life Expectancy

Just as a SWAG, if you are 45 years old and plan to a 95% portfolio survivability for, say 40 years, that means your money has a 1 in 20 chance of running out of money by age 85. But there is approximately a 50% chance you'll be dead by 85. So that 1 in 20 chance is effectively cut in half to a 1 in 40 chance, or 97.5%.

 

[euro]

I agree with travellover, 95% and the knowledge that I have significant room to cut back comfortably, if needed, is good enough for me.

 

[Senator]

I agree with travellover, 95% and the knowledge that I have significant room to cut back comfortably, if needed, is good enough for me.

Exactly. The extra cushion puts you greater than 95%. If you were at the wire, a bare minimum at 95%, it would be a lot scarier. When a cutback means skipping the hot dogs in the beans and rice...

 

[brucethebroker]

It depends........do you just wear a belt?
Or do you wear a belt, PLUS suspenders?

Ok, Ok. My real question is what are your fall back plans if things don't go as well as planned? Could you downsize? Sell a vacation home? Boat, RV? Would you be willing to work part time until the crisis passes? An extra $500-$1000 a month could be huge if you "almost have enough" to survive.

 

[Midpack]

95% is reasonable. It's a crap-shoot anyhow.

If the stuff hits the fan, I'm gonna dial back my spending, anyway. I'd go with 95%.

+1. There have been people here say they retired with an 80% prob of success, others who waited for 200% (a nest egg 2X the 100% prob $) and everything in between. It's whatever allows you to sleep at night, there is no guarantee, so no right answer.

 

[DrRoy]

That's 19 out of 20. Probably OK for RE planning, but I'll pass if it's for successful airline landings.

 

[braumeister]

It's whatever allows you to sleep at night, there is no guarantee, so no right answer.

Yes. In my case, my spending is about ⅔ of what FIRECalc says I could safely spend, which gives me all the cushion I need. Occasionally there is a year when I spend considerably more for one reason or another, but in the long run I've stayed in the ⅔ to ¾ range.

Yes, that should leave a considerable legacy, but that's planned for and perfectly acceptable since the purpose is to give me the cushion I want for unforeseen comets and the like. Nearly 16 years since retirement and everything is still on track. It has been great to increase the travel budget since SS began!

 

[jabbahop]

I claim my small contribution to the SWR literature was to point out about 20 years ago on another internet forum that independent of the probability of one's portfolio lasting 30-40 years, one has to consider the probability of dying before running out of money. I think intercst from retireearlyhomepage.com picked up on this idea and extended it here:



Combining Safe Withdrawal Rates and Life Expectancy



Just as a SWAG, if you are 45 years old and plan to a 95% portfolio survivability for, say 40 years, that means your money has a 1 in 20 chance of running out of money by age 85. But there is approximately a 50% chance you'll be dead by 85. So that 1 in 20 chance is effectively cut in half to a 1 in 40 chance, or 97.5%.

Good point but if you are married, isn't the chance of one of you surviving 40 years much higher than 50%?

 

[samclem]

Good point but if you are married, isn't the chance of one of you surviving 40 years much higher than 50%?

No, it will just seem like 40 years.

 

[tmm99]

Although I now test with 100% and 95% both on Firecalc some of the time, since there are some variables I cannot predict (longevity, market performance at the beginning of retirement, in my case CAD/USD exchange rate), I see both numbers to be just a guideline and try to spend much less. I am planning to run Firecalc, FIDO planner, etc on regular basis to check where I am at and adjust my spending accordingly. Having said that, I did make sure I had more than 100% before pulling the plug.


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