Poll:What kind of adjustments do you make?

[SecondCor521]

Hi all,

I'd been wondering about something, and this post on another thread prompted me to start this thread:

http://www.early-retirement.org/forums/f28/firecalc-success-rate-and-re-97278.html#post2222578

The question is what kind of adjustments do you make when doing a run in FIREcalc?

"Optimistic" adjustments would be things like: accepting less than 100% because we won't have another Depression, counting on your budget coming in below what you're currently spending, planning on an inheritance, that sort of thing.

"Pessimistic" adjustments would be things like: Being over age 50 and planning on zero Social Security, ignoring certain assets that reasonably could be included in your FIRE stash, saving to more than 100% SWR.

For purposes of the poll, please answer only for the runs on which you base real-life decisions, like when to retire or how much to withdraw in a year. Don't include the runs where you're just curious about something.

I'm sure a lot of us do the latter. Some of us probably do the former. I think some of us do both.

Thanks!

 

[pacergal]

Optimistic, I guess.
I ran Firecalc for age 100. Most relatives died mid 80's,one lived to 100
I was comfortable with spending levels at 95 and 100% success rates.

 

[OldShooter]

... For purposes of the poll, please answer only for the runs on which you base real-life decisions, like when to retire or how much to withdraw in a year. ...

There is a kind of false premise buried here: That FireCalc is predictive.

(Nothing against FireCalc; all backtesting results seem to get treated as if they were predictive.)

 

[Jerry1]

On every planner I used, I made very conservative adjustments. I figured that in order to feel comfortable retiring early I needed to look at being able to survive a worse case scenario. While I didn't model another great depression, I modeled less that average market returns and a bit higher than average inflation. Basically the same as modeling no real rate of return. Hoping for the best, planning for the worst.

 

[Andre1969]

I used to run two sets of numbers, one with full SS benefits, and one assuming nothing. In just about every scenario I ran, no SS only pushed my retirement out by two years. I'd run a new set of numbers every year, and this never changed, so I quit with that second set of numbers a year or two ago.


I have my results plotted in a table that has retirement age along the X-axis, and the amount I want to retire on along the Y-axis. The success percentage is in the corresponding box. I have it divided into 3 different colors...green for a 95% or more change of success, yellow for 80-95%, and red for anything below 80%.


In the past, I always wanted at least a 95% chance, but if one scenario shows, say, 93.8% or whatever, I might call that close enough for government work!

 

[Teacher Terry]

We didn’t even know about FIRECalc when we semi-retired.

 

[stepford]

There is a kind of false premise buried here: That FireCalc is predictive.

(Nothing against FireCalc; all backtesting results seem to get treated as if they were predictive.)

If it were truly predictive then nobody would use pessimistic assessment criteria like requiring 100% success at some multiple of their expected spending rate (as I did). Rather it is just one of the indicators we use that correlates with a successful saving/spending plan. I think the OP knows this and was asking for behavior based on that assumption.

 

[SecondCor521]

There is a kind of false premise buried here: That FireCalc is predictive.

(Nothing against FireCalc; all backtesting results seem to get treated as if they were predictive.)

Personally I don't assume it is predictive.

What I do observe is that some people choose to make future decisions based on historical data. I also observe that many people make the kinds of adjustments I was asking about in the OP.

When making decisions about the future, I'd rank things as follows in terms of usefulness:

1. A working Magic 8-ball
2. Historical data
3. Monte Carlo
4. W2R "W****" indicator
5. Guesses
6. Feelings
7. Tea leaves
8. Horoscopes

Since I don't have option 1 available to me, I go with option 2 as it is the best of the rest.

 

[mamadogmamacat]

Voted for bacon as I am soon going to have some.

I do not allow emotion to play a part in my use of calculators. it seems a waste of time to me to do that.

I use each type, be it FIRECALC, or any of the many others, including my own spreadsheet, which is the most conservative, as logically and with as much accurate input as I have available. Perhaps if one is decades away from SS, one could reasonably consider not including it, as the effects of legislative changes that far out are harder to predict. But for someone within a decade of FRA, the only "logical" runs it seems to me would be with at most a 25% haircut on SS benefit amount.


As someone already retired 3+ yrs, I did all my calculating before ER, made my decision, and have not touched a calculator of any type since.

 

[Vincenzo Corleone]

Both, but mostly pessimistic, I think. Depending on how pessimistic I'm feeling on any given day, I may assume either a 50% cut or a 100% cut in social security, and I may or may not include DWs pension that she's expecting to start collecting in a few years. Sometimes I leave the default CPI inflation, and sometimes I enter in 3%.

I also never include an inheritance I'm likely to receive at some point.

 

[redduck]

Personally I don't assume it is predictive.

What I do observe is that some people choose to make future decisions based on historical data. I also observe that many people make the kinds of adjustments I was asking about in the OP.

When making decisions about the future, I'd rank things as follows in terms of usefulness:

1. A working Magic 8-ball
2. Historical data
3. Monte Carlo
4. W2R "W****" indicator
5. Guesses
6. Feelings
7. Tea leaves
8. Horoscopes

Since I don't have option 1 available to me, I go with option 2 as it is the best of the rest.

For making predictions about the future, you might want to try the entrails of a small, furry animal.

 

[Dtail]

I try to put in what I feel are my most realistic figures based on current knowledge. I do test the maximum spending as another reference, but don't feel it is necessary to put in overly pessimistic factors like receiving zero SS when currently 59 y.o.

 

[Car-Guy]

I haven't run FireCalc or any other retirement calculators in years. I ran several calculators weekly along with a custom spreadsheet until I retired some ~7 years ago. After that I ran them occasionally for another few years but now I'm done. Now I just watch my bottom line on an annual basis and as long as it doesn't go down, I quit worrying about it.


When I did run the numbers, I used high WD rates and pushed it out to 100. I guess doing that has allowed me to go on auto pilot now.

 

[audreyh1]

I was already early retired over 5 years when I stumbled across this board and Firecalc.

I used the Trinity study and adjusted for longer retirement period. This was simply to make sure our assets were sufficient for supporting a very early retirement.

Way back then I didn’t count on SS because I was still 26 years away from FRA and it wasn’t that high anyway due to my short working period. In other words somewhat lost in the noise - didn’t make a material difference. Plus my confidence was low about getting what was promised.

 

[mrfeh]

I don't include projected income from a small stake in a business. I don't really consider that "pessimistic", however, as that income is not guaranteed.

Generally speaking, I use actual numbers. No fudging.

 

[Ronstar]

No adjustments. I ran Firecalc only once - when I first joined. I just wanted a rough idea if I could make it.

 

[traineeinvestor]

Definitely on the conservative side: I assumed expenses would be be 20% above pre-retirement level, that DD1 and DD2 will never be off the payroll, that our retirement period would be forever (rather than 50 years for DW) and that we would have no employment related income post me FIREing.

The rational was simple: I wanted to sleep well at night and not worry about the possibility that I might have to look for a job or cut expenses later in life.

 

[mrWinter]

I make the following assumptions that I guess are all somewhere between pessimistic and realistic:

• only receiving 75% of my projected SS benefits
• our household income will not increase significantly over the next 20 years such that I contribute significantly more to savings (or that if we do bring in more money we blow it rather than save it)
• I live a long time
• Some money that might end up as retirement savings or might not (equity in current house, while I'm saving cash for the down payment on the next house) is not included in my current retirement savings stash.

I'm also using 25k/yr as an estimate for health insurance costs between retirement and medicare. At two decades out who knows if that's optimistic or pessimistic, just a wag.

 

[jollystomper]

I did both types, but the most useful to me were the pessimistic ones. My retirement income is from pension, investments, and (eventually) social security. I did runs to see what would happen if I lost one or two of these streams in various combinations.

 

[jimandthom]

We do adjust for the P/I on our mortgage when paid off in the next decade, although by an amount that is less than the P/I

We do not adjust for no taxation on
--- non-taxable portion of spouses pension
--- state tax on my SS when taken.

We run the age at 100, which is not unrealistic for us.

We still come up with 100%--- so

 

[Midpack]

I made pessimistic adjustments, but it’s because I may be retired for 40 years. If our portfolio suffers worse losses than past history, we’ll be fine. If money piles up in our portfolio, we’ll definitely adjust spending up in the decades ahead. It would be more painful to curtail spending when we’re much older, than it is today. Of course deciding when to spend more and how much is an open question, no easy answers.

Fortunately we’re completely comfortable with what we’re spending, so no need to spend more - even if we can afford it according to any retirement calculator or what success rate others plan on.

 

[audreyh1]

Some of these adjustments I don't consider pessimistic, but rather factual. Retiring 10 years before 65? Well assuming 40 year instead of 30 years is just the facts. Social security 25 or more years in the future? What can you safely assume about the availability so far ahead? That is definitely more of an assumption, but seems reasonable rather than pessimistic per se. Assuming it is going to be exactly the same as present seems a bit optimistic to me, especially with an impending shortfall where adjustments are going to be required.

 

[Lsbcal]

I use VPW with age to depletion of 110 and a retirement year of 1966. I find that in the worst case year of 1982 the portfolio does not go much below 40% of the inflation adjusted starting value. The idea is to always feel the cliff edge is far away.

It turns out that such assumptions work out well for our current spending. If I had to cut back on spending with these assumptions would I modify the assumptions? Hmmm...

Is this optimistic or pessimistic? Not sure about the wording of the OP.

 

[SecondCor521]

Some of these adjustments I don't consider pessimistic, but rather factual. Retiring 10 years before 65? Well assuming 40 year instead of 30 years is just the facts. Social security 25 or more years in the future? What can you safely assume about the availability so far ahead? That is definitely more of an assumption, but seems reasonable rather than pessimistic per se. Assuming it is going to be exactly the same as present seems a bit optimistic to me, especially with an impending shortfall where adjustments are going to be required.

Sure. Each person and situation is different, and what each of us considers optimistic/neutral/pessimistic can vary.

What I'm looking for is the kind of adjustment where one says, "Well, I expect Social Security to be there for me with a haircut...but just to be safe I'm going to ignore it altogether." So it's relative to what you consider neutral.

As I thought, most here make pessimistic adjustments. The ones I don't particularly understand are those who make adjustments both ways. I guess it is a search for more accurate predictions.

 

[ncbill]

Only pessimistic.

I also choose "significantly worse than average" market returns on Fidelity's retirement planner.