audreyh1
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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/
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