Bernicke’s model questions

[PandaBear]

EDIT: well I figured out my error.

Well I thought I figured my error, but perhaps not. If I start with 270K spending model at age 58, I have 19 years of reduction and ten 11 years consistent with the Bernicke model.

22K Social Security
87K + 75K pensions (no inflation)
1.8 million in assets.

The model says it reduces by 2-3% a year. But I hot a baseline at 19 years at about 125K per year.

But when I manually reduce 270K by 3% a year over 19 years, I end at about 160K.

I guess that’s what I wonder what I’m doing wrong?

 

[samm]

Please define the Bernicke model and a constant spending model. We can comment if we know what you are talking about.

 

[rodi]

Are you using Firecalc with the default settings? If you enter your pension you can select COLA or non COLA - you would select non-COLA. Then on the tab where you select spending models it assumes a decline in spending after a certain age with Bernicke.

Inflation is covered - it's 'real dollars'... and is accounted for by selecting not-COLA for your pensions.

 

[USGrant1962]

From the description in FIRECalc "If selected, this option will reduce your inflation-adjusted yearly spending by 2-3% per year starting at age 56, and then stabilizing at age 76 to keep up with inflation." So yes, Bernicke is both inflation adjusted and reduced by 2-3% per year.

It ends up being a pretty substantial cut over 20 years - about half. But it is based on analysis of actual spending data so has a basis.

When I play with the Bernicke model I usually lie about my age, subtracting 10 years. This starts the spending reductions at 66 instead of 56 years of age. Using that model, and not being a borderline spending case (comfortably above 100% in FIRECalc), seems to give rational results.

 

[PandaBear]

Are you using Firecalc with the default settings? If you enter your pension you can select COLA or non COLA - you would select non-COLA. Then on the tab where you select spending models it assumes a decline in spending after a certain age with Bernicke.

Inflation is covered - it's 'real dollars'... and is accounted for by selecting not-COLA for your pensions.

Thank you, I did that. I thought that’s where I screwed up, but it wasn’t.

 

[PandaBear]

From the description in FIRECalc "If selected, this option will reduce your inflation-adjusted yearly spending by 2-3% per year starting at age 56, and then stabilizing at age 76 to keep up with inflation." So yes, Bernicke is both inflation adjusted and reduced by 2-3% per year.

It ends up being a pretty substantial cut over 20 years - about half. But it is based on analysis of actual spending data so has a basis.

When I play with the Bernicke model I usually lie about my age, subtracting 10 years. This starts the spending reductions at 66 instead of 56 years of age. Using that model, and not being a borderline spending case (comfortably above 100% in FIRECalc), seems to give rational results.

This is why I’m confused. Why is the reduction so significant? (I start at 270K and end about 125K) When I do the numbers manually, the drop isn’t so great.

 

[PandaBear]

When I play with the Bernicke model I usually lie about my age, subtracting 10 years. This starts the spending reductions at 66 instead of 56 years of age. Using that model, and not being a borderline spending case (comfortably above 100% in FIRECalc), seems to give rational results.

That’s a good idea. I will try that.