bernicke input


Recycles dryer sheets
Jul 10, 2006
I love firecalc. Thanks for sharing this great tool.

Any chance a future update will allow us to put a different age into Bernicke? For example, it uses 55 to start tapering off on expenses. We think 65 might be a better place to start for us. Is that possible?

Thanks very much,

Aggie and Txdakini
I think so. I put in 45 as starting age instead of 55 retiring. it certainly gave me an answer I like! Thanks for the idea.

Bernicke doesn't care what age you put in but the model has spending decreasing beginning at age 56 and continuing until age 76. If you put in that you are already 65 years old, the deductions will start from there. If you put in that you are only 45, the deductions won't begin until you reach 55.

Bernicke adjusts spending based on his findings that as people age their interest in "things" will decrease. His goal is to avoid deferring retirement longer than necessary and spending more when the retiree is younger. This is intended to maximize "enjoyment."

It comes with risks, of course. You will draw down your portfolio. If there is a major life changing event, your available cash will be smaller. You won't be able to brag on the forum that you're living on a SWR of 1.7% of your portfolio. Your children won't inherit as much.

I personally believe we should carefully consider what Bernicke is saying and incorporate at least some of his approach into our planning. Since spending will not keep up with inflation during the 56 to 76 period, it's important to make sure your available spending for "essentials" can be met with what will be available at age 77.

If you haven't read his article, I recommend it so you can better understand his approach.
I used current age 45, but still not confident in results. Answers didn't seem exactly what I expected so model may be using different assumptions than I am. Still hope some day we can put in the actual age at which we'd like the Bernicke effect to start, e.g., start decreasing spending at 65 or 70. then I'd have more confidence that the model is showing me what I intended.
txdakini said:
Still hope some day we can put in the actual age at which we'd like the Bernicke effect to start, e.g., start decreasing spending at 65 or 70. then I'd have more confidence that the model is showing me what I intended.
Every spending model & financial calculator has its flaws.

The fundamental flaw of Bernicke's model is that you have to believe that you'll want to reduce your spending at ANY age due to a transition from "go-go" to "less go" to "no go". If you turn out to have substantial longevity and a real penchant for worldwide longboard surfing then your retirement might get more expensive every year. I also know a real estate agent who says that he'll never retire because what once were his vices now are habits and the "cost" of retiring gets higher for him every year.

On the more realistic side of the debate, Bernicke does not adequately analyze the effects of higher healthcare expenses (especially maintenance prescriptions) and long-term care costs.

I would say that if your entire ER decision rests on getting Bernicke's model to work, then you should keep going until your SWR is 4-5%. Or consider ESRBob's semi-retirement 95%-SWR system.

On the admin side of things, if FIRECalc's Bernicke option had a variable age for changing spending then it wouldn't resemble Bernicke's research and would probably have to be called something else like the "Txdakini Variable Spending" calculator. And you could probably use any version of FIRECalc to simulate what you're looking for by either reducing your expense data after a certain age or by adding synthetic inflation-adjusted pensions after a certain number of years.

In any case you've hit upon a big flaw of just about every single retirement calculator out there-- a failure to adequately model variable spending. So if your ability to make the ER decision relies upon riding this razor's edge, then it's probably better to keep working or to reduce your expected expenses.

But with a huge financial contribution to FIRECalc enough feedback Dory might be willing to look at a software change. As soon as cruising season is over, anyway...
Thanks for your comments, Nords. We are not depending on Bernicke to make it. We're fine either with a "normal" run and slightly better using a buckets approach. We're still "playing" with variations in trying to understand what our spending model might be. I understand and agree that health care spending in the future will probably upset all plans, including Bernicke's. I absolutely don't think we will be spending less in the next few years and we are 55 now. Health insurance alone is taking a huge chunk of our retirement income and no one expects it to go down.

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