Getting Down to Brass Tacks

[almost there]

"jebmke;2293971]This isn't uncommon but I would not suggest anyone simply assume that will be the case. Often, I find people spend all their time on the return side and not enough analyzing their expenses - both now and down the road."

Yes, see #2 of the 2 things.
#1 Was true for me. But am not saying it is for everyone.

 

[TNBigfoot]

You are under-analyzing this one. Any analysis with static, average inputs does not reflect real life.

What I suggest is to use FIRECalc, starting with the defaults - that will use historic values, and will report the actual historic variation and interaction of returns of stocks/bonds and inflation. Straight-line math and Monte Carlo do not do this. I don't trust them. And you will see some 'scary dips' in your portfolio - can you handle those?

Isn't that better than some guy saying "well, it usually happens like this or that"? Try FIRECalc, using history, not Monte Carlo, and report back please.

-ERD50

Taking your suggestion, here is a summary of the results out of FIRECalc using 1) default CPI vs 3.8% inflation. 2) target gross spend vs +10%. *All run at -20% Social Security discount.

Worst success rate is 97% using +10% Spend and 3.8% inflation. Time horizon is out to age 96.

Not surprisingly, using default CPI, all runs are at 100%.

I use Firecalc regularly but most certainly not at expert level. Am I modeling the inflation risk correctly looking at default CPI vs. a fixed rate?

 

[GravitySucks]

I see your first failure is about 28 years out.
I like to take my failure rate and incorporate the odds I'll be alive at the first instance of failure and use that number.
Example: One of my runs showed a 90% success rate, but the first failure date fell on a year that I only have a 10% chance of seeing. So a 1% overall failure rate. Comforting, no?

Taking your suggestion, here is a summary of the results out of FIRECalc using 1) default CPI vs 3.8% inflation. 2) target gross spend vs +10%. *All run at -20% Social Security discount.

Worst success rate is 97% using +10% Spend and 3.8% inflation. Time horizon is out to age 96.
View attachment 32578
Not surprisingly, using default CPI, all runs are at 100%.

I use Firecalc regularly but most certainly not at expert level. Am I modeling the inflation risk correctly looking at default CPI vs. a fixed rate?

 

[pb4uski]

Taking your suggestion, here is a summary of the results out of FIRECalc using 1) default CPI vs 3.8% inflation. 2) target gross spend vs +10%. *All run at -20% Social Security discount.

Worst success rate is 97% using +10% Spend and 3.8% inflation. Time horizon is out to age 96.
View attachment 32578
Not surprisingly, using default CPI, all runs are at 100%.

I use Firecalc regularly but most certainly not at expert level. Am I modeling the inflation risk correctly looking at default CPI vs. a fixed rate?

Yes, I think default CPI is better.... as I understand the default CPI it is the historical CPI for the year for which the returns are being used.

GravitySucks makes a good point on the failures... what I would add is that if you look at the failure lines and were living them it would be apparent long in advance that the plan is in jeopardy and you could tighten your belt to avoid a failure.... and even when there is a failure beyond that failure point you would still have SS and any pensions.

 

[Retired Expat]

When did I know I was ready?

It does seem that you are trying to cut if close. Why bother?

Just add a 25% contingency amount to your portfolio and you are good to go.

Everyone's comfort zone is different. Everyone's bucket list or expectations and dreams are different. Other that some of the really clear cases where people aren't ready or are sitting on a HUGE reserve, the answer for most is, when you feel comfortable.

My FA advisor told me I was ready long before I really was emotionally. Only now that I have rebalanced assets into more income producing and I can see that my budget for expenses in Retirement are equal to my income plus a 3% withdrawal rate and there is a $50K annual contingency for more lavish spending or not depending how the year is shaping up do I really feel comfortable saying, I Am Retired, and turning paid work options away. I suppose if I am feeling short and spent my contingency then I might do the odd consulting gig but finally feel like I can take Business Class both ways, book an extra trip, maybe upgrade to the new Apple watch. Of course that goes the other way, there is lots of leeway in my expenses and budget to cut back and I don't know that I would even notice...Would the New iPhone 11 change my life?

So if your life is such that you have a good budget and know your real costs per year and how much you really need (after retirement as pre-retirement costs can be really different....) you can figure it out.. If you are making up numbers to plug into a retirement calculator then maybe you aren't ready?

Just my 2 cents..

 

[Oz investor]

from my ( almost ) 10 years chasing the retirement adventure ,

planning to excess doesn't work , sure , have a plan for very harsh times ( as well as rosy times ) but keep the room to change tactics in a low stress timely manner. ( and this is all during an unusually long bull market ).

just remember a big downturn ( in any area ) gives some opportunities , which you might like to take .

maybe fine-tuning your education in the world of investing would be better ( understand which bonds have hidden traps , and which companies are badly run despite impressive figures , etc. etc )