Author Topic: How many here expect to have a bigger stache 30 years after retiring?  (Read 17427 times)

Ishmael

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Re: How many here expect to have a bigger stache 30 years after retiring?
« Reply #50 on: February 22, 2018, 06:09:55 AM »
I see a lot of people using firecalc and cfiresim to calculate how much they need for retirement. My question is if I use the 4% rule and say I want 40k a year for spending then I need 1M dollars and that will last 30 years. But when I go into those simulators, I still have 100% success rate when using much lower starting amount- 850k,750k etc. So what's the deal?
I just tried it, and CFireSim doesn't seem to be working right - the statistics aren't showing up. But if I enter 850k and hit go, the graph clearly shows failure cases.

My wild guess is that you're entering the 750k in, but a retirement date in the future when you plan to retire. CFireSim would be calculating investment returns on the 750k between todays' date and the date you have entered, meaning it's going to be a lot larger than 750k by the time you start withdrawing the 40k/year.

Just check your inputs closely is my suggestion, and if you can't find the issue, post more details about what you're entered - maybe a screenshot. 

StockBeard

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Re: How many here expect to have a bigger stache 30 years after retiring?
« Reply #51 on: February 22, 2018, 06:45:47 PM »
How many here expect to have a bigger stache 30 years after retiring?

You're doing it wrong.

This means, you should have retired 10 years ago.  :)
I don't know. Typically, if you aim for 95% chance of success (95% chance of not running out of money by the time you die, which is a reasonable target) in tools such as cfiresim or firecalc, then you get a decent chance (50%~ish ?) of ending up with more than what you had when you started.

Frugal-Investor

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Re: How many here expect to have a bigger stache 30 years after retiring?
« Reply #52 on: February 23, 2018, 10:29:03 AM »
Here's my simpleminded answer to this question:
1. my spending grows on a linear basis and stays well below 4% spend level,
2. my stache grows on an exponential basis (and is highly diversified),
...so baring a meltdown of entire economy and mobs in the street, the stache is going to be bigger.

Padonak

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I'm not concerned at all about having more money later in retirement. I am aiming for a relatively low FIRE number at a reasonably conservative withdrawal rate, location arbitrage and occasional side gigs in retirement, so having more money later on means more options such as:
-renting a bigger and better apartment/house in a better neighborhood,
-buying a property,
-not having to rely on location arbitrage at all or choosing to live in a more expensive country and city,
-doing side gigs only if I'm really bored,
-more travel,
-financially supporting my relatives,
-charity,
-more expensive, private retirement home when I can't take care of myself,
..the list goes on

One thing to note is that, same as portfolio failure, portfolio outperformance doesn't happen suddenly. You don't just wake up one morning and realize that you have either saved too much or too little. You watch and re-evaluate your portfolio regularly and adjust your plans and lifestyle accordingly. If there is a higher risk of portfolio failure, you can either cut your expenses or make some extra money or both. If you have a lot more money than you need, you can always adjust your expenses upwards. Having more money than you need is a great problem to have. I have a lot of solutions in mind.
« Last Edit: May 20, 2018, 09:36:37 PM by Padonak »

RookieStache

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I see a lot of people using firecalc and cfiresim to calculate how much they need for retirement. My question is if I use the 4% rule and say I want 40k a year for spending then I need 1M dollars and that will last 30 years. But when I go into those simulators, I still have 100% success rate when using much lower starting amount- 850k,750k etc. So what's the deal?

I was actually going to ask something very similar using the same numbers...

As stated above, retiring on $1M at 4% would be $40,000 a year. With our current contributions, our family would be expected to hit $1M at my age of 48 (We make a good living for our location but no where near the majority of you!)

According to pretty much all of your responses, it would be entirely possible to retire on this as long as we kept the 4% withdrawal rate as we would be expected to have an even larger stash than this at the age of 78? 


Greystache

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I'm surprised that I haven't seen much discussion of sequence of returns risk in this thread. If your portfolio experiences a big, extended bear market early in retirement, you may not fail (run out of money) but your chances of building a larger portfolio in retirement decrease dramatically.  If you are retiring today, with valuations near all-time highs, you are probably looking at low or negative returns in the near term. This is especially problematic if you are planning a very lean retirement budget and don't have a lot of room to cut back or be flexible. If you are forced to withdraw 4% when your portfolio is way down, it could take a very long time to recover. Having said all that, I chose to retire three years ago.

RookieStache

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I'm surprised that I haven't seen much discussion of sequence of returns risk in this thread. If your portfolio experiences a big, extended bear market early in retirement, you may not fail (run out of money) but your chances of building a larger portfolio in retirement decrease dramatically.  If you are retiring today, with valuations near all-time highs, you are probably looking at low or negative returns in the near term. This is especially problematic if you are planning a very lean retirement budget and don't have a lot of room to cut back or be flexible. If you are forced to withdraw 4% when your portfolio is way down, it could take a very long time to recover. Having said all that, I chose to retire three years ago.

May I ask what age and what the stash is?

Fishingmn

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We willingly chose to work a little longer in order to have a very healthy nest egg and lower withdrawal rate.

When I see things like my mother going from healthy to having a rare condition that has put her in a nursing home for life at a cost of $8k/mo it is good to be able to have a lot extra toward end of life. Who knows if Medicaid will be there and what types of facility options will accept it. If you've ever had to go through the process the differences in good vs. bad places are huge.

And if we end up with too much money our kids will inherit it - or more likely we will spend lots on them while we are living.

TheWifeHalf

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I expect it to be larger. 2% (rather than 4) will be just fine, especially when Railroad Retirement (as opposed to Social Security) adds more $ in 4 years.

Much Fishing to Do

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I think when you pick a 4% withdrawal rate with a 80/20 type allocation like I have you expect there is a very small chance you are running out of money at year 30 and a small chance the stache is exploding upward to new realms of riches in real dollars.  If I had to guess I'd suspect I'll be returning 7% actual and so after a normal 3% inflation hit and 4% withdrawal my stache will stay about the same in real dollars over time... with equal chances it'll be lower or greater than that....I guess my eventual SS will then likely help it grow in the latter years or save me from failure if its been dropping.
« Last Edit: May 21, 2018, 02:59:25 PM by Strick »

Threshkin

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Re: How many here expect to have a bigger stache 30 years after retiring?
« Reply #60 on: June 05, 2018, 03:44:15 PM »
Definitely!

A) I would much rather be old and rich than old and poor.
B) Medical expenses of the elderly can be incredibly expensive. (see A)
C) My DW is statistically very likely to outlive me and I want her to be protected (see A)

John Galt incarnate!

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Re: How many here expect to have a bigger stache 30 years after retiring?
« Reply #61 on: June 25, 2018, 02:34:13 PM »
I have run Firecalc many times.
It says my chances of having more money 30 years after retirement than at retirement is very high.
Do others expect to have more 30 years after retirement than at retirement?

Since I live a very simple life I have a low cost of living and 0 debt.

I have every thing I want and need.

Currently my equity portfolio = ~ 59X my total annual living expenses.

 My  fixed-income portfolio yields ~ 3.9X my total annual living expenses so  I don't need any $ from my equity portfolio; I just let it grow.

Every month I add $ from my fixed-income portfolio to my equity portfolio.

So my answer to your ? is yes: I do expect to have much more $ 30 years hence.

« Last Edit: June 25, 2018, 02:41:49 PM by John Galt incarnate! »