Did the Great Resignation class of 21-22 just pick the worst time to retire?

[mspym]

John Green (author and vlogger) summed up my feelings about retirement in this short (56 sec) which recently popped up on my feed.
https://www.youtube.com/watch?v=HvnNJ0nUpK4

[AlanStache]

...
I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

Similar deal with the family friend, she just sort of talked to the owners when she went in and then they offered her a job.  Free coffee and soda so its probably just like a law firm :-)

I never knew John Green had a formal job before youtube & writing, good to learn he is one of us.

[Wolfpack Mustachian]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

Those must have been some interesting opinions....mind sharing?

[EscapeVelocity2020]

I am not holding my breath for a 5% rule but we have to remember things might turn out better for us. 

The ERN article linked in this thread said the 5% rule was definitely possible. Would love for somebody to read that and give us a summary since I didn’t entirely understand it.

I’d be happy with 5% if stocks are objectively on sale - the CAPE is below the all time market average ~17 (it’s currently ~27 - https://www.multpl.com/shiller-pe).  Most recently, stocks have only been subjectively on sale (cheaper than they used to be).  There’s no way to know what earnings will be in the future (companies provide guidance, change the guidance, and get hammered for missing expectations), but long term index CAPE is the current gold standard on if stocks are overvalued or undervalued.  I’m also a big believer in reversion to mean.  That doesn’t mean the stock market will be fine during the zombie apocalypse though…

[Metalcat]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

Those must have been some interesting opinions....mind sharing?

Nothing groundbreaking, I just insisted that "The Patriot" is orders of magnitude better than "Breaking Bad" and "The Wire" and that the best way to describe it is that's it's "Shakespearean." My opinion wasn't important, but the fact that the managing partner shared it was. That lead to after work beers, cool chats, and enthusiastic ideas of projects we could work on together.

That's how fun networking is in retirement.

[GuitarStv]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

Those must have been some interesting opinions....mind sharing?

Nothing groundbreaking, I just insisted that "The Patriot" is orders of magnitude better than "Breaking Bad" and "The Wire" and that the best way to describe it is that's it's "Shakespearean." My opinion wasn't important, but the fact that the managing partner shared it was. That lead to after work beers, cool chats, and enthusiastic ideas of projects we could work on together.

That's how fun networking is in retirement.

You thought that Mel Gibson film was better than The Wire?

[Metalcat]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

Those must have been some interesting opinions....mind sharing?

Nothing groundbreaking, I just insisted that "The Patriot" is orders of magnitude better than "Breaking Bad" and "The Wire" and that the best way to describe it is that's it's "Shakespearean." My opinion wasn't important, but the fact that the managing partner shared it was. That lead to after work beers, cool chats, and enthusiastic ideas of projects we could work on together.

That's how fun networking is in retirement.

You thought that Mel Gibson film was better than The Wire?

I'm pretty sure I specified the TV show in my initial post...

Yep, I did.

[Morning Glory]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

Those must have been some interesting opinions....mind sharing?

Nothing groundbreaking, I just insisted that "The Patriot" is orders of magnitude better than "Breaking Bad" and "The Wire" and that the best way to describe it is that's it's "Shakespearean." My opinion wasn't important, but the fact that the managing partner shared it was. That lead to after work beers, cool chats, and enthusiastic ideas of projects we could work on together.

That's how fun networking is in retirement.

You thought that Mel Gibson film was better than The Wire?

I'm pretty sure I specified the TV show in my initial post...

Yep, I did.

I have not heard of the show but inferred from your post that one exists, as I don't remember that movie being very good. 

[Glenstache]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

Those must have been some interesting opinions....mind sharing?

Nothing groundbreaking, I just insisted that "The Patriot" is orders of magnitude better than "Breaking Bad" and "The Wire" and that the best way to describe it is that's it's "Shakespearean." My opinion wasn't important, but the fact that the managing partner shared it was. That lead to after work beers, cool chats, and enthusiastic ideas of projects we could work on together.

That's how fun networking is in retirement.

+1 on The Patriot.
I sure hope that you spoke some jargon over beers:
https://www.youtube.com/watch?v=ccnfHKZebRk

[wageslave23]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

Poor thing. Go into a high school classroom and tell the kids that when they get older, they'll be happy to work at a gas station so they can get out and talk to people. That'll pore cold water on their high flying hopes and dreams :)  That might be one of the most depressing things I've ever read on these forums.

[dividendman]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

Poor thing. Go into a high school classroom and tell the kids that when they get older, they'll be happy to work at a gas station so they can get out and talk to people. That'll pore cold water on their high flying hopes and dreams :)  That might be one of the most depressing things I've ever read on these forums.

I agree a gas station is an odd choice given the not so pleasant people and the constant exposure to dangerous chemicals. Why not a library or something?

[nereo]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

Poor thing. Go into a high school classroom and tell the kids that when they get older, they'll be happy to work at a gas station so they can get out and talk to people. That'll pore cold water on their high flying hopes and dreams :)  That might be one of the most depressing things I've ever read on these forums.

Why is that? I don't get the distain for people who decide they enjoy doing something you might not.

[Metalcat]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

Poor thing. Go into a high school classroom and tell the kids that when they get older, they'll be happy to work at a gas station so they can get out and talk to people. That'll pore cold water on their high flying hopes and dreams :)  That might be one of the most depressing things I've ever read on these forums.

Why is that? I don't get the distain for people who decide they enjoy doing something you might not.

Yeah, that's a pretty classic response, imo.

It's clear that the person is making this choice because they want to. If that's what they enjoy, that's what they enjoy.

What I would emphasize to the highschool student is that people are phenomenally diverse and that financial freedom gives people the choice to fly whatever freak flag they want to.

Hopefully this person enjoys their new job, and if they don't, who cares, they don't need it.

[AlanStache]

Why a gas station I dont know but she is an early riser so maybe because libraries are not open at 6am?  The gas station is a few blocks from her home in her neighborhood so maybe gets to know people around too?

[nereo]

Why a gas station I dont know but she is an early riser so maybe because libraries are not open at 6am?  The gas station is a few blocks from her home in her neighborhood so maybe gets to know people around too?

I’ve got two uncles who both have far more money than they know what to do with. Both took up part time gigs in their 70s - one delivers flowers, the other bartends at the legionnaires. Both give a similar reason: “I get to talk with people I normally never would interact with, and they always are happy to see me”.

For both it’s such a minor fraction of their week they don’t view it as ‘work’. One uncle donates his entire pay cheque to a domestic abuse shelter.

Shrug — it makes them happy and involved. I can’t find fault with that.

[Villanelle]

A senior in my orbit has a part time job at a drug store.  Claims they don't need the money and are doing it for interaction and a sense of purpose, or something like that.  I don't buy it.  I suspect that while they might technically be okay financially, things might be really tight and the drug store money helps give them more wiggle room and allow a few more wants to be fulfilled. 

[2Birds1Stone]

A PT job for some play money doesn't sound like a terrible idea for many situations and reasons.

With a mustachian spending level, a PT job can add quite the padding/safety even at a low wage and low hours.

[Morning Glory]

Why a gas station I dont know but she is an early riser so maybe because libraries are not open at 6am?  The gas station is a few blocks from her home in her neighborhood so maybe gets to know people around too?

I'm nor sure where you live but if you're close to Wisconsin, Kwik trip is on the best places to work list. Friend worked there through a cancer scare and the insurance was pretty good.

https://www.wxow.com/news/kwik-trip-named-one-of-the-best-places-to-work-in-2021/article_1face9c7-1658-5a64-8df2-a977a6cec23e.html#:~:text=(WXOW)%2D%20Kwik%20Trip%20has,2019%20and%20October%2019%2C%202020.

[wageslave23]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

Poor thing. Go into a high school classroom and tell the kids that when they get older, they'll be happy to work at a gas station so they can get out and talk to people. That'll pore cold water on their high flying hopes and dreams :)  That might be one of the most depressing things I've ever read on these forums.

Why is that? I don't get the distain for people who decide they enjoy doing something you might not.

I took it as they were bored in retirement and this was a way to be less bored. Maybe I'm wrong and working at a gas station is a dream of theirs and brings them great joy. If the latter, then I'm happy for them.  My dad recently retired and he has been working for so long and doesn't have any hobbies or interests, so he doesn't know what to do with his time.  He walks around the mall and drives his car around in circles because he doesn't know what else to do.

[AlanStache]

Why a gas station I dont know but she is an early riser so maybe because libraries are not open at 6am?  The gas station is a few blocks from her home in her neighborhood so maybe gets to know people around too?

I'm nor sure where you live but if you're close to Wisconsin, Kwik trip is on the best places to work list. Friend worked there through a cancer scare and the insurance was pretty good.

https://www.wxow.com/news/kwik-trip-named-one-of-the-best-places-to-work-in-2021/article_1face9c7-1658-5a64-8df2-a977a6cec23e.html#:~:text=(WXOW)%2D%20Kwik%20Trip%20has,2019%20and%20October%2019%2C%202020.

Crazy but that is actually where she is working. 

In past she has also worked at an olive oil store.  Not sure I would say she was board but more that she really likes talking to people. 

[Morning Glory]

Why a gas station I dont know but she is an early riser so maybe because libraries are not open at 6am?  The gas station is a few blocks from her home in her neighborhood so maybe gets to know people around too?

I'm nor sure where you live but if you're close to Wisconsin, Kwik trip is on the best places to work list. Friend worked there through a cancer scare and the insurance was pretty good.

https://www.wxow.com/news/kwik-trip-named-one-of-the-best-places-to-work-in-2021/article_1face9c7-1658-5a64-8df2-a977a6cec23e.html#:~:text=(WXOW)%2D%20Kwik%20Trip%20has,2019%20and%20October%2019%2C%202020.

Crazy but that is actually where she is working. 

In past she has also worked at an olive oil store.  Not sure I would say she was board but more that she really likes talking to people.

I miss Kwik Trip. You will recognize the brand of butter in this meme.

[Reynold]

[snip]
I question 1% less over the next 50+ years. Is that a real prediction, or just part of your hedging? I think there are going to be more inflexion points in productivity with increasing gains and profits for corporations. Hopefully - this time the workers will reap some of the benefits. But I think stock returns a/o dividends will be better raher than worse long term.
[snip]

I believe 1% less because demand for stocks has increased over the last 50 yrs. Much like flipping housing can be highly profitable if only one or two people are doing it in an area. Once there are dozens of flippers bidding on distressed properties, the profit margins decrease. Labor force participation rate has peaked and is declining. Technology doesn't seem to be making any major productivity breakthroughs. Technological advances are already baked in to future earnings expectations, so technology has to surprise on the upside, or the slope or rate of change needs to increase. But back to the equation, it feels great knowing that the decision isn't based on fear or hope but on careful reasoning. If my calculations end up being wrong then my global lifetime suckiness level increases a bit, but neither error is catastrophic.

I'm also targeting more like 3-3.5%, because the 4% rule has been modeled for the U.S., historically the rest of the world has experienced lower SWRs. 

http://retirementresearcher.com/the-shocking-international-experience-of-the-4-rule/

It is certainly possible that the U.S. will continue to be an outlier among all developed countries for the next 30+ years, but demographic trends in the U.S. are moving towards those seen earlier in places like Europe and Japan, so I'd rather not bet on that.  Japan, in particular, may be an illustration of near zero market returns for decades with a shrinking work force. 

[Davnasty]

On the flip side, I recently decided that I won't plan to model past 90,

LOL, unless they really need me on the catwalk! Meow!

This is a little old but... high five

[mistymoney]

On the flip side, I recently decided that I won't plan to model past 90,

LOL, unless they really need me on the catwalk! Meow!

This is a little old but... high five

Just a little unintentional word play. I meant I had recently decided that I wouldn't model my stache longevity past 90, I had been modeling to 100 just in case, but decided I was going to be ok with being reduced to only social security by 90 if I did live that long.

But after I posted, it could have been interpreted as modeling, so just making fun of my lack of clarity in the post. :)

[Fru-Gal]

Japan, in particular, may be an illustration of near zero market returns for decades with a shrinking work force.

The thing is I agree with some who say Japan’s stagflation is not a simple age-of-workforce question. Their lack of immigration and very insular society/economy where innovation bets are not diverse enough for a global market are also factors. So for example their leadership with hybrid cars but failure to dominate with electric cars, choosing instead to do hydrogen.

If the US continues to be the friendliest country for immigrant workers in the world, we will dominate for sometime longer.

[Cranky]

Just got word that a family friend got a retirement job at a gas station, she in no way needs the money.  Just wanted to get out and talk to people 16hr/wk.  Personally I am not sure I would work a regular shift starting at 6am for my current pay rate but good for her.

I just got offered a job as a consultant for a law firm. I know nothing about law and have never worked for a law firm. Go figure.

ETA: this basically happened because of my strong opinions about the show "The Patriot."

A guy who got his biology PhD with dh works for a law firm in Toronto, in intellectual property, so it's interesting how it goes...

[Apoc]

No, the 21-22 class didn't pick the worst time to retire. In fact, at that point in time they picked the best time so far, since they had saved and invested more than ever before. That said, the returns in 2022 are horrible so with the wisdom of hindsight it would have been particularly valuable to keep working and investing for one more year. But saying they picked the worst time ever ignores the fact that picking an earlier time would have been even worse.

Of course this assumes that this retiree happened to follow the economy enough to realize that by late 2021 stocks were way overpriced by all metrics so choosing a 4% withdrawal rate would put them in the danger zone. If someone just hit 25x in late 2021 and immediately retired with no flexibility in spending, then better to consider it a sabbatical and go back to work.

[wageslave23]

I'm surprised this thread died. We're just entering the interesting period. Disregard all of the personal anecdotes and emotions. What do the numbers say? Where does the hypothetical 4% swr retiree stand right now?

[Psychstache]

I'm surprised this thread died. We're just entering the interesting period. Disregard all of the personal anecdotes and emotions. What do the numbers say? Where does the hypothetical 4% swr retiree stand right now?

I don't think we got the interesting period for another 2-5 years on this topic.

[wageslave23]

I'm surprised this thread died. We're just entering the interesting period. Disregard all of the personal anecdotes and emotions. What do the numbers say? Where does the hypothetical 4% swr retiree stand right now?

I don't think we got the interesting period for another 2-5 years on this topic.

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

[nereo]

I'm surprised this thread died. We're just entering the interesting period. Disregard all of the personal anecdotes and emotions. What do the numbers say? Where does the hypothetical 4% swr retiree stand right now?

I don't think we got the interesting period for another 2-5 years on this topic.

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

You are basically making the case that the next few years will likely determine whether 21-22 was the worst time to retire. In other words, we don’t know yet

[wageslave23]

I'm surprised this thread died. We're just entering the interesting period. Disregard all of the personal anecdotes and emotions. What do the numbers say? Where does the hypothetical 4% swr retiree stand right now?

I don't think we got the interesting period for another 2-5 years on this topic.

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

You are basically making the case that the next few years will likely determine whether 21-22 was the worst time to retire. In other words, we don’t know yet

That's right we don't yet. But like I said in my previous post, I think we are entering a very interesting period.  These next twelve months could make or break the 4% rule for hypothetical 2021 retiree.

[GuitarStv]

These next twelve months could make or break the 4% rule for hypothetical 2021 retiree.

This sentence is kinda always true though, isn't it?  The first few years following retirement have a pretty huge impact on the success of said retirement, and since nobody's got a crystal ball it's always possible that this could occur.

[MisterA]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

[BeanCounter]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

I was wondering the same. 2021 and 2022 market data are not in firecalc yet right?

[EscapeVelocity2020]

I'm surprised this thread died. We're just entering the interesting period. Disregard all of the personal anecdotes and emotions. What do the numbers say? Where does the hypothetical 4% swr retiree stand right now?

This thread died because we won't have a definitive answer until 28-29 years from now and we won't even have a good answer until ~5 years from now.  It was fun to speculate in 2022 because we were seeing a shift from a historic bull market to something like a 'can't win' market of falling bond prices, falling equities, and increasing inflation...  The world didn't collapse, so now we get to muddle along for a few years wondering if we are in for anything worse.  If inflation goes to double digits, bond yields continue to go up, and equities lose another 20%, then this thread will get hot again.

[mistymoney]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

why 30% Wasn't the 2022 sp500 loss just 20%? So maybe ~5% for the withdrawn funds?

[MisterA]

Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

why 30% Wasn't the 2022 sp500 loss just 20%? So maybe ~5% for the withdrawn funds?

I just wrote 'eg' (= for example). I was simply trying to figure out what parameters @wageslave23 had used for his comment about the 21-22 cohort being on about a 75% chance of success right now.

[wageslave23]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

I started with $1M, decreased it by 18% for losses since the peak. Decreased by another 8% for inflation and pulled $40k out. Then plugged that number into firecalc. 29 yrs left, 40k spend. I think the actual percentage was 70% success rate, but I rounded up to 75% for arguments sake.

[wageslave23]

These next twelve months could make or break the 4% rule for hypothetical 2021 retiree.

This sentence is kinda always true though, isn't it?  The first few years following retirement have a pretty huge impact on the success of said retirement, and since nobody's got a crystal ball it's always possible that this could occur.

True. I just find this time is a good psychological test for myself and my risk tolerance.  Would I be comfortable sitting on $750k in 2021 dollars and $40k spend, with inflation still not under control and many predicting an imminent recession. I think I would already be looking for another job. I think this is the first real test for a lot of almost there FIREees. The failure percentage isn't as important as the % chance that I feel the need to go back to work. Just trying to get a better grasp on what the numbers actually mean.

[2Birds1Stone]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

I started with $1M, decreased it by 18% for losses since the peak. Decreased by another 8% for inflation and pulled $40k out. Then plugged that number into firecalc. 29 yrs left, 40k spend. I think the actual percentage was 70% success rate, but I rounded up to 75% for arguments sake.

But by doing this and running the sim, you're treating the starting year like a random year, when in fact it's a starting year after we have just experienced a ~30% inflation adjusted loss.

This is why ERN's fire spreadsheet does a much better job of illustrating the impact of already being down on forward success odds.

[nereo]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

I started with $1M, decreased it by 18% for losses since the peak. Decreased by another 8% for inflation and pulled $40k out. Then plugged that number into firecalc. 29 yrs left, 40k spend. I think the actual percentage was 70% success rate, but I rounded up to 75% for arguments sake.

But by doing this and running the sim, you're treating the starting year like a random year, when in fact it's a starting year after we have just experienced a ~30% inflation adjusted loss.

This is why ERN's fire spreadsheet does a much better job of illustrating the impact of already being down on forward success odds.

Exactly. Subsequent years are not independent. 

[EscapeVelocity2020]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

I started with $1M, decreased it by 18% for losses since the peak. Decreased by another 8% for inflation and pulled $40k out. Then plugged that number into firecalc. 29 yrs left, 40k spend. I think the actual percentage was 70% success rate, but I rounded up to 75% for arguments sake.

But by doing this and running the sim, you're treating the starting year like a random year, when in fact it's a starting year after we have just experienced a ~30% inflation adjusted loss.

This is why ERN's fire spreadsheet does a much better job of illustrating the impact of already being down on forward success odds.

Exactly. Subsequent years are not independent.

Conversely, you are just giving us the failure rate on an above 4% WR starting now... not a 'real time' indication that a 4% WR in 2021 is or isn't going to fail.  These calculators are only as useful as the information you plug in, you can't game them to tell you if you are in a success or failure cohort after plugging in some data.  I agree that ERN is trying to improve on that situation as well as adjust SWR for starting conditions... 

With that said, I'd also argue that your 8% inflation reduction is overly pessimistic.  That assumes 8% average inflation for 30 years.

[wageslave23]

I dont know. According to firecalc.com they have about a 75% of success right now. Depending on how inflation and a recession shakes out over the next 12 months could make or break them. The soft landing means they are probably fine. Prolonged battle with inflation or a recession that drops the market another 15-20% and they probably fail.

What parameters did you put into firecalc to get a 75% success rate? All you put into firecalc is your spend, portfolio and number of years, you can't backdate it to 2021. Or are you assuming a (eg) 30% loss during 2022, and entering the balance after the loss, with the same spend?

I started with $1M, decreased it by 18% for losses since the peak. Decreased by another 8% for inflation and pulled $40k out. Then plugged that number into firecalc. 29 yrs left, 40k spend. I think the actual percentage was 70% success rate, but I rounded up to 75% for arguments sake.

But by doing this and running the sim, you're treating the starting year like a random year, when in fact it's a starting year after we have just experienced a ~30% inflation adjusted loss.

This is why ERN's fire spreadsheet does a much better job of illustrating the impact of already being down on forward success odds.

Exactly. Subsequent years are not independent.

Conversely, you are just giving us the failure rate on an above 4% WR starting now... not a 'real time' indication that a 4% WR in 2021 is or isn't going to fail.  These calculators are only as useful as the information you plug in, you can't game them to tell you if you are in a success or failure cohort after plugging in some data.  I agree that ERN is trying to improve on that situation as well as adjust SWR for starting conditions... 

With that said, I'd also argue that your 8% inflation reduction is overly pessimistic.  That assumes 8% average inflation for 30 years.

My using current portfolio value and seeing if it will last over 29 years is thr same as taking starting portfolio value and seeing the odds of it lasting 30 yrs. In the later typical case, you also don't take into consideration what the market did in previous years. I'm not saying that doesn't matter, but firecalc.com is based on picking a starting value and seeing if it lasts for 30 yr years historically. I'm doing the same with 29 years. Market valuations do matter and I agree that ERNs calculations are more precise. But if you are using firecalc.com then you are assuming previous years don't matter.

I used 8% inflation because that how much actual inflation was. Your 2021 $1milliom dollar portfolio is now worth 92% of that in 2021 dollars before considering withdrawals and investment performance. That is not making any predictions about future inflation. 

[EscapeVelocity2020]

I used 8% inflation because that how much actual inflation was. Your 2021 $1milliom dollar portfolio is now worth 92% of that in 2021 dollars before considering withdrawals and investment performance. That is not making any predictions about future inflation.

I'll just focus on this bit.  It is obviously wrong because no 30 year period with inflation above 3% per year would survive, double digit inflation would've been un-survivable.  Retirement calculators do have adjustments for inflation, but it's much more complicated than just subtracting it from your portfolio value, you need to discount the inflation over time on your spending, and also make sure it's only the relevant personal inflation rate, which is probably less than 8% for most retirees (assuming they are not buying new homes and cars at the same rate as workers, etc.)

[wageslave23]

I used 8% inflation because that how much actual inflation was. Your 2021 $1milliom dollar portfolio is now worth 92% of that in 2021 dollars before considering withdrawals and investment performance. That is not making any predictions about future inflation.

I'll just focus on this bit.  It is obviously wrong because no 30 year period with inflation above 3% per year would survive, double digit inflation would've been un-survivable.  Retirement calculators do have adjustments for inflation, but it's much more complicated than just subtracting it from your portfolio value, you need to discount the inflation over time on your spending, and also make sure it's only the relevant personal inflation rate, which is probably less than 8% for most retirees (assuming they are not buying new homes and cars at the same rate as workers, etc.)

Yes an a specific retiree would use there personal inflation rate. But when discussing a hypothetical retiree, using the actual cpi inflation rate makes the most sense. Maybe its tripping you up because I am discounting the portfolio value instead of inflating the retirees expenses from $40k to 43k. But when calculating failure rates its the same thing.

Another way to visualize it is by increasing inflation to an extreme such as 100% inflation over one year. You can either say the portfolio is now worth half of what it was worth or you can say the portfolio value is constant but your expenses have doubled. In our case case of a $1 M starting portfolio in a checking account with zero fluctuation and $40k spend, after a year of 100% inflation,  you either say the portfolio is now worth $500k and spending is still $40k or you can say portfolio value is still $1 M but expenses are now $80k. It just depends on whether you are using 2021 or 2022 dollars. But you do need to factor in inflation to portfolio returns.  If over the next year the market is up 10% but inflation is also 10%, then your situation has not changed because the net real investment return is 0. Just as over the past year the real investment return is -18% market plus 8% inflation loss for a real loss of -26%.  These are all ballpark numbers. Actual market returns and actual inflation may differ, but the concept is correct.

[nereo]

There’s an axiom in modeling: garbage in, garbage out

[EscapeVelocity2020]

@wageslave23 I'll just tell you that you need to go to FireCalc, use 40k spending 820k starting portfolio, and adjust the inflation rate to 8% (available in spending models tab) and see that the success drops to 11.4%. 

There is a lot more to this discussion than I want to get in to.

Edit, wrong numbers, 18% drop is 820k remaining

[wageslave23]

@wageslave23 I'll just tell you that you need to go to FireCalc, use 40k spending 820k starting portfolio, and adjust the inflation rate to 8% (available in spending models tab) and see that the success drops to 11.4%. 

There is a lot more to this discussion than I want to get in to.

Edit, wrong numbers, 18% drop is 820k remaining

But I'm not saying that. I'm saying 820k portfolio value and 43k spend. Vand I believe explained it up thread.

[EscapeVelocity2020]

@wageslave23 I'll just tell you that you need to go to FireCalc, use 40k spending 820k starting portfolio, and adjust the inflation rate to 8% (available in spending models tab) and see that the success drops to 11.4%. 

There is a lot more to this discussion than I want to get in to.

Edit, wrong numbers, 18% drop is 820k remaining

But I'm not saying that. I'm saying 820k portfolio value and 43k spend. Vand I believe explained it up thread.

OK, run your analysis on FireCalc with 8% inflation rate and tell me what your success rate is.  Thanks.