"Length of Retirement," or When Will You Shuffle Off this Mortal Mustache?

[pigpen]

Hello,

I'm curious -- for purposes of calculating your "length of retirement" in cFIREsim (or whichever model/calculator you use), what method do you use for estimating your age at death? Obviously lifestyle and family history play a huge role here, so I know that everyone's estimate will be unique. But since I currently don't know the exact date in question, I need to apply some sort of decision-making criteria to come up with a best guess for planning purposes.

So, if I think that based on all the circumstances of my life that 85 is as good a guess as any, do I use that number? Pad it by a few years just to play it safe? Some other method?

Thanks.

Pigpen

[teen persuasion]

I use 105 or 110.  I don't want to ever run out early.  And then there's family longevity: a great aunt lived to 102, both my parents are alive and healthy (dad's 86 now), and both of them have older siblings going strong at 90-something.  With medical advances, my lifespan could easily be longer than my grandparents (who were all born 1898).

[Retire-Canada]

I typically shoot for ~95yrs old. My parents are 90 and 94 currently. I don't see a whole lot of difference between a FIRE plan that works for me to say 90 or to 110. So I am not overly fussed about the topic.

[Al1961]

It's better to have and not need, than to need and not have.

I always ran projections out to age 100, and still do as I update things based on actual spending and investing experience.

There is some longevity on both sides of the family, with parents/uncles in their 80s and my mom still going strong at 85, some grandparents and great aunts lived to late 90s or early 100s. I don't expect to live that long, but who knows, maybe I "won" the genetic lottery.

[Retire-Canada]

It's better to have and not need, than to need and not have.

If this ^^^ requires extra years of working at the prime of your life I would not trade that for some extra security later on.  In all likelihood with the 4% WR rule I'll be challenged to spend all the money I'm likely to have even if I live to 120. Especially since I'll have Gov't benefits kicking in from age 60 onwards and the data shows we spend less as we age not the other way around.

[Al1961]

It's better to have and not need, than to need and not have.

If this ^^^ requires extra years of working at the prime of your life I would not trade that for some extra security later on.  In all likelihood with the 4% WR rule I'll be challenged to spend all the money I'm likely to have even if I live to 120. Especially since I'll have Gov't benefits kicking in from age 60 onwards and the data shows we spend less as we age not the other way around.

I figured this would be the likely response to that statement.

It's not like we never enjoyed ourselves during those extra years or got no satisfaction from what we accomplished during the last, peak years of our careers. We each retired at 53 - the odds are that one of us still has nearly 40 years to enjoy retirement.

My in-laws are in their early 80s and have outlived their savings (supporting asshole, alcoholic BIL). They have declining health, and CPP/OAS don't quite cut it. We help out. When you see the toll it takes, the extra years were an easy price tp pay to avoid that fate.

[Lake161]

Livingto100.com has a detailed life expectancy calculator that takes into account your health status and family history. That would get you a good starting number. We then went conservative and tacked on 10 years.

[soccerluvof4]

We ran our numbers when Fire'd to 2068 which puts me at 95. Don't think i will need much if I make it to that point and if history repeats itself would have more money not less.

[Monkey Uncle]

I've typically used 95 because that seems like a suitably conservative number.  But I also do some shorter runs to see where those end up, because the longer runs have fewer years available to run the simulations.  If you use an extreme old age number, thinking you're being conservative, you may actually end up being less conservative due to the smaller sample size.

Assuming entitlements and my pension don't get changed too much by the pols (a big assumption), those sources will cover basic expenses by the time I reach my early sixties.  So I'm also doing runs that end when I hit 62.  This gives me a different perspective - kind of a worst-case scenario - will my savings last at least until I'm able to go on the govt. dole?  This makes for a much larger sample size and allows me to see the impact of the dot.com crash in '00.

[arebelspy]

I have no calculation that requires picking a number. If I run out ever, I probably set it up wrong based on my criteria--e.g. I have no desire to spend down to zero based on a guess of a date.  Excess to charity is fine with me.

[pigpen]

I've typically used 95 because that seems like a suitably conservative number.  But I also do some shorter runs to see where those end up, because the longer runs have fewer years available to run the simulations.  If you use an extreme old age number, thinking you're being conservative, you may actually end up being less conservative due to the smaller sample size.

Assuming entitlements and my pension don't get changed too much by the pols (a big assumption), those sources will cover basic expenses by the time I reach my early sixties.  So I'm also doing runs that end when I hit 62.  This gives me a different perspective - kind of a worst-case scenario - will my savings last at least until I'm able to go on the govt. dole?  This makes for a much larger sample size and allows me to see the impact of the dot.com crash in '00.

Good points. I hadn't thought about the fact that using a longer time frame reduces the sample size.

I have no calculation that requires picking a number. If I run out ever, I probably set it up wrong based on my criteria--e.g. I have no desire to spend down to zero based on a guess of a date.  Excess to charity is fine with me.

How do you run your calculations? I don't want to spend down to $0 either, but I don't understand how you wouldn't need to account for time as a variable in calculating FIRE. I'm not questioning your method, by the way -- just trying to make sure I'm not missing something important that I should know.

[maizefolk]

I've typically used 95 because that seems like a suitably conservative number.  But I also do some shorter runs to see where those end up, because the longer runs have fewer years available to run the simulations.  If you use an extreme old age number, thinking you're being conservative, you may actually end up being less conservative due to the smaller sample size.

Assuming entitlements and my pension don't get changed too much by the pols (a big assumption), those sources will cover basic expenses by the time I reach my early sixties.  So I'm also doing runs that end when I hit 62.  This gives me a different perspective - kind of a worst-case scenario - will my savings last at least until I'm able to go on the govt. dole?  This makes for a much larger sample size and allows me to see the impact of the dot.com crash in '00.

This. The longest stock market series data I know of is the Schiller dataset which goes back to 1871. So 145 years of data. The number of time segments you can test is (Number of Years of Data) - (Length of Retirement) + 1. That means someone FIREing at 55, planning to live to 95 has a 30 year retirement, and 115 30 year periods to test their withdrawal rate on but a 30 year old planning to live to 110 has an 80 year retirement and only 65 80 year periods to test their withdrawal rate on.

The other problem with extremely long retirement windows in the type of calculation cFIREsim does is that they're removing the retirement years closest to the present, which, if you think the stock market may behave differently today than it did back in the 19th century, is the very last thing you want to do. A 30 year retirement window can calculate the outcome of retirements from 1871-1985. For an 80 year retirement, the most recent window in your analysis is a retirement staring in 1945.

I'd rather look at more, shorter time windows, and maybe consider the cases where I wouldn't be out of money, but am well below my starting balance after 30 years as "likely failures" instead of throwing out so much of the data.

[arebelspy]

I have no calculation that requires picking a number. If I run out ever, I probably set it up wrong based on my criteria--e.g. I have no desire to spend down to zero based on a guess of a date.  Excess to charity is fine with me.

How do you run your calculations? I don't want to spend down to $0 either, but I don't understand how you wouldn't need to account for time as a variable in calculating FIRE. I'm not questioning your method, by the way -- just trying to make sure I'm not missing something important that I should know.

Plan for a growing, rather than declining, asset base.

[pigpen]

Thanks, everybody. Appreciate the help.

[Monkey Uncle]

The other problem with extremely long retirement windows in the type of calculation cFIREsim does is that they're removing the retirement years closest to the present, which, if you think the stock market may behave differently today than it did back in the 19th century, is the very last thing you want to do. A 30 year retirement window can calculate the outcome of retirements from 1871-1985. For an 80 year retirement, the most recent window in your analysis is a retirement staring in 1945.

Actually 1937 would be the most recent start year for an 80-year run, assuming the data for 2016 is available at this point.  Either way you miss modeling early sequence risks for the financial crisis, the dot.com bust, and the stagflation era.

[arebelspy]

The other problem with extremely long retirement windows in the type of calculation cFIREsim does is that they're removing the retirement years closest to the present, which, if you think the stock market may behave differently today than it did back in the 19th century, is the very last thing you want to do. A 30 year retirement window can calculate the outcome of retirements from 1871-1985. For an 80 year retirement, the most recent window in your analysis is a retirement staring in 1945.

Actually 1937 would be the most recent start year for an 80-year run, assuming the data for 2016 is available at this point.  Either way you miss modeling early sequence risks for the financial crisis, the dot.com bust, and the stagflation era.

For that single run, but you can always model your max and every run short of it, if it makes you feel more secure.

[boarder42]

the longer you stretch out your years of retirement in CFIREsim the less accurate the results are b/c their are less time frames that will be used.  Its commonly held perception based on historical data if your retirment funds last 40 years they will last forever. assuming you have high equity holdings forever

[fatcow240]

I don't use an end date.  There isn't much difference in 50 years vs indefinite in the size of the stache for early retirement.

[maizefolk]

Well that is a thoroughly embarrassing basic math error. Thank you for the catch Uncle Monkey.

[boarder42]

you've got to get the 60s in there for it to have any real value IMO. but at the end of the day its just semantics.  save til you hit 4% then retire and be flexible. when you're young you can do lots of things to make money.  buy and resell things, photography, credit card tradelines.

[Retire-Canada]

you've got to get the 60s in there for it to have any real value IMO. but at the end of the day its just semantics.  save til you hit 4% then retire and be flexible. when you're young you can do lots of things to make money.  buy and resell things, photography, credit card tradelines.

Yes! My annual costs are not 100% fixed. I can varying from 3% WR to 5% WR as long as my average over say a decade is around 4% WR with no suffering and no need to earn extra $$. I'll just schedule my non-essential expenditures to align with market performance which adds a very beneficial shock absorber to my portfolio. If I add to that the option of an easy PT job for $10K/yr if needed I can vary my portfolio WR down to 2% with no suffering and that's as much safety net as I can be bothered to think about. Beyond that I'd worry more about my ability to out run zombies than how many $$ in my account. ;)

[maizefolk]

I decided to actually look at the interaction of retirement length, and failure rate (either running out of money or ending up with less than you started with in inflation adjusted terms) instead of just handwaving about how it should cause problems. And yup, it looks like increasing your assumed retirement length can actually decrease failure rates at the same withdrawal rate by taking bad years out of the model. So a longer assumed retirement can end up making you less conservative instead of more.



(I used the Shiller 1871-Present stock market and consumer price index dataset, and 100% stocks for simplicity).

[MrsPete]

I use 105 or 110.  I don't want to ever run out early.  And then there's family longevity: a great aunt lived to 102, both my parents are alive and healthy (dad's 86 now), and both of them have older siblings going strong at 90-something.  With medical advances, my lifespan could easily be longer than my grandparents (who were all born 1898).

My thoughts are similar.  Based upon my family history, 100 is realistic, but with medical advances, I also assume 105-110. 

If this ^^^ requires extra years of working at the prime of your life I would not trade that for some extra security later on.  In all likelihood with the 4% WR rule I'll be challenged to spend all the money I'm likely to have even if I live to 120. Especially since I'll have Gov't benefits kicking in from age 60 onwards and the data shows we spend less as we age not the other way around.

I disagree.  I don't hate my job, though I do enjoy my free time more; so working a few more years isn't a big problem today ... but it may be literally impossible later.  Even with working a few more years to get that extra security, I'm probably looking at 50-55 years in retirement.  Should I whine that it might be 55-60 instead? 

[Retire-Canada]

Should I whine that it might be 55-60 instead?

You should only regret that extra 5 years if you have something better to do than work with your time and you are confident that you'll not be one of those unlucky folks who dies at 54.95yrs old.

It's all about opportunity cost if you don't mind trading trading time for more money go for it, but just keep in mind you can fail at FIRE by many more ways than running out of money.

[MrsPete]

Should I whine that it might be 55-60 instead?

You should only regret that extra 5 years if you have something better to do than work with your time and you are confident that you'll not be one of those unlucky folks who dies at 54.95yrs old.

It's all about opportunity cost if you don't mind trading trading time for more money go for it, but just keep in mind you can fail at FIRE by many more ways than running out of money.

Yeah, I could die at 54.95 years old, but the chances that I'll live well into my 90s or beyond seems more realistic.  It makes sense to put effort into what's most likely to happen. 

Yeah, you can fail in various ways, but I'd guess that money is what goes wrong for the majority of people. 

[Retire-Canada]

Yeah, I could die at 54.95 years old, but the chances that I'll live well into my 90s or beyond seems more realistic.  It makes sense to put effort into what's most likely to happen. 

Yeah, you can fail in various ways, but I'd guess that money is what goes wrong for the majority of people.

I'd challenge that idea...that money is the most likely cause of FIRE failure. If you have a plan along the lines of a 4%WR and a broad set of index funds you already have an exceedingly conservative and robust FIRE plan.  My guess [I don't think there is any research] is that health and/or fear is the biggest cause of FIRE failure. As Arebelspy pointed out in the 4% Rule sticky  if you work FT 5yrs extra to avoid a small chance of having to work PT later or being flexible with your WRs you've failed at FIRE before you started.

I think that sedentary work is the smoking of our times and is killing people just real slowly so we don't notice it until we are decades into it and suffer the physical and mental consequences. So personally getting away from that desk for 5 extra years at the prime of my life is super valuable.

As a corollary I'd say fear or the dreaded OMY syndrome is one of the biggest problems with FIRE I see on this forum. As noted above failure to launch for many extra years at the prime of your life is a failure regardless of the pile of $$ you've accumulated. If it wasn't than the sure way to succeed at FIRE is to work and save until you die. No chance of running out of money with that plan. Just not such an awesome retirement. ;)

But as I noted this is an opportunity cost calculation. If you don't have something you'd rather do than work FT it doesn't make sense to quit. I really like the MMM blog post about treating money choices as if the cost was zero once you are FI. If TVs were free would you have 10? If work didn't pay would you still go?