Author Topic: Anybody know the math? FIRECalc question.  (Read 1646 times)


  • 5 O'Clock Shadow
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Anybody know the math? FIRECalc question.
« on: January 26, 2017, 04:17:57 PM »
I'm wondering about the success rate of how a new spending model on the FIRECalc website might work out.

What I want to know is how much riskier would it be to withdraw the GREATER of 1.  4% of original balance adjust for inflation.  2. 4% of the current balance.

They have a spending model that is kind of the opposite. Basically greater of 4% current balance or 95% of previous year.

I look at the standard 4% rule and I see so many chances of ending up with much more money at the end, and I'd rather spend or give it away while alive.

I know this is increased risk but I'd like to know how much. Or if you can't calculate it, does anybody have a any suggestions of a withdrawal option that allows you to spend a little more if the market is booming (particularly at beginning of reitrement). For example let's say you retired and the first 10 years were a huge boom period. After the inevitable recession after that boom evens out why not take 4% of that new number?


  • 5 O'Clock Shadow
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Re: Anybody know the math? FIRECalc question.
« Reply #1 on: January 26, 2017, 04:36:49 PM »
Another method I was thinking about is kind of a trailing 4 year method.  This theory revolves around the fact that the first two years of retirement are very important. So if it goes down the first two years of your retirement you have to work more or save more to make up for it.

However if the market goes up then you can increase spending. Here is my idea. If the market goes up the first two years of your retirement then you could reset your 4% rule. That sounds nice in theory but what if the next two are down years. Then you are in trouble and need to cut spending again. So what if starting 4 years into your retirement you look back to the previous 4 years. If all four years were in the black then you can reset the 4% rule based on the portfolio balance 2 years ago.  This way you get the benefits of the first two years going up but you don't take them till you are sure the next two went up as well.  Looking at this there are a lot of 4 year stretches in the black. Thoughts?


  • Walrus Stache
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Re: Anybody know the math? FIRECalc question.
« Reply #2 on: January 26, 2017, 07:42:24 PM »
Eventually you have to let go of precision when planning a future involving stock market returns.  Your first question hinges on how much stock market returns have outpaced inflation + 4%, which isn't knowable in advance.  Over the medium to long term, probably - but not certainly, as a recent decade fell short of that amount.

Is the possibility of full time nursing care included in your plans?  Although you're trying to spend it all during your lifetime, the uncertainty of medical and related expenses could do that for you - or might not.  The 4% "rule" is more of a guideline, and if you make it too precise you could be overconfident in future market returns.


  • Magnum Stache
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Re: Anybody know the math? FIRECalc question.
« Reply #3 on: January 26, 2017, 07:46:06 PM »
OP, you're talking about something originally called the pay out period reset model.  Others have inevitably come along more recently and given it their own names.  You might be interested in the following research:


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