CFireSim Success Rate

[CCCA]

Even after reading this thread, as a fairly risk-averse person and engineer (safety factor and all), I was targeting 90+% success rate, in part because we are close to 80% now, and with another year or two of work, it's not that hard to get to 90% to 95% by our mid 40's. 


Those cfiresim runs and success rates were predicated actually having healthcare that is reasonably priced.  With the new President elect, it's not clear that either of those things is possible (having healthcare without being employed and having it be reasonably priced).  We are currently healthy but 50-60 year retirement is a long time, especially if we don't know what's going to happen with Medicare. 
Now I'm thinking we'll probably target 100% but not sure about quitting even if we hit that, if Obamacare is not going to be around. Medical expenses that hit 6 figures would turn a 100% success rate into 0%.

With a timeline of 50-60 years and all the potential political and economic uncertainties associated with that much time, compounded by the uncertainties associated with assuming that the past predicts the future, the difference between 90-95% and 100% is completely meaningless. (As an engineer, you should know that ;) ).  When you're FIREing that early, you have to plan on being flexible and maintaining your ability to earn some dough should the circumstances require it, regardless of how high your success rate is.

Yes, I do know that a few percentage point is kinda meaningless, however, the actual difference is as much as a couple hundred thousand in the size of the stache in 1-2 years of extra work.  That definitely gives a little bit extra piece of mind in weathering any additional uncertainty. 


The good thing is that since we are doing so well (as evidenced by our high % success rate) it allows me more flexibility in how we look towards work.  Since my company gives benefits down to 50% working, that's where I'm at.  I'm trying to eke out a more sustainable balance of work and non-work.  See this thread where I talk about my ADEPT status:
http://forum.mrmoneymustache.com/welcome-to-the-forum/new-acronym-and-new-stage-of-my-fi-journey-adept/
So even if I'm not quite FIRE yet, I do have a bit more flexibility in work, but still getting employer based health care and just trying to understand better what the next few years might bring (i.e. if Trump is going to burn the place down, or merely be another version of GWB or something else). 

[Classical_Liberal]

The years of looking at this made me realize similar things. I've personally shifted my plan to a 6%. I have many options including but not limited to contract work, hobby income, and just sheer flexibility.

I'm using a flat out 6% of balance variable withdrawal.  Also keeping my professional license and a PRN job which requires around 200 hrs every two years of work to keep.  I'll work 100, up to maybe 500 hours a year depending on the stars, the weather, and my enjoyment level.  If I get lucky with good growth, I  may give it up 5-10 years in. If I get lucky with a big drawdown, I might work a few more hours to invest the dip for strippers and booze in my 80's (I'll probably give to charity instead, geez stop judging!).  This will cut 2-4 years off required full time work to reach the 4% rule. Oh yeah, and then there's SS. 

I'm single & no kids, it has advantages.

[gerardc]

That graph always makes me think that we really should all be talking about a 6-7% WR, and then discussing the little things we can do (earn some side-gig income, cut spending in bad years, etc.) to make sure we're in the half of those runs that succeeds.

The 4% rule is so ridiculously safe in the hands of anyone flexible/willing to adjust to the market, it's silly.

Not so fast.

I agree in principle, why not stop working at 50% success rate at 35 years old, take the 5 more years it would take to get to 80 or 90% success rate, and postpone them far in the future, maybe 2 years when you're 50, 2 more  from 54-56 and the last year from 58-59; then "flip your coin", start your retirement, see if it works, and if it does, BONUS, you can just skip those 5 more years!

Problems:
- Cutting spending in bad years: this only works if you spend rather freely already. I'm pretty mustachian, living with $35k/year in a HCOL area, and I could retire on $20k/year elsewhere, but then how much could I cut back, really, without sitting at home all day?
- Going back to work: for career types, extended breaks are career suicide (or are they?), and you'll get a 70% pay cut, so those 5 years are more like... 15? (factoring return timing). If you work at McDonalds, sure.

[arebelspy]

That graph always makes me think that we really should all be talking about a 6-7% WR, and then discussing the little things we can do (earn some side-gig income, cut spending in bad years, etc.) to make sure we're in the half of those runs that succeeds.

The 4% rule is so ridiculously safe in the hands of anyone flexible/willing to adjust to the market, it's silly.

Not so fast.

I agree in principle, why not stop working at 50% success rate at 35 years old, take the 5 more years it would take to get to 80 or 90% success rate, and postpone them far in the future, maybe 2 years when you're 50, 2 more  from 54-56 and the last year from 58-59; then "flip your coin", start your retirement, see if it works, and if it does, BONUS, you can just skip those 5 more years!

Problems:
- Cutting spending in bad years: this only works if you spend rather freely already. I'm pretty mustachian, living with $35k/year in a HCOL area, and I could retire on $20k/year elsewhere, but then how much could I cut back, really, without sitting at home all day?
- Going back to work: for career types, extended breaks are career suicide (or are they?), and you'll get a 70% pay cut, so those 5 years are more like... 15? (factoring return timing). If you work at McDonalds, sure.

This has already been discussed a million times, but I'll give you the benefit of the doubt and give you some quick answers, in case you haven't read all the discussion.

1) Lots.  One example: If you want to travel, and it's a down year, book a $500 plane ticket, rent out your home, go live somewhere overseas for 10-20k.  Suddenly spending is halved, plus you have some income coming in, plus you spend a kickass year doing some travel.  No big deal.  If you don't like to travel, switch from paid to free stuff.  That not spending money requires "sitting at home" is a giant, false myth.

2) Doesn't matter--you don't need to work the same, because you don't need to earn what you were... just need to earn the small amount to reduce your WR in those years.  Say, for example, you were earning 150k, spending 30k, and you pull the plug early.  Chances are, you never have to work again.  If you do, you don't have to go earn that 150k. You could earn 10k as a side gig, and suddenly your 4% WR becomes a 2.6% WR that year.  You're only earning 10k, instead of 150k, but it's more than enough to see you through bad years. Sure, you could do a few more years at 150k, but that's a guaranteed failure of selling more years of your life, versus the possibility of maybe getting a small side gig that's enough to see you through.  No big deal.

[Metric Mouse]

I agree in principle, why not stop working at 50% success rate at 35 years old

I agree as well. I don't see many good reasons not to.

[hawkeye_de]

interesting discussion...actually to make the 80% success threshold rate more practical...if I'd had FIREed just before the financial crisis 2008/2009 that would count (probably) to the 20% failure segment, right ?

[GenXbiker]

I dont want to have a scenario where i have to live below my minimum to survive and enjoy my work enough to keep doing it and not consider years of my life `wasted'.

Its a bit arrogant to call year working wasted years of life sold.  I am alive just as much as an early retireee.

I had a very similar response recently when it was stated that I was "trading healthiest years for money."
https://forum.mrmoneymustache.com/welcome-to-the-forum/gap-year-for-my-7-5-and-40-year-old/msg1644217/#msg1644217

[Classical_Liberal]

While it is true that one must make a decision, and that decision is a trade off in terms of years worked vs stash size, i often see you imply peopke are stupid for wanting to have a higher wealth target and work more years, as if `optimizing for the minimum' is a abolute goal that is de facto superior.

I'm not going to take any moral issue stance on the subject, although I think it's possible to make an argument for the superior morality of reduced consumption.  Personal choices and all, I don't judge, or think people are stupid.  I will point out that this particular venue is one that focuses (or at least used to focus) on those whose goal was "optimizing for minimum".  That's why many of the earliest forum members speak so highly of that choice and encourage it.  Most who came here were looking for that type of reinforcement and camaraderie, as its not present in most mainstream investment or retirement venues.   

[PizzaSteve]

While it is true that one must make a decision, and that decision is a trade off in terms of years worked vs stash size, i often see you imply peopke are stupid for wanting to have a higher wealth target and work more years, as if `optimizing for the minimum' is a abolute goal that is de facto superior.

I'm not going to take any moral issue stance on the subject, although I think it's possible to make an argument for the superior morality of reduced consumption.  Personal choices and all, I don't judge, or think people are stupid.  I will point out that this particular venue is one that focuses (or at least used to focus) on those whose goal was "optimizing for minimum".  That's why many of the earliest forum members speak so highly of that choice and encourage it.  Most who came here were looking for that type of reinforcement and camaraderie, as its not present in most mainstream investment or retirement venues.

I have no problem with your comment.  But the site seems to me to be more about building an open community around ideas like asserting personal control over ones financial destiny.

The idea that our core values are a formulaic idea with fixed lifestyle choices is depressing.  One can like riding a bike, save to a 4% withdraw rate, assume specific market returms, make frugal choices, and do construction side gigs.  Without prejudice.

[Classical_Liberal]

One can like riding a bike, save to a 4% withdraw rate, assume specific market returms, make frugal choices, and do construction side gigs.  Without prejudice.

LOL, very true! 

When I started shifting my lifestyle towards decreased consumption and FI, I found myself trying to pick up habits others on here encouraged.  Somethings they were great, but most times they stunk!   I tend to have the personality of one who takes an existing model, tries it out, then modify. No need to reinvent the wheel, just readjust the spokes.  Others do better developing their own independent models and tend to resist group-think. Most tend to just follow the leader. 

Perhaps this shows the level of expertise in a particular subject vs personality?  Anyway... I'm not judging any particular type, just recognizing the difficulties with interpersonal communication between them.

This forum has a higher than general population number of model creators and modifiers (based on your posts you seem to be a model creator?).  Which is why I stick around, tons of smart people and good ideas for me to tinker with.  Still, the follower-the leader types are always going to be most prevalent and can lead to frustration.  Some days I deal with that frustration better than others.

[spokey doke]

Ugh...these threads have become really depressing.  I've spent a lot of time with cfiresim, adding lots of padding in terms of periodic expenses for house repairs, car replacement, and also cutting expected SS and pension payouts, adding in a generous amount to the annual budget for health insurance uncertainties, and using very long life-span predictions.  Add on to that the fact that we are pretty bad-ass in terms of survival skills and flexibility, and also have a budget that has fat that can easily be trimmed in case of serious down-turns.  I've even built a small business that could generate a difference making amount of income for many years if it was ever needed.

Cfiresim puts us at 100% success, with the lowest ending balances still being fairly substantial.

Despite having gone over the numbers and the assumptions many times, and understanding the basics, on some level DW doesn't really believe the math, and we are basically held hostage by that lack of confidence.  Uncertainty about the future combined with family/social expectations (and being engaged by her work) keep us in the game.

Oh well...if cfiresim is on track, then there is a good chance I will get to spend and give away a crap load of money at some point.  In the meantime, I tell myself I really can do whatever I want, since there is this huge safety net under me, and bide my time following a passion of mine, and try to gain satisfaction from the stealth wealth factor.  But it is still work, and constrains things like substantial travel (which I have done very little of ) and other itch scratching activities...