### Author Topic: cFiresim SEVERELY overestimates success rates for Mustachians  (Read 72049 times)

#### farfromfire

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #200 on: August 22, 2017, 08:02:55 AM »

#### dragoncar

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #201 on: August 22, 2017, 12:25:17 PM »
It astounds me that anyone could read through the hundreds of pages of careful mathematical analysis this forum has done about safe withdrawal rates, and then accuse us of blind faith because of a thread title summarizing our findings.

If the there is no reason to worry about the 4% withdrawal rule (as per the thread title), why is hundreds of pages of careful mathematical analysis going on then?
Congratulations, this wins dumbest post on MMM forums 2017! Your prize? You get to continue regurgitating the same tired arguments ad nauseam.

If that's the dumbest post on MMM forums in 2017, then why is there so many pages of disussion?

#### farfromfire

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #202 on: August 22, 2017, 11:40:35 PM »
lol
Thanks a lot, dragoncar, for making me soil my keyboard. And now I sprayed coffee all over it too.

#### gerardc

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #203 on: January 04, 2018, 06:52:14 PM »
There might be another source of bias. The two formulations considered so far:

- Plan A: You start with \$1m at a random year, you spend \$40k yearly from then on, what's the probability of success over 50 years?
- Plan B: You start at 0, you save \$50k yearly, when you reach \$1m you stop working, then you start spending \$40k yearly, what's your probability of success over 50 years?

Here's another one, possibly more accurate:

- Plan C: You start at 0 spending most of your paycheck, when you stumble into the MMM forums*, you start saving 50% of your income, and when you reach your target you stop working, and start spending 4% yearly, what's your probability of success?

*We can assume that every year, you have a probability of stumbling into MMM that is proportional to the number of recent FIREes (who will spread the word) and a coefficient representing your openness to external information / time spent browsing the internet. Recent FIREes can be estimated from FIRE density.

In Plan A, FIRE years were uniformly distributed. In Plan B, accumulation starting years were uniformly distributed, but not FIRE years. In Plan C, even accumulation starting years will be centered around market growth.

The bias I'm trying to get at is that during an economic boom, optimism is contagious, and this may increase the number of people who will buy into FIRE and start getting serious about saving. Since we're currently in a market boom, I'm wondering how much of an effect this may have on the 4% rule. Think about it. Would we have a glowing MMM forum in 2008?

I posted the code in the post above. Anyone want to take a stab at implementing it?

#### DavidAnnArbor

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #204 on: January 04, 2018, 07:41:27 PM »
There might be another source of bias. The two formulations considered so far:

- Plan A: You start with \$1m at a random year, you spend \$40k yearly from then on, what's the probability of success over 50 years?
- Plan B: You start at 0, you save \$50k yearly, when you reach \$1m you stop working, then you start spending \$40k yearly, what's your probability of success over 50 years?

Here's another one, possibly more accurate:

- Plan C: You start at 0 spending most of your paycheck, when you stumble into the MMM forums*, you start saving 50% of your income, and when you reach your target you stop working, and start spending 4% yearly, what's your probability of success?

*We can assume that every year, you have a probability of stumbling into MMM that is proportional to the number of recent FIREes (who will spread the word) and a coefficient representing your openness to external information / time spent browsing the internet. Recent FIREes can be estimated from FIRE density.

In Plan A, FIRE years were uniformly distributed. In Plan B, accumulation starting years were uniformly distributed, but not FIRE years. In Plan C, even accumulation starting years will be centered around market growth.

The bias I'm trying to get at is that during an economic boom, optimism is contagious, and this may increase the number of people who will buy into FIRE and start getting serious about saving. Since we're currently in a market boom, I'm wondering how much of an effect this may have on the 4% rule. Think about it. Would we have a glowing MMM forum in 2008?

I posted the code in the post above. Anyone want to take a stab at implementing it?

If you read the threads on FIRE 2017, or 2018, most people are not blithely optimistic, and have established padding into their investments, such that if the market falls by 40% they still can meet expenses with the 4% rule, or they have ways of cutting expenses, or they have an ongoing sidegig of income production that isn't time consuming.

#### gerardc

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #205 on: January 04, 2018, 07:55:25 PM »
If you read the threads on FIRE 2017, or 2018, most people are not blithely optimistic, and have established padding into their investments, such that if the market falls by 40% they still can meet expenses with the 4% rule, or they have ways of cutting expenses, or they have an ongoing sidegig of income production that isn't time consuming.

Well yeah, if they use 2-3% WR or are flexible, they'll succeed anyway, and that's good for them. Success rate calculations are for people who play it somewhat aggressively (e.g. high WR) and want to get an idea of their situation.

About "contagious optimism", I assume that sites like these flourish more in good market conditions. Optimism or not, this will have the effect of attracting newcomers to FIRE. In addition to forums and word of mouth, it seems higher salaries would have a similar effect of making people aware of the possibility of FIREing, hence correlating accumulation phase starting years with good market conditions by a different but similar mechanism.

#### brooklynguy

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #206 on: January 04, 2018, 09:10:10 PM »
About "contagious optimism", I assume that sites like these flourish more in good market conditions. Optimism or not, this will have the effect of attracting newcomers to FIRE. In addition to forums and word of mouth, it seems higher salaries would have a similar effect of making people aware of the possibility of FIREing, hence correlating accumulation phase starting years with good market conditions by a different but similar mechanism.

Yes, extremely-early-retirement-seeking-activity will tend to correlate with the existence of conditions conducive to (or seemingly conducive to) extremely-early-retirement-attainment.  If you zoom out further in your perspective, you can identify a FIRE counterpart to cosmology’s anthropic principle:  early retirement will exist only under those conditions that allow for its existence, which is why we’re here discussing it.

My off-the-cuff intuition is that any bias added by the “Plan C” you described isn’t especially meaningful—the clustering of accumulation start dates around market boom years should have less impact on portfolio success rates than the clustering of retirement start dates around market boom years, which you’ve already examined, and, if anything, I would guess that the effects of the former would tend to cancel out the occurrence of the latter for reasonably high (but not extraordinarily high) savings rate levels (as savers who start accumulating during boom years would tend to be more likely to reach their savings targets during the next phase of the market cycle).

#### WhiteTrashCash

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #207 on: January 04, 2018, 09:18:32 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

#### Classical_Liberal

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #208 on: January 04, 2018, 10:44:06 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Bidets save on TP expenditures!  Someone with such a large budget wouldn't concern themselves with TP spending.  I'd go with the non-gold option for better ROI.
« Last Edit: January 04, 2018, 10:45:43 PM by Classical_Liberal »

#### BookLoverL

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #209 on: January 05, 2018, 05:47:20 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

If you're 4% FIREd and only spending <10k a year, you might have more difficulty finding places to cut back, but also some sort of part time job or self-employment would cover a much larger portion of your income, and I assume most people aren't planning on spending their entire retirement sitting on the sofa doing nothing.

#### gerardc

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #210 on: January 05, 2018, 07:37:48 AM »
My off-the-cuff intuition is that any bias added by the “Plan C” you described isn’t especially meaningful—the clustering of accumulation start dates around market boom years should have less impact on portfolio success rates than the clustering of retirement start dates around market boom years, which you’ve already examined, and, if anything, I would guess that the effects of the former would tend to cancel out the occurrence of the latter for reasonably high (but not extraordinarily high) savings rate levels (as savers who start accumulating during boom years would tend to be more likely to reach their savings targets during the next phase of the market cycle).

Good point. I bet plan C would mostly affect high savings rate folks, who weren't affected under plan B (since their accumulation phase is so short anyway) but would be affected by starting their accumulation phase around market booms (which would make their FIRE start year shortly after). So basically, people will either suffer market bias on the end of their accumulation phase (at low savings rates) or on the start of it (at high savings rates).

#### Prairie Stash

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #211 on: January 05, 2018, 08:32:06 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

If you're 4% FIREd and only spending <10k a year, you might have more difficulty finding places to cut back, but also some sort of part time job or self-employment would cover a much larger portion of your income, and I assume most people aren't planning on spending their entire retirement sitting on the sofa doing nothing.
That's my plan D, the early retirement from early retirement...

#### BTDretire

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #212 on: January 05, 2018, 08:38:00 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yikes, if \$40k/year is fancypants, I must have an extra pair in the closet and a gold bidet in both bathrooms. Maybe even add cable TV!

#### boarder42

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #213 on: January 05, 2018, 08:59:24 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yikes, if \$40k/year is fancypants, I must have an extra pair in the closet and a gold bidet in both bathrooms. Maybe even add cable TV!

This greatly depends on mortgage or no mortgage if you're at 40k with a mortgage i dont know if thats extremely fancy pants based on what MMM would be spending with a mortgage has been calculated to be around 40k.  we're over that though with just raw spending.  i'm a cafeteria mustachian mostly here for the optimization of my soldiers i do save and how to withdraw them efficiently.

#### TheAnonOne

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #214 on: January 05, 2018, 09:08:21 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yikes, if \$40k/year is fancypants, I must have an extra pair in the closet and a gold bidet in both bathrooms. Maybe even add cable TV!

This greatly depends on mortgage or no mortgage if you're at 40k with a mortgage i dont know if thats extremely fancy pants based on what MMM would be spending with a mortgage has been calculated to be around 40k.  we're over that though with just raw spending.  i'm a cafeteria mustachian mostly here for the optimization of my soldiers i do save and how to withdraw them efficiently.

For a couple of two who spent 39k last year..... (No mortgage included)

Travel....
Vegas X2
LA
Tokyo Japan!
FL
7 night cruise
(+ a good number of weekend road-trips on the bike)

Got a used Chevy Volt(Sold two older cars for it but still costs us taxes ect ect)

Ate out to the tune of a whopping \$6,196 (A lot of this is me buying friends meals for CC points and them returning cash to me, so realistically we are probably closer to 3k but all 6k is in my spend)

I'd say 40k is pretty luxurious.
« Last Edit: January 05, 2018, 09:10:36 AM by TheAnonOne »

#### boarder42

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #215 on: January 05, 2018, 09:37:50 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yikes, if \$40k/year is fancypants, I must have an extra pair in the closet and a gold bidet in both bathrooms. Maybe even add cable TV!

This greatly depends on mortgage or no mortgage if you're at 40k with a mortgage i dont know if thats extremely fancy pants based on what MMM would be spending with a mortgage has been calculated to be around 40k.  we're over that though with just raw spending.  i'm a cafeteria mustachian mostly here for the optimization of my soldiers i do save and how to withdraw them efficiently.

For a couple of two who spent 39k last year..... (No mortgage included)

Travel....
Vegas X2
LA
Tokyo Japan!
FL
7 night cruise
(+ a good number of weekend road-trips on the bike)

Got a used Chevy Volt(Sold two older cars for it but still costs us taxes ect ect)

Ate out to the tune of a whopping \$6,196 (A lot of this is me buying friends meals for CC points and them returning cash to me, so realistically we are probably closer to 3k but all 6k is in my spend)

I'd say 40k is pretty luxurious.

correct throw a 400k house mortgage on there like MMM has and you payments would be around 18-20k per year - so now you're cutting out all of those things you did and bought most likely  - unless you travel hacked and used points for all those trips.

#### TomTX

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #216 on: January 05, 2018, 11:37:12 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.

#### dandarc

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #217 on: January 05, 2018, 11:50:10 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
That can be solved (under current law) after retirement pretty easily, if your spending is low.  And if your income is not low, particularly in retirement, you can afford to pay the actual cost of health insurance.

#### boarder42

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #218 on: January 05, 2018, 12:12:21 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
That can be solved (under current law) after retirement pretty easily, if your spending is low.  And if your income is not low, particularly in retirement, you can afford to pay the actual cost of health insurance.

or it could be solved by getting rid of this horrible plan and allowing me to self insure for catastrophic coverage and pay for other things out of pocket.

#### BTDretire

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #219 on: January 05, 2018, 12:33:56 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

#### WhiteTrashCash

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #220 on: January 05, 2018, 01:04:59 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

You should probably get a better job. Or maybe move somewhere that has better options on the healthcare exchange if you use that. I refuse to believe that people are helpless about this kind of situation.

#### boarder42

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #221 on: January 05, 2018, 01:56:36 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

You should probably get a better job. Or maybe move somewhere that has better options on the healthcare exchange if you use that. I refuse to believe that people are helpless about this kind of situation.

i dont think this post was meant to complain.  but until they fix the cost of heathcare problem it doesnt matter who the hell pays the bill.  just read an article where the cost of a knee surgery in michigan varied from 44k to 6k depending on the hospital and a birth varied from 12k to 2k - and a C - Section was 25k to 4k ... this entire industry doesnt have any price control that a typical capitalist run society has - its a joke

#### BookLoverL

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #222 on: January 05, 2018, 02:51:35 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

You should probably get a better job. Or maybe move somewhere that has better options on the healthcare exchange if you use that. I refuse to believe that people are helpless about this kind of situation.

i dont think this post was meant to complain.  but until they fix the cost of heathcare problem it doesnt matter who the hell pays the bill.  just read an article where the cost of a knee surgery in michigan varied from 44k to 6k depending on the hospital and a birth varied from 12k to 2k - and a C - Section was 25k to 4k ... this entire industry doesnt have any price control that a typical capitalist run society has - its a joke

Perhaps the kids can contribute to their own health insurance once they graduate college and have found their footing financially.

I do agree that healthcare sucks in the US, though - I'm glad to live in the UK, even if the NHS is very overworked right now. As far as I can tell, the US has the worst of all worlds in healthcare (within the set of options in which healthcare is actually good and not "visit the local medicine man so he can get rid of spirits" or whatever): you don't have government-subsidised healthcare, but also, the fact that everyone has health insurance enables hospitals to jack up the cost of everything so that by now, you can only afford complex treatment with insurance, despite the fact that half the things probably don't cost anywhere near what you pay for them. I hope future governments make things better for you all on that front instead of worse. If health insurance didn't cover such large payouts, hospitals would be forced to charge amounts people could actually pay if they wanted to have any customers, possibly.

Regarding mortgages, if your mortgage is a particularly high percentage of your expenditure, you should probably consider a smaller house. Or renting out some of the rooms to help recoup the cost, maybe?

#### VoteCthulu

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #223 on: January 05, 2018, 03:00:32 PM »
i dont think this post was meant to complain.  but until they fix the cost of heathcare problem it doesnt matter who the hell pays the bill.  just read an article where the cost of a knee surgery in michigan varied from 44k to 6k depending on the hospital and a birth varied from 12k to 2k - and a C - Section was 25k to 4k ... this entire industry doesnt have any price control that a typical capitalist run society has - its a joke
Capitalist run societies don't typically have price controls.

If you meant that American healthcare doesn't have any meaningful competition in medical service pricing, I agree.

#### boarder42

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #224 on: January 05, 2018, 03:21:24 PM »
i dont think this post was meant to complain.  but until they fix the cost of heathcare problem it doesnt matter who the hell pays the bill.  just read an article where the cost of a knee surgery in michigan varied from 44k to 6k depending on the hospital and a birth varied from 12k to 2k - and a C - Section was 25k to 4k ... this entire industry doesnt have any price control that a typical capitalist run society has - its a joke
Capitalist run societies don't typically have price controls.

If you meant that American healthcare doesn't have any meaningful competition in medical service pricing, I agree.

yes that was the basis of my point - price controls allocated by societal pressures of capitalism thru open competition

#### slappy

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #225 on: January 05, 2018, 03:58:10 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

You should probably get a better job. Or maybe move somewhere that has better options on the healthcare exchange if you use that. I refuse to believe that people are helpless about this kind of situation.

i dont think this post was meant to complain.  but until they fix the cost of heathcare problem it doesnt matter who the hell pays the bill.  just read an article where the cost of a knee surgery in michigan varied from 44k to 6k depending on the hospital and a birth varied from 12k to 2k - and a C - Section was 25k to 4k ... this entire industry doesnt have any price control that a typical capitalist run society has - its a joke

Perhaps the kids can contribute to their own health insurance once they graduate college and have found their footing financially.

I do agree that healthcare sucks in the US, though - I'm glad to live in the UK, even if the NHS is very overworked right now. As far as I can tell, the US has the worst of all worlds in healthcare (within the set of options in which healthcare is actually good and not "visit the local medicine man so he can get rid of spirits" or whatever): you don't have government-subsidised healthcare, but also, the fact that everyone has health insurance enables hospitals to jack up the cost of everything so that by now, you can only afford complex treatment with insurance, despite the fact that half the things probably don't cost anywhere near what you pay for them. I hope future governments make things better for you all on that front instead of worse. If health insurance didn't cover such large payouts, hospitals would be forced to charge amounts people could actually pay if they wanted to have any customers, possibly.

Regarding mortgages, if your mortgage is a particularly high percentage of your expenditure, you should probably consider a smaller house. Or renting out some of the rooms to help recoup the cost, maybe?

Actually not everyone has health insurance. That's part of why the costs are so high. Because people without insurance still go to ER for treatment and then aren't able to pay the bill.  Then the price has to go up so that the people with insurance and those who can pay are subsidizing those who can't/don't pay.

#### BookLoverL

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##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #226 on: January 05, 2018, 04:18:45 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

You should probably get a better job. Or maybe move somewhere that has better options on the healthcare exchange if you use that. I refuse to believe that people are helpless about this kind of situation.

i dont think this post was meant to complain.  but until they fix the cost of heathcare problem it doesnt matter who the hell pays the bill.  just read an article where the cost of a knee surgery in michigan varied from 44k to 6k depending on the hospital and a birth varied from 12k to 2k - and a C - Section was 25k to 4k ... this entire industry doesnt have any price control that a typical capitalist run society has - its a joke

Perhaps the kids can contribute to their own health insurance once they graduate college and have found their footing financially.

I do agree that healthcare sucks in the US, though - I'm glad to live in the UK, even if the NHS is very overworked right now. As far as I can tell, the US has the worst of all worlds in healthcare (within the set of options in which healthcare is actually good and not "visit the local medicine man so he can get rid of spirits" or whatever): you don't have government-subsidised healthcare, but also, the fact that everyone has health insurance enables hospitals to jack up the cost of everything so that by now, you can only afford complex treatment with insurance, despite the fact that half the things probably don't cost anywhere near what you pay for them. I hope future governments make things better for you all on that front instead of worse. If health insurance didn't cover such large payouts, hospitals would be forced to charge amounts people could actually pay if they wanted to have any customers, possibly.

Regarding mortgages, if your mortgage is a particularly high percentage of your expenditure, you should probably consider a smaller house. Or renting out some of the rooms to help recoup the cost, maybe?

Actually not everyone has health insurance. That's part of why the costs are so high. Because people without insurance still go to ER for treatment and then aren't able to pay the bill.  Then the price has to go up so that the people with insurance and those who can pay are subsidizing those who can't/don't pay.

I admit I haven't studied the US system in great detail, but I don't mean I'm under the impression that 100% of people have insurance. In order for what I said to make sense, probably somewhere between 0% and 10% of people might have health insurance? IDK a specific figure, I'm just making up numbers here. But a low percent.

#### BTDretire

• Magnum Stache
• Posts: 3074
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #227 on: January 05, 2018, 04:35:30 PM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

You should probably get a better job. Or maybe move somewhere that has better options on the healthcare exchange if you use that. I refuse to believe that people are helpless about this kind of situation.

I don't want a job! I don't want to work the 15 hrs a week I work now, I only do it to give my wife some time off from the business.
I had the insurance thing figured out and then Obamacare came along. I was paying \$4,300
for a family of 4. It dropped from \$9,900 to \$4,300 when I raised my deductible to \$10,000.
I opened an HSA and maxed that out, had my \$10,000 in less than two years.
Everything was great and then Obamacare regulations started, with an 18.4% increase, then a 19.2% increase and a 24% increase the following 3 years. Thanks a fucking lot Obama.
I stayed with my policy because I was concerned and hoping Obamacare wouldn't last.
I was also concerned that once I dropped my policy and got Obamacare, if it ever disappeared, I would not be able to get anything with as good as what I have.

#### BookLoverL

• Bristles
• Posts: 431
• Location: England
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #228 on: January 06, 2018, 01:19:46 AM »
Look at all these fancypants people spending \$40,000/year. I bet you have a solid gold bidet in your bathroom.

Yeah, if you're spending 40k a year, unless you have a very large family then you've got a lot of luxuries you could cut back on if you found the 4% rule wasn't working for you...

In the USA, one of those luxuries is "health care" - which could eat a very significant fraction of \$40k. With a family of 3, I'm paying \$7k just in premiums - with an employer paying more half.
I'm paying \$11,252 for Health insurance , family of 4, I pay it all, plus both are in college.

You should probably get a better job. Or maybe move somewhere that has better options on the healthcare exchange if you use that. I refuse to believe that people are helpless about this kind of situation.

i dont think this post was meant to complain.  but until they fix the cost of heathcare problem it doesnt matter who the hell pays the bill.  just read an article where the cost of a knee surgery in michigan varied from 44k to 6k depending on the hospital and a birth varied from 12k to 2k - and a C - Section was 25k to 4k ... this entire industry doesnt have any price control that a typical capitalist run society has - its a joke

Perhaps the kids can contribute to their own health insurance once they graduate college and have found their footing financially.

I do agree that healthcare sucks in the US, though - I'm glad to live in the UK, even if the NHS is very overworked right now. As far as I can tell, the US has the worst of all worlds in healthcare (within the set of options in which healthcare is actually good and not "visit the local medicine man so he can get rid of spirits" or whatever): you don't have government-subsidised healthcare, but also, the fact that everyone has health insurance enables hospitals to jack up the cost of everything so that by now, you can only afford complex treatment with insurance, despite the fact that half the things probably don't cost anywhere near what you pay for them. I hope future governments make things better for you all on that front instead of worse. If health insurance didn't cover such large payouts, hospitals would be forced to charge amounts people could actually pay if they wanted to have any customers, possibly.

Regarding mortgages, if your mortgage is a particularly high percentage of your expenditure, you should probably consider a smaller house. Or renting out some of the rooms to help recoup the cost, maybe?

Actually not everyone has health insurance. That's part of why the costs are so high. Because people without insurance still go to ER for treatment and then aren't able to pay the bill.  Then the price has to go up so that the people with insurance and those who can pay are subsidizing those who can't/don't pay.

I admit I haven't studied the US system in great detail, but I don't mean I'm under the impression that 100% of people have insurance. In order for what I said to make sense, probably somewhere between 0% and 10% of people might have health insurance? IDK a specific figure, I'm just making up numbers here. But a low percent.

I thought of a better way of explaining my point about costs and insurance, I guess?
Let me formulate it mathematically.

Let h be the cost of health insurance. Let p(h) be the number of people buying health insurance as a function of h.
Let c be the cost to the hospital of treating patients. Let x be the cost to the patient of being treated, once their health insurance has covered whatever it's going to cover. Let t(x) be the number of patients who seek treatment, as a function of x.
Let G be government subsidies to healthcare. Let D be private charitable donations to healthcare.
Let w be wages of a healthcare worker. Let d(w) be the number of healthcare workers as a function of w.

Then in a situation where the healthcare industry makes no profit and no loss,  hp(h) + xt(x) = ct(x) + wd(w) - G - D.

As far as I'm aware right now, in the US, hp(h) + xt(x) > ct(x) + wd(w) - G - D, partially due to inflating h and x way above what c is equal to. Now, if hp(h) + xt(x) >> ct(x) + wd(w) - G - D, then social pressure may be able to decrease healthcare costs to the public back to the situation that is current now. But in order for some sort of change in the system to come about, we probably need hp(h) + xt(x) < ct(x) + wd(w) - G - D, which is only likely if p(h) and/or t(x) drop sufficiently low.

Now, in the UK, ignoring the very small number of private hospitals and people with private insurance, what we effectively have is h=0 and x=0, except in the case of prescriptions and dentistry, in which x=a very small amount. So then we have 0=ct(x) + wd(w) - G - D, or ct(x) + wd(w) = G + D. Due to an increase in elderly people with complex conditions, and the failure of G to keep up with that increase, d(w) has, as far as I can tell, been decreasing, creating hospitals that are stressed and have barely enough resources. So hopefully we'll figure out a solution to that at some point.

How does this help people who are at risk of FIRE failure due to healthcare?
Well, firstly, if you keep as fit and healthy as you can, while you might still catch an illness, at least you won't need treatment for type II diabetes or knee and hip replacements. Secondly, if h + x > some constant multiple of your yearly income, consider whether it'd actually be worth paying all that and seeking treatment, or whether it'd be better to make your peace with the illness. Harsh, I know. But it's that or work extra years to pad your stache. Finally, for minor complaints, consider looking into herbalism or something. If you found a herb that worked well to replace ongoing prescription medication, that'd probably save a lot of money.

#### TomTX

• Walrus Stache
• Posts: 5345
• Location: Texas
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #229 on: January 06, 2018, 05:28:02 AM »
One item I would like to point out: If you have healthcare while working - use it to address any long-term health issues before your retire.

Example: I had some long-running recurring back pain, I expect largely caused by all the sitting I do for work (and some at home, like right now) - sitting at my desk at work, or sitting in cars going to/from project sites.

I got diagnosed, referred for physical therapy - and haven't had a back issue in the ~2 years since. Work insurance paid 80%.

#### BTDretire

• Magnum Stache
• Posts: 3074
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #230 on: January 06, 2018, 05:32:13 AM »
If you found a herb that worked well to replace ongoing prescription medication, that'd probably save a lot of money.

Can't comment on your math, but I find many herbals are more expensive than prescription meds. I'm on two meds, one is \$10 a month the other is less than \$4 a month.
My doc starts with the cheapest that may do the job and works up. OH, I forgot, I had a 50%
increase in the \$10 prescription recently, it's now \$15. That sucks, but it's still cheap.

#### BookLoverL

• Bristles
• Posts: 431
• Location: England
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #231 on: January 06, 2018, 06:54:36 AM »
If you found a herb that worked well to replace ongoing prescription medication, that'd probably save a lot of money.

Can't comment on your math, but I find many herbals are more expensive than prescription meds. I'm on two meds, one is \$10 a month the other is less than \$4 a month.
My doc starts with the cheapest that may do the job and works up. OH, I forgot, I had a 50%
increase in the \$10 prescription recently, it's now \$15. That sucks, but it's still cheap.

I was more thinking that depending on the herb, you may be able to learn how to grow them and prepare the herbal medicine yourself, which doesn't seem likely for prescription drugs.

#### Ursus Major

• Stubble
• Posts: 157
• Location: Silicon Valley, CA
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #232 on: January 08, 2018, 04:14:33 PM »
My off-the-cuff intuition is that any bias added by the “Plan C” you described isn’t especially meaningful—the clustering of accumulation start dates around market boom years should have less impact on portfolio success rates than the clustering of retirement start dates around market boom years, which you’ve already examined, and, if anything, I would guess that the effects of the former would tend to cancel out the occurrence of the latter for reasonably high (but not extraordinarily high) savings rate levels (as savers who start accumulating during boom years would tend to be more likely to reach their savings targets during the next phase of the market cycle).

Good point. I bet plan C would mostly affect high savings rate folks, who weren't affected under plan B (since their accumulation phase is so short anyway) but would be affected by starting their accumulation phase around market booms (which would make their FIRE start year shortly after). So basically, people will either suffer market bias on the end of their accumulation phase (at low savings rates) or on the start of it (at high savings rates).

I'm not sure, if this has been mentioned before: A recent blog post by ERN did evaluate the scenario you are discussing, that is start accumulation equally distributed and then retire after savings allows for a 4% WR: https://earlyretirementnow.com/2017/12/13/the-ultimate-guide-to-safe-withdrawal-rates-part-22-endogenous-retirement-timing/

As expected the failure rate is at bit higher than under the assumption of equally distributed retirement months, but not dramatically so. Read the post and draw your own conclusions.

#### MrsPete

• Magnum Stache
• Posts: 3505
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #233 on: January 09, 2018, 02:44:39 PM »
If a market crash happens, most rational people will adjust their spending accordingly. Some will get a job, others will earn money from a side business, rent out a room in their house or maybe just cut expenses.
Assuming, of course, that adjusting is possible.  Sure, a 50-year old who realizes he's in trouble has options:  He can cut expenses, get a part-time job, or make any number of other choices.  An 90-year old in the same situation may have fewer options; he may not be able to dismiss the lawn care guys /cut his own grass.  And if his financial problems are medical in nature, cutting back on services may not be possible.

That's why I want to be sure I have a solid buffer before I become the 90-year old.

#### BudgetSlasher

• Handlebar Stache
• Posts: 1212
##### Re: cFiresim SEVERELY overestimates success rates for Mustachians
« Reply #234 on: January 09, 2018, 03:24:22 PM »
I walked past this today and while the subject matter of the models may be different, I feel that the analysis is still relevant.