The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: CCCA on June 15, 2018, 10:17:40 AM
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I really liked @maizeman 's graphs (see https://forum.mrmoneymustache.com/post-fire/for-those-who-follow-the-4-rule/msg1438246/#msg1438246 (https://forum.mrmoneymustache.com/post-fire/for-those-who-follow-the-4-rule/msg1438246/#msg1438246) as one example) and I thought I'd make an interactive version of this graph so people could play with it and customize it to their particular parameters, rather than play with python and updating his script. I DM'd maizeman and got his blessing to do so as I didn't want to step on anyone's toes.
https://engaging-data.com/will-money-last-retire-early/ (https://engaging-data.com/will-money-last-retire-early/)
It should be relatively intuitive how to use it and the idea is to play with it and test out new theories/plans/scenarios and understand the options. You shouldn't be able to break it, but if you do, please let me know and I'll try to fix it. It uses the same data as cFIREsim, historical periods from 1871 to 2016 to run through each scenario with inflation adjusted spending and then calculates the probability of success or failure, but adds, like maizeman's graphs did, the probability of death from social security life expectancy tables depending on your sex.
If you hide the "wedge of death", you can also use it as a simpler form of FIREcalc or cFIREsim without all the extras that complicate it. I've gotten a few comments about things to add: social security, taxes, variable investment fees and I will probably do those, though I'm not sure about the timeline. If you have other things you want to add, let me know and I'll see. I'll be on vacation for awhile so I might not get to things for a few weeks at the earliest.
I'd appreciate any other comments or suggestions as well.
(http://www.engaging-data.com/pages/scripts/deadandbroke/DAB.png) (http://engaging-data.com/will-money-last-retire-early/?utm_source=mmm)
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That dead % is scary...
Can you add something like a "life event" option that would add in Soc Sec or pension income? I'd like to combat that broke %.
Maybe a non-smoker checkbox to lower the dead % too...
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Thanks for doing this, nice work!
Another suggestion would be to add a joint life option for a couple.
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Neat! Thanks for sharing, CCCA (and thanks Maizeman again for the static version).
I played around with a variety of inputs, and it almost always works great, but something weird seems to happen when I input an allocation of exactly 70/20/10 (Stock/Bond/Cash): it says the numbers don't add up to 100%. Any ideas?
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Great tool, I am much more likely to die than to go broke.
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Wow, I loved the Maizeman graphs and so this is awesome.
Stupid question I'm sure... The Balance<Start and the Balance>2x wedges demarcations are all based on inflation adjusted dollars, right?, I'm not sure I can wrap my head around if that is definitely the case or not...
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Neat! Thanks for sharing, CCCA (and thanks Maizeman again for the static version).
I played around with a variety of inputs, and it almost always works great, but something weird seems to happen when I input an allocation of exactly 70/20/10 (Stock/Bond/Cash): it says the numbers don't add up to 100%. Any ideas?
I saw this also for 60/30/10.
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First off, thanks everyone for the feedback. Keep it coming! And I'm glad that the tool is useful/fun for everyone here.
That dead % is scary...
Can you add something like a "life event" option that would add in Soc Sec or pension income? I'd like to combat that broke %.
Maybe a non-smoker checkbox to lower the dead % too...
Hmm, I'll have to think about the smoker thing. I will definitely add the SS annuity thing, though not sure when I'll get around to it.
Thanks for doing this, nice work!
Another suggestion would be to add a joint life option for a couple.
Great, glad that you like it. I like the idea of a joint life option, will add to the list.
Great tool, I am much more likely to die than to go broke.
Yup, I think that's the stark reminder in the graph. That wedge of death gets awfully big, awfully fast. But still need to worry about longevity of your stache.
Neat! Thanks for sharing, CCCA (and thanks Maizeman again for the static version).
I played around with a variety of inputs, and it almost always works great, but something weird seems to happen when I input an allocation of exactly 70/20/10 (Stock/Bond/Cash): it says the numbers don't add up to 100%. Any ideas?
I saw this also for 60/30/10.
Thanks! I fixed the issue with the asset inputs. My check for summation to 100% was a little too strict given how javascript converts numbers. Anyway, I loosened the allowable sloppyness in the numbers and should be fine now.
Wow, I loved the Maizeman graphs and so this is awesome.
Stupid question I'm sure... The Balance<Start and the Balance>2x wedges demarcations are all based on inflation adjusted dollars, right?, I'm not sure I can wrap my head around if that is definitely the case or not...
. Everything is in nominal dollars here. I think I will add a toggle (again, some point in the future) to switch between real and nominal dollars.
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That dead % is scary...
I was looking at the red thinking "that's not that scary, but why is % death not increasing with age"... "oh shit, black is death %!"
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Very cool/useful tool! Sell this to mass media for use on CNBC and the like.....
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Loads fine for me.
I had a disheartening amount of red on the screen until I realized I had left a 0 off of my stash number!
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If we all live long enough to get the Ray Kurzweil immortality treatments, that death wedge can drop back down to 0.
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Great visual tool. Still not sure what to make of a 70% probability I’ll be dead in 40 years, but if I do live that long there’s a 20% chance I’ll be broke. Hmmmm....
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If we all live long enough to get the Ray Kurzweil immortality treatments, that death wedge can drop back down to 0.
Of course with paying for monthly injections of nanobots (or whatever form the treatment takes) added to the budget, I'd imagine that red wedge would rise to 100% pretty darn fast. ;-)
I'd told CCCA this earlier, but I really like the new calculator and display. Reading through some of the early comments, it would seem we're rapidly going to be adding a lack of good, detailed actuarial data for life expectancy at different ages with different combinations of health risks to my perennial complaint about the lack of good public sector datasets on stock and bond returns outside the USA.
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very cool. an interesting way of looking at the future landscape.
What is the death % calculation based on?
Rob
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Social security provides this handy table with your risk of dying in the next year and average number of years you have left to live for any given age: https://www.ssa.gov/OACT/STATS/table4c6.html
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First off, thanks everyone for the feedback. Keep it coming! And I'm glad that the tool is useful/fun for everyone here.
That dead % is scary...
Can you add something like a "life event" option that would add in Soc Sec or pension income? I'd like to combat that broke %.
Maybe a non-smoker checkbox to lower the dead % too...
Hmm, I'll have to think about the smoker thing. I will definitely add the SS annuity thing, though not sure when I'll get around to it.
Yeah, I mentioned this in another thread about this same graph. With 15 years of FIRE until getting a decent SS benefit, it's quite significant:
https://forum.mrmoneymustache.com/investor-alley/maizeman's-trippy-script/msg2036794/#msg2036794
But even 92% without SS when it includes a large discretionary spending cushion in the WR is not bad in itself. Still it would be nice to tack on some SS. I expect that would show 100% here as with cFireSim.
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That dead % is scary...
Yeah. I think there's a bug.
No matter how much I jack up the size of the stash, the dead-region doesn't get any smaller.
That can't be how it's supposed to work. Not in real life. </s>
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I needed that laugh tonight. Thank you @shuffler.
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That dead % is scary...
Yeah. I think there's a bug.
No matter how much I jack up the size of the stash, the dead-region doesn't get any smaller.
That can't be how it's supposed to work. Not in real life. </s>
Lol
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That dead % is scary...
Yeah. I think there's a bug.
No matter how much I jack up the size of the stash, the dead-region doesn't get any smaller.
That can't be how it's supposed to work. Not in real life. </s>
Sure you can, there's a toggle to turn the dead zone off .
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If we all live long enough to get the Ray Kurzweil immortality treatments, that death wedge can drop back down to 0.
Of course with paying for monthly injections of nanobots (or whatever form the treatment takes) added to the budget, I'd imagine that red wedge would rise to 100% pretty darn fast. ;-)
I'd told CCCA this earlier, but I really like the new calculator and display. Reading through some of the early comments, it would seem we're rapidly going to be adding a lack of good, detailed actuarial data for life expectancy at different ages with different combinations of health risks to my perennial complaint about the lack of good public sector datasets on stock and bond returns outside the USA.
Since maizeman is in the thread I’d like to thank him again for his idea to put the death projection and portfolio projections together.
I think one key value of this is that it reframes the considerations from purely focused on the few percentage points we normally agonize over in cfiresim (trying to go from 10% failure to 5% or 0%). But when viewed with the giant “wedge of death”, the differences between 5, 10 or even 20% seem relatively small compared to the chance of death.
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If we all live long enough to get the Ray Kurzweil immortality treatments, that death wedge can drop back down to 0.
Or if the Nick Bostrom / Eliezer Yudkowsky wing of the AI/singularity conversation is correct then the death wedge will spike to 100% for all of us at some unknown point.
I want to thank both maizeman and CCCA for this. I've shared maizeman's graphs with a lot of people, and now I will need to send them CCCA's link. You guys are awesome!
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thanks maizeman and CCCA!
I downloaded the Ken Fisher, "when can I retire" guide (ad link at side), just for fun. Hope you get a kickback and enable your FIRE earlier.
No, I did NOT use my real name and email address. Did that twice before and was bugged for years (Fisher and some gold thingy).
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thanks maizeman and CCCA!
I downloaded the Ken Fisher, "when can I retire" guide (ad link at side), just for fun. Hope you get a kickback and enable your FIRE earlier.
No, I did NOT use my real name and email address. Did that twice before and was bugged for years (Fisher and some gold thingy).
Thanks for the thought, though you don't need to click on ads. If we all live long enough to get the Ray Kurzweil immortality treatments, that death wedge can drop back down to 0.
Or if the Nick Bostrom / Eliezer Yudkowsky wing of the AI/singularity conversation is correct then the death wedge will spike to 100% for all of us at some unknown point.
I want to thank both maizeman and CCCA for this. I've shared maizeman's graphs with a lot of people, and now I will need to send them CCCA's link. You guys are awesome!
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Yeah, I'm sort of on the pessimistic side of the AI/singularity thing but who knows what will happen.
Please share the link. I'm happy that people find it useful.
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Boy, I'm not sure how I feel about the fact that I'm far more likely to be dead than broke!
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Though I suspect the high educational attainment of Mustachians -- a protective factor -- probably skews towards a significantly lower death rate curve.
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Though I suspect the high educational attainment of Mustachians -- a protective factor -- probably skews towards a significantly lower death rate curve.
Huh, it makes a bigger difference than I would have guessed. So based on this paper* from back in 2010, a 25 year old man with a graduate degree can expect to live to 85, while a 25 year old man who only graduated from high school can expect to live to 76.
The difference is smaller for women: 87 (graduate degree) and 81 (high school) respectively.
*https://www.ncbi.nlm.nih.gov/pubmed/25093685
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it looks amazing. it Is not running.
there is no button to run it
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it looks amazing. it Is not running.
there is no button to run it
Hmm, if you change the numbers in the input boxes, and it doesn't update, you can press "Enter" on your keyboard to make sure that the change is registered, or just click on the "Update Asset Allocation" button, which will redraw the graph based on the updated inputs.
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i was using a work cpu
at home it works like a charm
Thank you! so, we're all gonna die, huh?
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i was using a work cpu
at home it works like a charm
Thank you! so, we're all gonna die, huh?
given enough time, yes. Hence, the point is to do things that add meaning to your life, not just scrimp and save.
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i was using a work cpu
at home it works like a charm
Thank you! so, we're all gonna die, huh?
if there was no picture at all, maybe your work computer disabled javascript?
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I love this! Thank you (and thanks also to Maizeman). I'm posting mainly so I'll be able to easily find in the future. I think it will make a great teaching tool to illustrate the general idea of the 4% rule to people, and then (of course) it goes way beyond that because of all the scenarios you can play with.
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Are the different degrees of success based on comparing inflation-adjusted portfolio values or nominal?
Nominal values. I have plans to update it to allow for an inflation adjusted view as well.
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It would complicate this beautifully simple tool, but it would be nice if it modeled a couple. When I do simulations, it seems that the odds that both DW and I will survive 45 years is sadly very small (although my GPs on one side both made it to 95). If we imagine that spending for 1 of us would be 75% of the two of us, it really lowers the chances of ever going broke, since the chances of both of us making it to our 80s is less than 30%.
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Though I suspect the high educational attainment of Mustachians -- a protective factor -- probably skews towards a significantly lower death rate curve.
Huh, it makes a bigger difference than I would have guessed. So based on this paper* from back in 2010, a 25 year old man with a graduate degree can expect to live to 85, while a 25 year old man who only graduated from high school can expect to live to 76.
The difference is smaller for women: 87 (graduate degree) and 81 (high school) respectively.
*https://www.ncbi.nlm.nih.gov/pubmed/25093685
Yeah, and from what I've read, the gap has been widening. With all the talk about how "college isn't worth it" going on now (primarily because of the rising expenses), the fact remains that not only do those with college degree significantly out-earn their non-college peers over a lifetime, but they are also now living significantly longer. That's the uncomfortable inequality -- longevity inequality -- most people aren't talking about.
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Though I suspect the high educational attainment of Mustachians -- a protective factor -- probably skews towards a significantly lower death rate curve.
Huh, it makes a bigger difference than I would have guessed. So based on this paper* from back in 2010, a 25 year old man with a graduate degree can expect to live to 85, while a 25 year old man who only graduated from high school can expect to live to 76.
The difference is smaller for women: 87 (graduate degree) and 81 (high school) respectively.
*https://www.ncbi.nlm.nih.gov/pubmed/25093685
Yeah, and from what I've read, the gap has been widening. With all the talk about how "college isn't worth it" going on now (primarily because of the rising expenses), the fact remains that not only do those with college degree significantly out-earn their non-college peers over a lifetime, but they are also now living significantly longer. That's the uncomfortable inequality -- longevity inequality -- most people aren't talking about.
I have no data to support this, but I would guess that it has a lot to do with which group is more likely to smoke. If you took out the smokers, I bet the longevity would be considerably closer.
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That's a good point. Lower educational attainment is also associated with a higher probability of drunk driving.* I'm guessing you'd see a lot of other high risk behaviors that show similar patterns. And also suicides: "Men with a high school education were twice as likely to die by suicide compared with those with a college degree in 2014."**
* https://www.ncbi.nlm.nih.gov/pubmed/12711655
** https://www.ncbi.nlm.nih.gov/pubmed/28756896
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Subscribing to learn when we get the inflation-adjusted option. 2x starting stache doesn't mean much if it ain't inflation adjusted
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As with a pension...I presume this doesn't factor any SS income either?
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Neato! Thanks for making and sharing.
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As with a pension...I presume this doesn't factor any SS income either?
See the original post.
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Why is everyone dead at 105? 100%
There is always the chance that we discover ways to prevent cell death/decay.
Or download your mind into whatever quantum computer thingy they have in 40 years (but then not sure how large of a stash one needs...maybe a lot more, maybe not as much)
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Given current health and medical science, out of every 100,000 male babies born today, we would expect 76 (so 0.076%) to live to 105, so I suspect CCCA's website is just rounding that value to zero. Women do a little better, 0.3% of them can expect to make it to 105.
But yes, there is indeed a non-zero (but difficult if not impossible to estimate) longevity "risk" from discovering a transformational cure for old age.
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One thing I always struggled with on the FIRE discussions was the enthusiastic discussion of the fact that people die or get incapacitated earlier than 'traditional retirement age', so that's a great reason to ER. As a corollary, there is also enthusiastic talks about how, if we manage to live a really long time, we will spend less and leave lots of money to others. Both of these discussions made me a little sad as to why, if you really are 'betting' to die in 10 - 20 years, then do ER and don't complain if you don't die, but stop talking about it like you are 60 or 70 years old. Also, if you live below your means for much longer than expected, then enjoy figuring out to do with all that excess then. But in the meantime, just figure out a good way to optimize for the foreseeable future. The long term for you will inevitably be something different from whatever an average projects, and only you can be the best judge if you, say, eat better than average, exercise more than average, have better genetics than average, build net worth better than average, etc.
In my engineering job, Operations complains when we try to make things inflexible and reduce their job to the point where they don't have to think. That is apparently the most dangerous situation, when inexperienced people rely on safeguards as a matter of course.
Replacing 'expected outcomes' with 'normalized outcomes' subjects the individual to inevitable disappointment.
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Given current health and medical science, out of every 100,000 male babies born today, we would expect 76 (so 0.076%) to live to 105, so I suspect CCCA's website is just rounding that value to zero. Women do a little better, 0.3% of them can expect to make it to 105.
But yes, there is indeed a non-zero (but difficult if not impossible to estimate) longevity "risk" from discovering a transformational cure for old age.
If this were found, and it were somehow available to the masses, I wonder how that would affect the hidden assumptions of the Trinity study? Would working habits and productivity change? That type of demographic shift has the potential to really disturb economies (not to mention population growth if the balance between adding and subtracting shifts dramatically).
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Yup, radical life extension (that works and is available to many people) definitely falls into the that category of black swan/long tail events where historical data probably would lose most of its ability to forecast the future.
If the reality of a person's body or mind being too old to work went away, would the concept of regular retirement vanish entirely? Or would people continue to retire and the balance of workers to retirees would rapidly spiral out of control? (If timed perfectly this could work well with the accelerating pace we're seeing blue and white collar jobs being replaced by robotics and AI respectively.)
In the past increases in life expectancy in a given country tend to be correlated with declines in birth rates (usually with a lag time of a generation or so, so you still see a dramatic uptick in population). Would that relationship hold true if lifespans doubled or tripled?
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this is amazing
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Re-reading my unsolicited rant from last night :) I think I was trying to get around to asking for a 'Mustachian' button. It would be really awesome to toggle between statistical average (current version) to an optimized outcome (college educated, married, cope well with stress, etc for longvity + able to reduce withdrawal 25% during bear market, AA annually re-balanced, etc.)... Just for fun. Maybe it would nudge people in a good direction toward financial education and being more confident to ER.
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Yup, radical life extension (that works and is available to many people) definitely falls into the that category of black swan/long tail events where historical data probably would lose most of its ability to forecast the future.
If the reality of a person's body or mind being too old to work went away, would the concept of regular retirement vanish entirely? Or would people continue to retire and the balance of workers to retirees would rapidly spiral out of control? (If timed perfectly this could work well with the accelerating pace we're seeing blue and white collar jobs being replaced by robotics and AI respectively.)
In the past increases in life expectancy in a given country tend to be correlated with declines in birth rates (usually with a lag time of a generation or so, so you still see a dramatic uptick in population). Would that relationship hold true if lifespans doubled or tripled?
google's futurist predicted the millenial generation will be the first to have to choose to die. be really cool to see if that comes true. Death parties. unlike weddings and the other things you can waste money on to hurt you - a big blow out bash where you give away money and throw one helluva party followed by killing yourself in some crazy way.
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Re-reading my unsolicited rant from last night :) I think I was trying to get around to asking for a 'Mustachian' button. It would be really awesome to toggle between statistical average (current version) to an optimized outcome (college educated, married, cope well with stress, etc for longvity + able to reduce withdrawal 25% during bear market, AA annually re-balanced, etc.)... Just for fun. Maybe it would nudge people in a good direction toward financial education and being more confident to ER.
I think the easiest way to handle life expectancy is just to have the system auto-populate the number it's using now, and let the user change it to anything they want. Go nuts with a third-party LE calculator or just guess. It's the least work for the creator with maximum flexibility
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google's futurist predicted the millenial generation will be the first to have to choose to die. be really cool to see if that comes true. Death parties. unlike weddings and the other things you can waste money on to hurt you - a big blow out bash where you give away money and throw one helluva party followed by killing yourself in some crazy way.
I mean in all fairness I could choose to do die that way (complete with blowing all of my savings on a ridiculous party) today or tomorrow. ;-)
But yes, one way or another it's going to be fascinating to see what the next several decades have in store. And if google's futurist is right, perhaps see what the next several centuries have in store.
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My preference would be sentenced to death in the manner of Socrates for corrupting
the youth, but without blowing my savings on a farewell party.
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google's futurist predicted the millenial generation will be the first to have to choose to die. be really cool to see if that comes true. Death parties. unlike weddings and the other things you can waste money on to hurt you - a big blow out bash where you give away money and throw one helluva party followed by killing yourself in some crazy way.
I mean in all fairness I could choose to do die that way (complete with blowing all of my savings on a ridiculous party) today or tomorrow. ;-)
But yes, one way or another it's going to be fascinating to see what the next several decades have in store. And if google's futurist is right, perhaps see what the next several centuries have in store.
i dont know that its fair or right to stay alive for the sake of being alive. and depleting natural resources.
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Thank you! so, we're all gonna die, huh?
Hahaha!
Seriously, though, I love this calculator. The visual is so striking, and it's much easier for "regular" people to use and understand at a glance than others, like FIREcalc (which I also love).
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My preference would be sentenced to death in the manner of Socrates for corrupting
the youth, but without blowing my savings on a farewell party.
i wasnt saying blow it all i was saying give it all away and have some to fund the party. whether its to heirs or your favorite charities. We're all going to die with mulitple millions thats the likely case here.
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What will likely happen, to prevent massive overpopulation if a cure for aging happens, is forced birth control. Maybe to have a kid, you have to agree to terminate yourself at some future time.
Otherwise in a few centuries the earth would just be a shithole.
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Sorry, I've been (and still am) on vacation and haven't had time to check on the thread. But I did find a few minutes to do a few things:
1- I updated the tool so that you can now toggle between nominal and inflation adjusted values. You can see that the inflation adjusted (real) metrics for success look worse than the nominal metrics (i.e. > than initial balance or 2x initial balance).
2 - I checked twitter and noticed that Jacob (the guy from ERE) tweeted my tool out to his followers and posted it to the ERE forums. Nice to see some acknowledgement from one of the founders of the FIRE movement: https://twitter.com/extremejacob/status/1010301383034245126
3- I updated the site to https. I may have broken some things for a few hours, but hopefully it's all working now.
I'll try to add more items from the list as I find a few min/hours on my vacation.
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Congrats, CCCA! It's exciting to see your tool getting name dropped by one of the two people who (at least from my personal perspective) really kicked off the modern FIRE movement.
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Thanks for adding inflation, cool tool. Ur in the Bay Area I’ll buy you a beer
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This is really cool, thank you!
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Freakin' awesome! You sir are an absolute star!
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Trying to wrap my head around how the likelihood of me being broke increases when I toggle off the death curve. Is this just so everything adds up to 100%?
It's like the performance of the stock market all depends on me being alive....definitely not true.
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Trying to wrap my head around how the likelihood of me being broke increases when I toggle off the death curve. Is this just so everything adds up to 100%?
It's like the performance of the stock market all depends on me being alive....definitely not true.
When you uncheck death, that takes death out of the equation. If you're not dead, it's down to one of the other results.
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But why would me being alive impact the 4% rule (what I plugged in for spend and portfolio) failing?
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But why would me being alive impact the 4% rule (what I plugged in for spend and portfolio) failing?
The percent chance of being broke is the chance that you run out of money either before you die or before you reach the maximum age in the simulation.
If you knew with absolute certainty you were going to die in 6 months, you could spend 150% of your net worth per year and have no risk of running out of money.
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But why would me being alive impact the 4% rule (what I plugged in for spend and portfolio) failing?
Let's say at some point you have the following percentages at age 85:
2x - 10%
>start and <2x - 10%
less than start - 10%
broke - 10%
dead - 60%
If you know for certain that you have invented a miracle anti-death medicine and an Ironman suit that prevents death from accidents, then you know you won't die by then. What are the chances of the other situations? They should each be 25% now. It's a little like rolling a die. If you have a normal 6 sided die, there's a 1/6 chance of rolling each number. If you want a 1/4 chance, how can you get that from a standard die? You could just say that you'll completely ignore and re-roll any 5s and 6s that you roll. Now the odds of rolling a 1, 2, 3, and 4 are 1/4. In that example you have to completely ignore the 5s and 6s - if they come up you need to just pretend they didn't happen.
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Sorry, I've been (and still am) on vacation and haven't had time to check on the thread. But I did find a few minutes to do a few things:
1- I updated the tool so that you can now toggle between nominal and inflation adjusted values. You can see that the inflation adjusted (real) metrics for success look worse than the nominal metrics (i.e. > than initial balance or 2x initial balance).
Please give some info on the inflation toggle, i.e. is this in line with a historical inflation of the last 'x' years (x being retirement time-frame selected), or simply fixed current inflation (~2%), historical CPI, historically estimated chained-CPI?.
Is ER healthcare accounted for, because that is definitely higher than 2% inflation.
Thanks for the work you are putting in to this!
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Sorry, I've been (and still am) on vacation and haven't had time to check on the thread. But I did find a few minutes to do a few things:
1- I updated the tool so that you can now toggle between nominal and inflation adjusted values. You can see that the inflation adjusted (real) metrics for success look worse than the nominal metrics (i.e. > than initial balance or 2x initial balance).
Please give some info on the inflation toggle, i.e. is this in line with a historical inflation of the last 'x' years (x being retirement time-frame selected), or simply fixed current inflation (~2%), historical CPI, historically estimated chained-CPI?.
Is ER healthcare accounted for, because that is definitely higher than 2% inflation.
Thanks for the work you are putting in to this!
Yes, inflation is historically indexed and linked to the same annual data for stock and bond returns. There is currently no ER healthcare accounted for.
Trying to wrap my head around how the likelihood of me being broke increases when I toggle off the death curve. Is this just so everything adds up to 100%?
It's like the performance of the stock market all depends on me being alive....definitely not true.
Others have answered and in skimming them, I think the answers are correct but I thought I'd add my own, hopefully, clear explanation. The main thing is that the retirement balance probabilities (i.e. balance > start, balance< start, balance <0) is that they are all assuming that you are alive.
Conditional probability is the probability of event B occurring assuming that event A will occur (or has already occurred). If you die with money left, you cannot by definition, become broke later (i.e. probability of going broke is 0%, if you die). The probability of going broke, if you are alive until you are 80 to 100 is non-zero for many ER scenarios.
Thus removing the death wedge is like looking at the conditional probabilities of various outcomes of your retirement balance assuming you are alive throughout the entire period of interest. Including the death wedge, you are multiplying the conditional probabilities by the probability of being alive. If you have a 50% chance of being alive in a given year, then your likelihood of becoming broke cannot be over 50%.
Not sure if that is clearer or not, but adding another explanation can hopefully help people who didn't get it after the other explanations.
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Sorry, I've been (and still am) on vacation and haven't had time to check on the thread. But I did find a few minutes to do a few things:
1- I updated the tool so that you can now toggle between nominal and inflation adjusted values. You can see that the inflation adjusted (real) metrics for success look worse than the nominal metrics (i.e. > than initial balance or 2x initial balance).
Please give some info on the inflation toggle, i.e. is this in line with a historical inflation of the last 'x' years (x being retirement time-frame selected), or simply fixed current inflation (~2%), historical CPI, historically estimated chained-CPI?.
Is ER healthcare accounted for, because that is definitely higher than 2% inflation.
Thanks for the work you are putting in to this!
Yes, inflation is historically indexed and linked to the same annual data for stock and bond returns. There is currently no ER healthcare accounted for.
Please toss out the reference you used for your historical inflation adjustment. Thanks!
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I have a question for folks here, who might help me with some of the logic for the pension/social security addition to the calculator.
If I want to add a pension/social security value of $20,000 per year (and adjusted for inflation annually) to the calc when the user is aged 67, how would I expect the user (who might retire at age 40) to enter the value of this pension/SS benefit? Are they entering the nominal dollars 27 years in the future or are then entering a nominal amount now that I need to calculate 27 years of inflation for?
Will most people be getting estimates of the 2018 value of these future benefits or the in-year estimate (say 2045) value?
thanks.
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If I want to add a pension/social security value of $20,000 per year (and adjusted for inflation annually) to the calc when the user is aged 67, how would I expect the user (who might retire at age 40) to enter the value of this pension/SS benefit? Are they entering the nominal dollars 27 years in the future or are then entering a nominal amount now that I need to calculate 27 years of inflation for?
It's closer to present value, but technically, it's neither of the two options you provided. Salary under age 60 is indexed (but by average age index not by inflation) up until age 60, above age 60, the index is always 1.0. See the example and text on the left side of this page for more detail: https://www.ssa.gov/oact/progdata/retirebenefit1.html
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Please toss out the reference you used for your historical inflation adjustment. Thanks!
From CCCA's website:
Data source and Tools Historical Stock/Bond and Inflation data comes from Prof. Robert Shiller (http://www.econ.yale.edu/~shiller/data.htm).
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I have a question for folks here, who might help me with some of the logic for the pension/social security addition to the calculator.
If I want to add a pension/social security value of $20,000 per year (and adjusted for inflation annually) to the calc when the user is aged 67, how would I expect the user (who might retire at age 40) to enter the value of this pension/SS benefit? Are they entering the nominal dollars 27 years in the future or are then entering a nominal amount now that I need to calculate 27 years of inflation for?
Will most people be getting estimates of the 2018 value of these future benefits or the in-year estimate (say 2045) value?
I always calculate my SS benefits in "today's dollars". That is the default, although there are options on some of the ssa.gov calculators for "future (inflated) dollars". In addition to the wage indexing mentioned, beginning at age 62, the benefit will increase by COLA each year, which is based on CPI-W, whether you have started taking benefits or not, not to be confused with the delayed retirement credit. So, if there was an option, I would pref to plug in my benefit for the year/age I expect to start taking benefits using the benefit calculated in today's dollars that I got from ssa.gov or the offline calculator and have your graph handle the compensation to future dollars for my FIRE date and beyond.
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Here is a
beta (not official), early preview version of the updated tool (https://engaging-data.com/pages/scripts/deadandbroke/RBoDss.html), (this link doesn't work anymore, go to the original link for the latest version) which now includes investment fees, taxes and social security/pension. I made some slight modifications to the code so things won't exactly line up with the old model with taxes, investment fees, and social security set to 0.
https://engaging-data.com/will-money-last-retire-early/
Social security is assumed to be in present dollars and inflated by the cumulative inflation rate until the age you take it. However, I realize there's no year assumed here. Year 1 of your retirement is assumed to be today, even if your starting retirement age is in the future.
As always, any suggestions, comments, etc are appreciated!
(https://engaging-data.com/pages/scripts/deadandbroke/RBoDss.png) (https://engaging-data.com/pages/scripts/deadandbroke/RBoDss.html)
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You are doin a lot of work to accommodate options, which is great, but here’s yet another suggestion:
Hide some of the options behind an “advanced options” menu or something to keep the basic tool unintimidating
Or I guess you could just publish two separate tools, basic and advanced
But if it gets too cluttered, more basic users might get scared away
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You are doin a lot of work to accommodate options, which is great, but here’s yet another suggestion:
Hide some of the options behind an “advanced options” menu or something to keep the basic tool unintimidating
Or I guess you could just publish two separate tools, basic and advanced
But if it gets too cluttered, more basic users might get scared away
Yeah, I’m trying to figure out how to not make this turn into firecalc or cfiresim. I thought of the idea of hiding things but maybe making a simple version is better.
But I do want it to be useful so I’d like to add things that can help people without scaring away others.
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There something I noticed playing around with SS. I set my retirement horizon to age 90. I got 100% initially regardless of what age I would take SS benefits, but when I scaled down my stash by $250K to drop my success rate to the high 90's% just for testing, I noticed my success rate using age 62 SS benefits gave me a slightly higher success rate than using my age 67 SS benefits (based on SS calculator and present day dollars.) This was unexpected for an age 90 time horizon, which is well past the break-even for delayed SS benefits. When I use those same figures in cFIREsim, I get slightly better success percentage by delaying SS to 67. I just confirmed that again now using the same age ranges, retirement length, allocation, and such comparing age 62 vs. age 67 benefits.
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Are you including the death curve?
If so, it makes sense that you'd get different results because in cFiresim, you're surviving until 90 100% of the time, and with CCCA's website, sometimes (fairly frequently) you die in 60s or 70s, and in that subset of scenarios taking social security early will either prove to be the better choice, or you'll have accumulated enough money through compounding that regardless of which choice you make, you won't run out of money.
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There something I noticed playing around with SS. I set my retirement horizon to age 90. I got 100% initially regardless of what age I would take SS benefits, but when I scaled down my stash by $250K to drop my success rate to the high 90's% just for testing, I noticed my success rate using age 62 SS benefits gave me a slightly higher success rate than using my age 67 SS benefits (based on SS calculator and present day dollars.) This was unexpected for an age 90 time horizon, which is well past the break-even for delayed SS benefits. When I use those same figures in cFIREsim, I get slightly better success percentage by delaying SS to 67. I just confirmed that again now using the same age ranges, retirement length, allocation, and such comparing age 62 vs. age 67 benefits.
It could be because of how I calculate SS benefits in a given year. I can’t remember how much more you get each year you delay SS but it is substantial as I understand it. However since inflation has been high in the past, maybe in a lot of cases taking it at 62 gets you as much (or almost as much) money when you are 67 as the SS calculator tells you. But you also get the money from 62 to 67.
Just speculating here but that could be why taking at 62 is better than 67 in this historical cycle context. If we think inflation won’t ever be higher than 2-3% going forward that may not hold in the future.
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Are you including the death curve?
If so, it makes sense that you'd get different results because in cFiresim, you're surviving until 90 100% of the time, and with CCCA's website, sometimes (fairly frequently) you die in 60s or 70s, and in that subset of scenarios taking social security early will either prove to be the better choice, or you'll have accumulated enough money through compounding that regardless of which choice you make, you won't run out of money.
I had the death curve turned off during my earlier testing which had given those results. But I just tested it again with the death curve enabled, and while the graph looks different with that increasing amount of grey, the death curve didn't change my success rate percentage (where it shows at the top above the graph, but enabling death does change the broke and other percentages where I hover the mouse pointer over the graph on the far right).
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There something I noticed playing around with SS. I set my retirement horizon to age 90. I got 100% initially regardless of what age I would take SS benefits, but when I scaled down my stash by $250K to drop my success rate to the high 90's% just for testing, I noticed my success rate using age 62 SS benefits gave me a slightly higher success rate than using my age 67 SS benefits (based on SS calculator and present day dollars.) This was unexpected for an age 90 time horizon, which is well past the break-even for delayed SS benefits. When I use those same figures in cFIREsim, I get slightly better success percentage by delaying SS to 67. I just confirmed that again now using the same age ranges, retirement length, allocation, and such comparing age 62 vs. age 67 benefits.
It could be because of how I calculate SS benefits in a given year. I can’t remember how much more you get each year you delay SS but it is substantial as I understand it. However since inflation has been high in the past, maybe in a lot of cases taking it at 62 gets you as much (or almost as much) money when you are 67 as the SS calculator tells you. But you also get the money from 62 to 67.
Just speculating here but that could be why taking at 62 is better than 67 in this historical cycle context. If we think inflation won’t ever be higher than 2-3% going forward that may not hold in the future.
I normally hear 8% per year. In my case the age 67 benefit was 42% higher than the age 62 benefit in today's dollars based on the ssa.gov offline calculator.
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Here is a beta (not official), early preview version of the updated tool (https://engaging-data.com/pages/scripts/deadandbroke/RBoDss.html), which now includes investment fees, taxes and social security/pension. I made some slight modifications to the code so things won't exactly line up with the old model with taxes, investment fees, and social security set to 0.
[ . . .]
CCCA - I love playing with this updated version and have shared it with a few friends and family. I have been using the social security feature to model having a part time salary, since it will let you use whatever age you want as a start age. I think it is really fun to see how well the stash holds up if you continue to work to replace various portions of your spending. My only requested enhancement would be a separate input line similar to the social security for other income with inputs for Starting age and Ending age.
I've also shared the Market Timing game with a few coworkers as they debate pulling out of the market every week or two. Engaging Data indeed.
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isn't it always better to start it at age 67?
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isn't it always better to start it at age 67?
No. What if you die when you're 66?
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isn't it always better to start it at age 67?
Hotly debated question. Bottom line it comes down to how long you live.
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isn't it always better to start it at age 67?
More specifically the government has structures SS so that for the average person the total lifetime payout is about equal regardless of when you take it. But you have lots of inside information on your own health/family history/genetic risk factors. So if, based on your insider info you're likely to live longer than the average person who makes it to retirement age (which is already longer than the average person at birth), it probably makes sense to delay. If you're likely to live less long than the average person who makes it to retirement age, you can maximize your expected total payout by taking SS early.
There's a second level of reasoning where delaying SS acts as longevity insurance if you live a lot longer than you had expected, which will be more or less important based on the rest of your assets/income/retirement expenses.
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CCCA - I love playing with this updated version and have shared it with a few friends and family. I have been using the social security feature to model having a part time salary, since it will let you use whatever age you want as a start age. I think it is really fun to see how well the stash holds up if you continue to work to replace various portions of your spending. My only requested enhancement would be a separate input line similar to the social security for other income with inputs for Starting age and Ending age.
I've also shared the Market Timing game with a few coworkers as they debate pulling out of the market every week or two. Engaging Data indeed.
Thanks! Having one or two additional income sources is fine and I can easily code that in. I think my challenge is that I'm trying to keep it from blowing up to an indeterminate number of income and spending sources like cFIREsim. And it's not a coding challenge but more of an interface challenge*.
*both from a visual clutter perspective as well as a web design issue (where adding more things makes the calculator bigger to the point where it doesn't fit on the screen anymore).
I have been thinking about other updates. I started to code up a spousal survival probability combination (probability of you dying and your spouse dying is where you don't need money anymore), but I kinda got into a bit of a complicated mess. The challenge is that both spending and income (i.e. SS) can change depending on if you or your spouse die. And since the outputs are probability based I guess I'd need to gather all the inputs (spending and income) and then calculate probabilities of running out of money for each of the possibilities (both live, you live, spouse lives). It's definitely doable but I have to re-do the structure of the calc alot.
Anyway, this is just me thinking out loud mostly. I should have time over the next few weeks to look at some of these issues and can probably do some of the easy things quickly. I think I'm not going to make this a full-fledged cFIREsim replacement, but I can replicate some of the main elements without too much more effort.
By the way, I just got back from a month-long vacation roadtrip with the family. It was nice to be out and about in the Western US, lots of beautiful mountain and deserts landscapes.
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Re-reading my unsolicited rant from last night :) I think I was trying to get around to asking for a 'Mustachian' button. It would be really awesome to toggle between statistical average (current version) to an optimized outcome (college educated, married, cope well with stress, etc for longvity + able to reduce withdrawal 25% during bear market, AA annually re-balanced, etc.)... Just for fun. Maybe it would nudge people in a good direction toward financial education and being more confident to ER.
I think the easiest way to handle life expectancy is just to have the system auto-populate the number it's using now, and let the user change it to anything they want. Go nuts with a third-party LE calculator or just guess. It's the least work for the creator with maximum flexibility
Another (big) thank you and a request for this ^. (Those of us in developed countries outside the US will typically have higher life expectancy.)
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Don't forget to remove taxes from your spending if you're using the average tax rate option.
With cFireSim, I use the option to increase my spending at age 65 due to the higher cost of Medicare Parts/supplemental.
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CCCA - I love playing with this updated version and have shared it with a few friends and family. I have been using the social security feature to model having a part time salary, since it will let you use whatever age you want as a start age. I think it is really fun to see how well the stash holds up if you continue to work to replace various portions of your spending. My only requested enhancement would be a separate input line similar to the social security for other income with inputs for Starting age and Ending age.
I've also shared the Market Timing game with a few coworkers as they debate pulling out of the market every week or two. Engaging Data indeed.
Thanks! Having one or two additional income sources is fine and I can easily code that in. I think my challenge is that I'm trying to keep it from blowing up to an indeterminate number of income and spending sources like cFIREsim. And it's not a coding challenge but more of an interface challenge*.
*both from a visual clutter perspective as well as a web design issue (where adding more things makes the calculator bigger to the point where it doesn't fit on the screen anymore).
I have been thinking about other updates. I started to code up a spousal survival probability combination (probability of you dying and your spouse dying is where you don't need money anymore), but I kinda got into a bit of a complicated mess. The challenge is that both spending and income (i.e. SS) can change depending on if you or your spouse die. And since the outputs are probability based I guess I'd need to gather all the inputs (spending and income) and then calculate probabilities of running out of money for each of the possibilities (both live, you live, spouse lives). It's definitely doable but I have to re-do the structure of the calc alot.
Anyway, this is just me thinking out loud mostly. I should have time over the next few weeks to look at some of these issues and can probably do some of the easy things quickly. I think I'm not going to make this a full-fledged cFIREsim replacement, but I can replicate some of the main elements without too much more effort.
By the way, I just got back from a month-long vacation roadtrip with the family. It was nice to be out and about in the Western US, lots of beautiful mountain and deserts landscapes.
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Very Interesting, I was thinking about requesting a button to be able to switch to death probablilites for a couple (i.e. 'both are dead' would be the death line) but didnt think about all these other changes that does occur. Which is funny because I never liked when people said there is no reason for life insurance after retirement because you are no longer making an income...I'm not saying life insurance is reasonable at an advanced age, but its simply not true that no one depends on your income after your retire if you have a spouse, I've seen it be a big hit to a couple of people when one of those SS checks disappears.
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THIS IS AWESOME!!! Thank you!!!
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Very Interesting, I was thinking about requesting a button to be able to switch to death probablilites for a couple (i.e. 'both are dead' would be the death line) but didnt think about all these other changes that does occur. Which is funny because I never liked when people said there is no reason for life insurance after retirement because you are no longer making an income...I'm not saying life insurance is reasonable at an advanced age, but its simply not true that no one depends on your income after your retire if you have a spouse, I've seen it be a big hit to a couple of people when one of those SS checks disappears.
I believe surviving spouse gets the higher of the two social security amounts. Say Joe is 72 collecting $2200/mo and Jane is 70 collecting $1500/mo and Joe dies, Jane can now collect $2200 instead of $1500.
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Very Interesting, I was thinking about requesting a button to be able to switch to death probablilites for a couple (i.e. 'both are dead' would be the death line) but didnt think about all these other changes that does occur. Which is funny because I never liked when people said there is no reason for life insurance after retirement because you are no longer making an income...I'm not saying life insurance is reasonable at an advanced age, but its simply not true that no one depends on your income after your retire if you have a spouse, I've seen it be a big hit to a couple of people when one of those SS checks disappears.
I believe surviving spouse gets the higher of the two social security amounts. Say Joe is 72 collecting $2200/mo and Jane is 70 collecting $1500/mo and Joe dies, Jane can now collect $2200 instead of $1500.
This is correct: "If you are the widow or widower of a person who worked long enough under Social Security, you can receive full benefits at full retirement age for survivors or reduced benefits as early as age 60."
https://www.ssa.gov/planners/survivors/ifyou.html
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Re-reading my unsolicited rant from last night :) I think I was trying to get around to asking for a 'Mustachian' button. It would be really awesome to toggle between statistical average (current version) to an optimized outcome (college educated, married, cope well with stress, etc for longvity + able to reduce withdrawal 25% during bear market, AA annually re-balanced, etc.)... Just for fun. Maybe it would nudge people in a good direction toward financial education and being more confident to ER.
I think the easiest way to handle life expectancy is just to have the system auto-populate the number it's using now, and let the user change it to anything they want. Go nuts with a third-party LE calculator or just guess. It's the least work for the creator with maximum flexibility
Another (big) thank you and a request for this ^. (Those of us in developed countries outside the US will typically have higher life expectancy.)
My guess is that there would be a major challenge here because you don't just need the average remaining life expectancy, but also the shape of the distribution of outcomes, so it wouldn't be as simple as typing in a single number.
This is particularly true because increases in life expectancy are primarily driven by reduced early death rates rather shifting the whole curve.
For example, look at the change in the distribution of age at death for men in the UK between the mid-1800s and the late 20th century:
(https://qph.fs.quoracdn.net/main-qimg-af54c70f142673241dcc3d2d45c1ca9b)
(https://qph.fs.quoracdn.net/main-qimg-135b681fb68e7cd6dc510e5545043dee)
Total life expectancy came close to doubling over that time frame, but if I just took the shape of the curve from the 1800s and either shifted it over 35 years, or multiplied all the ages by 2x, I'd do an awful job of modeling the mortality curve at the end of the 20th century.
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Re-reading my unsolicited rant from last night :) I think I was trying to get around to asking for a 'Mustachian' button. It would be really awesome to toggle between statistical average (current version) to an optimized outcome (college educated, married, cope well with stress, etc for longvity + able to reduce withdrawal 25% during bear market, AA annually re-balanced, etc.)... Just for fun. Maybe it would nudge people in a good direction toward financial education and being more confident to ER.
I think the easiest way to handle life expectancy is just to have the system auto-populate the number it's using now, and let the user change it to anything they want. Go nuts with a third-party LE calculator or just guess. It's the least work for the creator with maximum flexibility
Another (big) thank you and a request for this ^. (Those of us in developed countries outside the US will typically have higher life expectancy.)
My guess is that there would be a major challenge here because you don't just need the average remaining life expectancy, but also the shape of the distribution of outcomes, so it wouldn't be as simple as typing in a single number.
This is particularly true because increases in life expectancy are primarily driven by reduced early death rates rather shifting the whole curve.
For example, look at the change in the distribution of age at death for men in the UK between the mid-1800s and the late 20th century:
(https://qph.fs.quoracdn.net/main-qimg-af54c70f142673241dcc3d2d45c1ca9b)
(https://qph.fs.quoracdn.net/main-qimg-135b681fb68e7cd6dc510e5545043dee)
Total life expectancy came close to doubling over that time frame, but if I just took the shape of the curve from the 1800s and either shifted it over 35 years, or multiplied all the ages by 2x, I'd do an awful job of modeling the mortality curve at the end of the 20th century.
Luckily we live now so you can just use the actual distribution and adjust it left or right based on the input. It won’t be perfect, but it’s not like life expectancy is a perfect predictor anyways.
Hell its close enough to a normal distribution, especially looking at a conditional distribution for people who have survived childhood. just use a reasonable stdev
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Re-reading my unsolicited rant from last night :) I think I was trying to get around to asking for a 'Mustachian' button. It would be really awesome to toggle between statistical average (current version) to an optimized outcome (college educated, married, cope well with stress, etc for longvity + able to reduce withdrawal 25% during bear market, AA annually re-balanced, etc.)... Just for fun. Maybe it would nudge people in a good direction toward financial education and being more confident to ER.
I think the easiest way to handle life expectancy is just to have the system auto-populate the number it's using now, and let the user change it to anything they want. Go nuts with a third-party LE calculator or just guess. It's the least work for the creator with maximum flexibility
Another (big) thank you and a request for this ^. (Those of us in developed countries outside the US will typically have higher life expectancy.)
My guess is that there would be a major challenge here because you don't just need the average remaining life expectancy, but also the shape of the distribution of outcomes, so it wouldn't be as simple as typing in a single number.
This is particularly true because increases in life expectancy are primarily driven by reduced early death rates rather shifting the whole curve.
All true - but I suppose it comes down to a single set of numbers - life expectancy at each age, per gender. I haven't looked at the data so this is purely speculation, but I guess the US figures being different to other western countries largely comes down to the fact that (uniquely) some subset of the population has no/limited access to healthcare which probably does change the shape of the curve relative to other places. That's something that does not affect most FIREees and so maybe using data for the whole population is not entirely accurate here? Just modelling it as a normal distribution around the expected mean value doesn't seem too bad?
Secondary effects like the increased incidence of obesity in the US maybe have some smaller effect but probably don't change the shape of the curve much, just shift it slightly. US life expectancy seems to have fallen 3 years running, I guess it's hard to extrapolate stuff like that for someone retiring early.
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Life expectancy isn't a normal distribution, the right tail is extremely foreshortened and since your risk is going to be disproportionately driven by percent survival to the highest ages that means modeling it as a normal distribution is going to produce misleading results.
Now what about your other idea of trying to fit a change in life expectancy by just shifting the distribution left or right?
If you don't like the cross century comparison (easier to see the pattern I was talking about) how about an ~25 year comparison?
(https://www.ons.gov.uk/resource?uri=/peoplepopulationandcommunity/healthandsocialcare/healthinequalities/articles/mostcommonageatdeathbysocioeconomicpositionsinenglandandwales/a30yearscomparison/98bb54c9.png)
Modeling one of those curves as the other one shifted left or right would be statistical malpractice, and provide significantly less accurate results than just using the old distribution to model the new one or vice versa.
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Shifting looks good to me. Think of it like significant figures, it’s already guesswork so make the best of what you have. I’d rather use the shifted distribution than the original distribution, which is definitely wrong
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Shifting looks good to me. Think of it like significant figures, it’s already guesswork so make the best of what you have. I’d rather use the shifted distribution than the original distribution, which is definitely wrong
We may just have a fundamentally different approach to ethics on this point. The way I was trained, adding additional complexity to a model is only justifiable if you're increasing accuracy. More complexity just for the sake of feeling good for having other factors in the model is right up there with clubbing baby seals.
Anyway, good luck to ya.
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We may just have a fundamentally different approach to ethics on this point. The way I was trained, adding additional complexity to a model is only justifiable if you're increasing accuracy. More complexity just for the sake of feeling good for having other factors in the model is right up there with clubbing baby seals.
Anyway, good luck to ya.
It is common for actuaries to slide a mortality table forward or back a number of years. A projection scale is often used for the reasons you site, but sometimes a simple set-forward or setback fits well enough. Assuming CCCA is using a pretty recent mortality table, I think setting it back a few years it could increase accuracy for someone who has good reason to think they will live longer than average.
I think a simple workaround is just to use a lower retirement age. If you input 40 instead of 45 (and adjust the social security age similarly), I think everything should work the same except for setting the mortality back 5 years.
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Shifting looks good to me. Think of it like significant figures, it’s already guesswork so make the best of what you have. I’d rather use the shifted distribution than the original distribution, which is definitely wrong
We may just have a fundamentally different approach to ethics on this point. The way I was trained, adding additional complexity to a model is only justifiable if you're increasing accuracy. More complexity just for the sake of feeling good for having other factors in the model is right up there with clubbing baby seals.
Anyway, good luck to ya.
Them baby seals is EVIL, and in league with dragoncar! Sounds like a disguise for a devilbunny ... http://www.faqs.org/faqs/devilbunnies-faq/part1/
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Can someone tell me why i would ever leave it on "nominal"? I'm not super-intelligent on nominal vs inflation adjusted info.
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Can someone tell me why i would ever leave it on "nominal"? I'm not super-intelligent on nominal vs inflation adjusted info.
It doesn't change the chance of being broke or the success rates, but it will base your balance wedges <start and >2x start on a nominal balance when you FIRE vs. the inflation adjusted balance in the future, when those dollars won't go as far as they will on the day you FIRE. I always leave it set to use inflation adjusted.
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Can someone tell me why i would ever leave it on "nominal"? I'm not super-intelligent on nominal vs inflation adjusted info.
It doesn't change the chance of being broke or the success rates, but it will base your balance wedges <start and >2x start on a nominal balance when you FIRE vs. the inflation adjusted balance in the future, when those dollars won't go as far as they will on the day you FIRE. I always leave it set to use inflation adjusted.
Ah! Thank you!
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Re-reading my unsolicited rant from last night :) I think I was trying to get around to asking for a 'Mustachian' button. It would be really awesome to toggle between statistical average (current version) to an optimized outcome (college educated, married, cope well with stress, etc for longvity + able to reduce withdrawal 25% during bear market, AA annually re-balanced, etc.)... Just for fun. Maybe it would nudge people in a good direction toward financial education and being more confident to ER.
I think the easiest way to handle life expectancy is just to have the system auto-populate the number it's using now, and let the user change it to anything they want. Go nuts with a third-party LE calculator or just guess. It's the least work for the creator with maximum flexibility
Another (big) thank you and a request for this ^. (Those of us in developed countries outside the US will typically have higher life expectancy.)
My guess is that there would be a major challenge here because you don't just need the average remaining life expectancy, but also the shape of the distribution of outcomes, so it wouldn't be as simple as typing in a single number.
This is particularly true because increases in life expectancy are primarily driven by reduced early death rates rather shifting the whole curve.
For example, look at the change in the distribution of age at death for men in the UK between the mid-1800s and the late 20th century:
(https://qph.fs.quoracdn.net/main-qimg-af54c70f142673241dcc3d2d45c1ca9b)
(https://qph.fs.quoracdn.net/main-qimg-135b681fb68e7cd6dc510e5545043dee)
Total life expectancy came close to doubling over that time frame, but if I just took the shape of the curve from the 1800s and either shifted it over 35 years, or multiplied all the ages by 2x, I'd do an awful job of modeling the mortality curve at the end of the 20th century.
Luckily we live now so you can just use the actual distribution and adjust it left or right based on the input. It won’t be perfect, but it’s not like life expectancy is a perfect predictor anyways.
Hell its close enough to a normal distribution, especially looking at a conditional distribution for people who have survived childhood. just use a reasonable stdev
That curve could be easily approximated with a Weibull distribution. Sadly, I haven't used a Weibull in 15 years so I have no idea how to do it myself.
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Very Interesting, I was thinking about requesting a button to be able to switch to death probablilites for a couple (i.e. 'both are dead' would be the death line) but didnt think about all these other changes that does occur. Which is funny because I never liked when people said there is no reason for life insurance after retirement because you are no longer making an income...I'm not saying life insurance is reasonable at an advanced age, but its simply not true that no one depends on your income after your retire if you have a spouse, I've seen it be a big hit to a couple of people when one of those SS checks disappears.
I believe surviving spouse gets the higher of the two social security amounts. Say Joe is 72 collecting $2200/mo and Jane is 70 collecting $1500/mo and Joe dies, Jane can now collect $2200 instead of $1500.
This is correct: "If you are the widow or widower of a person who worked long enough under Social Security, you can receive full benefits at full retirement age for survivors or reduced benefits as early as age 60."
https://www.ssa.gov/planners/survivors/ifyou.html
Correct, but 2200 is much lower than 2200+1500 which is what the household use to collect in SS
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I've been working on some other things so haven't put as much time into this but I cranked out one set of updates to the model:
- I added the ability to add multiple extra income streams and expenses. In order not to add a ton of input text boxes, you can add multiple streams in the same box just separated with a semi-colon. this will allow people to add social security and pensions and other income streams and expenses like college.
I didn't really touch the life expectancy questions that people were discussing heavily here. I'm sort of on the same page as maizeman where i'm not comfortable making up the data, though I acknowledge all the other sources of uncertainty in the model. And the issue of married couple survival and spending/income changes is complicated enough that I don't think I want to tackle it right now.
Anyway, here's the primary website link again if you need it (I took down the link to the beta-version since this is now the latest version):
https://engaging-data.com/will-money-last-retire-early/
as always, I appreciate the helpful feedback and all of the discussion here.
(https://engaging-data.com/pages/scripts/deadandbroke/RBoD2.png)
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great tool, thanks.
to beat a dead horse, i wonder if SS is going to be functional in 40 years
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Great update! I have been stress testing the inputs a little bit this morning and so far everything seems consistent regardless of how I adjust the inputs (spending, income, ages, etc.). Only way I have broke it is by clearing out the income or expense fields (blank instead of zero).
Thanks again.
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great tool, thanks.
to beat a dead horse, i wonder if SS is going to be functional in 40 years
I think nobody can know that, but you are welcome to put in different levels of SS into your calculation to see if that affects your long-term probabilities. You can even set an end date (age) if you think it'll die in your lifetime after you start taking benefits.
Great update! I have been stress testing the inputs a little bit this morning and so far everything seems consistent regardless of how I adjust the inputs (spending, income, ages, etc.). Only way I have broke it is by clearing out the income or expense fields (blank instead of zero).
Thanks again.
thanks for the bug report. I think fixed this little issue but would appreciate any other issue reports.
of course, any other suggestions and comments are also appreciated.
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Reminds me of the old joke: "QA Engineer walks into a bar. Orders a beer. Orders 0 beers. Orders 999999999 beers. Orders a lizard. Orders -1 beers. Orders a sfdeljknesv."
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to beat a dead horse, i wonder if SS is going to be functional in 40 years
It'll likely be different, but not sure enough that many will notice. Maybe it pays 10% less for future retirees, or lifts the full retirement age, which effectively is the same thing given you can take it early at a discount, but I'm not sure most people today not in retirement could tell you within 10% what their SS Benefits are supposed to be. Maybe they add a couple percent to FICA, maybe they raise or eliminate the cap, or even tax higher incomes with an additional tax above the regular rate. They already did that with Medicare and I'm not sure how many people really noticed.
So maybe just type a number in the SS part 20% lower than what you estimate and you've covered the dysfunction.
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great tool, thanks.
to beat a dead horse, i wonder if SS is going to be functional in 40 years
It's off topic, so I don't think we should derail this thread. See this thread for more on the SS topic:
https://forum.mrmoneymustache.com/welcome-to-the-forum/social-security-will-not-be-bankrupt/
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Reminds me of the old joke: "QA Engineer walks into a bar. Orders a beer. Orders 0 beers. Orders 999999999 beers. Orders a lizard. Orders -1 beers. Orders a sfdeljknesv."
Okay I'll admit I had to look that one up.
<---- (Obvious non software engineer person)
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Reminds me of the old joke: "QA Engineer walks into a bar. Orders a beer. Orders 0 beers. Orders 999999999 beers. Orders a lizard. Orders -1 beers. Orders a sfdeljknesv."
good one. Making public-facing web tools is a relatively new thing for me but I'm learning.
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Made a couple of small updates to the calculator:
- added a >5x initial starting balance wedge as well. This is the largest wedge in most scenarios after about 45 years at 4% withdrawal rate (not counting the death wedge of course).
- added a Generate URL button to save the parameters into the URL so you can share your scenarios with other folks.
In other news, I shared these calculators with friends and family and a friend starting a new business said he needed some interactive visualizations done for his website. So I've now got a small side gig of web programmer (after just learning this web stuff earlier this year).
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Made a couple of small updates to the calculator:
- added a >5x initial starting balance wedge as well. This is the largest wedge in most scenarios after about 45 years at 4% withdrawal rate (not counting the death wedge of course).
- added a Generate URL button to save the parameters into the URL so you can share your scenarios with other folks.
In other news, I shared these calculators with friends and family and a friend starting a new business said he needed some interactive visualizations done for his website. So I've now got a small side gig of web programmer (after just learning this web stuff earlier this year).
Nice job on the side hustle!
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LOve the calculator but ages do not show up for me at the bottom in Chrome but they do in Edge, odd.
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Just me or does the page take FOREVER to load?
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LOve the calculator but ages do not show up for me at the bottom in Chrome but they do in Edge, odd.
Ages show for me in chrome, just fyi
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Love the updates (as always). Everything seems to be loading quickly and displaying fine in chrome for me.
Only bug I found is that it lets me click on the chart labels for Broke and Dead (but not any of the "Bal . . ." ones) to remove that color from the chart. But it does not spread out the remaining probabilities correctly like it does when I use the check boxes above, it just removes the color and fills it with whatever color is above. I can try to post screen shots if that is unclear.
Congrats on the side gig. Well deserved.
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Nice updates. And congrats on turning this -- quite useful to the community -- hobby into a new source of income!
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Love the updates (as always). Everything seems to be loading quickly and displaying fine in chrome for me.
Only bug I found is that it lets me click on the chart labels for Broke and Dead (but not any of the "Bal . . ." ones) to remove that color from the chart. But it does not spread out the remaining probabilities correctly like it does when I use the check boxes above, it just removes the color and fills it with whatever color is above. I can try to post screen shots if that is unclear.
Congrats on the side gig. Well deserved.
Thanks I fixed that issue by properly preventing the legend from being clicked.
Nice updates. And congrats on turning this -- quite useful to the community -- hobby into a new source of income!
Yeah the side gig was unexpected, but is fun to work on (and got a check yesterday!). Don't really need a sidegig but I could imagine doing small fun little individual projects that take ~5-20 hours total each.
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I'm surprised I missed it when you first posted it. Really nice job CCCA. The death wedge is very humbling.
BTW, this really needs to be posted on bogleheads to maybe smack some sense into the 2% withdrawal rate population. If it hasn't been already I would be glad to share it for you.
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I'm surprised I missed it when you first posted it. Really nice job CCCA. The death wedge is very humbling.
BTW, this really needs to be posted on bogleheads to maybe smack some sense into the 2% withdrawal rate population. If it hasn't been already I would be glad to share it for you.
I don't have an account on bogleheads, but if you do, go for it! Thanks.
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I'm surprised I missed it when you first posted it. Really nice job CCCA. The death wedge is very humbling.
BTW, this really needs to be posted on bogleheads to maybe smack some sense into the 2% withdrawal rate population. If it hasn't been already I would be glad to share it for you.
I don't have an account on bogleheads, but if you do, go for it! Thanks.
Posted. Here is the link if you are interesting in watching
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=260050
If you want me to add or change anything to the OP let me know.
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Just me or does the page take FOREVER to load?
Loads fine for me.
So, I'm not sure how to set up my income streams accurately. I will have a pension - the monthly payout will be fixed (no COLA) so the real value will drop over time. Once I get Social Security, that will have a COLA, so the real value will remain notionally constant.
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I'm surprised I missed it when you first posted it. Really nice job CCCA. The death wedge is very humbling.
BTW, this really needs to be posted on bogleheads to maybe smack some sense into the 2% withdrawal rate population. If it hasn't been already I would be glad to share it for you.
I don't have an account on bogleheads, but if you do, go for it! Thanks.
Posted. Here is the link if you are interesting in watching
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=260050 (https://www.bogleheads.org/forum/viewtopic.php?f=10&t=260050)
If you want me to add or change anything to the OP let me know.
Thanks for posting that there. I liked that the default you shared was $100k in spending and $2.5M in initial stache.
In looking over the comments there (I haven't set up an account to respond), the stereotype of bogleheads being very risk averse seems to be playing out. It's eye-opening.
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I'm surprised I missed it when you first posted it. Really nice job CCCA. The death wedge is very humbling.
BTW, this really needs to be posted on bogleheads to maybe smack some sense into the 2% withdrawal rate population. If it hasn't been already I would be glad to share it for you.
I don't have an account on bogleheads, but if you do, go for it! Thanks.
Posted. Here is the link if you are interesting in watching
https://www.bogleheads.org/forum/viewtopic.php?f=10&t=260050 (https://www.bogleheads.org/forum/viewtopic.php?f=10&t=260050)
If you want me to add or change anything to the OP let me know.
Thanks for posting that there. I liked that the default you shared was $100k in spending and $2.5M in initial stache.
In looking over the comments there (I haven't set up an account to respond), the stereotype of bogleheads being very risk averse seems to be playing out. It's eye-opening.
There are plenty of Bogleheads who are looking to retire at normal retirement age with $1 million and SS. Though $80-$100k in yearly spending seams to be close to average from my experience. There is a decent population there that thinks 3% withdrawal rate is pretty risky and even talks about 2%.
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Thanks for posting that there. I liked that the default you shared was $100k in spending and $2.5M in initial stache.
In looking over the comments there (I haven't set up an account to respond), the stereotype of bogleheads being very risk averse seems to be playing out. It's eye-opening.
Wow, you weren't kidding. At least one person over there arguing for assuming 0% real returns going forward others for sub 2% withdrawal rates (which if you don't retire until your 60s means you're assuming less than 0% real returns or that you'll live past 110).
I can understand the desire to save $3+ million and have a more luxurious retirement, even if that isn't for me. But it's hard to understand people being quite that risk adverse (if risk adverse is even the right word at this point).
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There are plenty of Bogleheads who are looking to retire at normal retirement age with $1 million and SS. Though $80-$100k in yearly spending seams to be close to average from my experience. There is a decent population there that thinks 3% withdrawal rate is pretty risky and even talks about 2%.
My god, they must not have been factoring in HEALTHCARE
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Made a couple of small updates to the calculator:
- added a >5x initial starting balance wedge as well. This is the largest wedge in most scenarios after about 45 years at 4% withdrawal rate (not counting the death wedge of course).
- added a Generate URL button to save the parameters into the URL so you can share your scenarios with other folks.
In other news, I shared these calculators with friends and family and a friend starting a new business said he needed some interactive visualizations done for his website. So I've now got a small side gig of web programmer (after just learning this web stuff earlier this year).
This tool was already great when I last checked it, and it just keeps getting better! I'm starting to think I may have built a teensy bit too much of a safety margin into my plans given the embarrassingly large size of my 5x wedge even on the inflation adjusted basis. I'm too scared to look how bad it will be if I stop budgeting for a 10% spending increase over my pre retirement budget (which most years I've been beating by 10%). I've worked too long haven't I? Doh!
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I get a little worried about this graphs showing me having a 50% chance on being broke at 67. I just really hope that my excel sheet with Norwegian tax rules is more correct for me. It probably is, but it doesn't show the chances of different outcomes like this graph does. One thing that is wrong with these numbers is of course that I won't FIRE this year, but earliest next year, so I would need to run the calculator again next year. And we should prepare for doing some consultancy work during FIRE.
I do realize very well that death can appear at any time, as my father passed away unexpected when he was 50.
I put in our entire stash. DH and I will receive normal pensions from the age of 67, that is why I put 67 in as last age to need FIRE stash. DH is a few years older than I am, so I put in his income from 65. For taxes I put in what we need to pay yearly on wealth taxes, which is 1%. What we take out of stash is not taxed the first 14 years, but taxed 30% for the remaining years (delayed tax). I cannot enter that in the graph. That's why I have an excel sheet.
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Couldn't you add that 30% via additional expenses?
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Hi Linda, do you have any flexibility in your budget if markets don't perform well? If not then I would be very nervous about your numbers too. Even ignoring taxes you would need to achieve a 4% above inflation return on your assets to have your 700,000 run out pretty much precisely when your pensions come on line. That's not an unreasonable return, but you have no allowance for any sequence of returns risk - which is why the historical modelling is showing a very high failure rate. It may be still doable if you are able to trim your sails significantly in the face of a downturn and/or pick up some additional income, but it strikes me as a very ballsy approach.
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At 7.1% for 20 years (maybe actually 19 when you retire?), it might actually make sense to experiment with putting more of your money into bonds and seeing what it does for success rates. At the 30-50 year horizons a lot of folks on the board use, bonds are actually "riskier" than stocks, but since you have a much shorter timeframe, more of your success depends on being able to spend down your principal without having its value decline dramatically, so a higher bond allocation MIGHT increase success (I haven't run the numbers).
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I get a little worried about this graphs showing me having a 50% chance on being broke at 67. I just really hope that my excel sheet with Norwegian tax rules is more correct for me. It probably is, but it doesn't show the chances of different outcomes like this graph does. One thing that is wrong with these numbers is of course that I won't FIRE this year, but earliest next year, so I would need to run the calculator again next year. And we should prepare for doing some consultancy work during FIRE.
I do realize very well that death can appear at any time, as my father passed away unexpected when he was 50.
I put in our entire stash. DH and I will receive normal pensions from the age of 67, that is why I put 67 in as last age to need FIRE stash. DH is a few years older than I am, so I put in his income from 65. For taxes I put in what we need to pay yearly on wealth taxes, which is 1%. What we take out of stash is not taxed the first 14 years, but taxed 30% for the remaining years (delayed tax). I cannot enter that in the graph. That's why I have an excel sheet.
The graph looks about right to me. Even though it is obviously more grey than this, I often view my ER as being two distinct periods as well, a similar 20 years before age 67 where my plan is to spend from my taxable accounts, and then the time after 67 where I'll spend from my retirement accounts, have SS and Medicare, kids will all be independent, etc.
Even though 20 years is a lot less time than 50, or whatever number we should use to consider the rest of our lives, once your swr goes over 5% the chance of failure increases pretty quickly if you're that invested in equities.
To see actual returns for some time periods I backtested portfolios close to yours and if you had retired in 2000 it would have run dry in a very quick 12 years at that withdraw rate. That was obviously an absolute horrible date to retire, but even if it was 1998 you would have run out in 18 years and if 2002 it looks like you'd run dry in a similar 18 years.
Running dry in my taxable account in 18 years was not a disastrous result for me as I would have access to my retirement accounts and/or early SS, etc, and of course its not like the portfolio disappeared at once so slight adjustments to the withdraw could have helped it survive the 20. But I guess that may not be the case with your plan if this is a barebones spend number for you and you don't have early access to those retirement pensions (or early access would reduce their income below future needs). You still don't have the problem of having run out of money and still have 30 years left with nothing, b/c the time between running out of money and the pension starting is not gonna be huge even in a bad case scenario, but there definitely is a fair chance there will be some time period between running out and the pension starting to think about and plan for.
But in the end, as you note re: your father's death, and as how I love this graphing tool throws in your face, one of your biggest risks to having a nice long successful retirement is not retiring early enough, as though your money may or may not become a problem the death curve is definitely gonna catch you at some point....so just figure out your tweaks (sounds like potential consulting work may be your answer if things do start to go south too early)
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Contingency plan:
In 2017 we spent approx 27,500$. Much less than our FIRE budget of 50,000$. I didn't change the FIRE budget though, because we count on having some big expenses every couple of years and I think on average it might be that high. Our main car won't live forever, or some major future home renovation. The 50,000$ in the scheme is not bare bones. We can live comfortably on a lot less.
Beside the FIRE stash we have another 400,000$ reserved for buying another house after FIRE. We can always decide to rent and eat up the house. There are many houses for sale in my country for a much lower price. So we can always just live in a cheaper place. As we intend to rent a house first after FIRE, to figure out which area we might like to live in, I calculated the difference between renting and putting the 400,000$ in the stock market. It pays off to rent if the rent isn't too high. And we have seen a couple of acceptably looking rentals for low prices.
We expect to inherit 3-400,000$ from our parents someday in the future, which is not included in the calculations.
DH has been working as a consultant for all his career. He can do the same thing privately as well. I currently also have a small sidegig, but haven't considered working in my current profession after FIRE. We could also choose to work part time at any kind of job. There are also some ways in this country to earn some money that is free for income tax.
As we are planning to eat up our stash during these 20 years, the swr doesn't have an enormous effect on my calculations. We have tested my excel sheet with a 2% withdrawl rate and DH and I thought it still looked acceptable.
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Contingency plan:
In 2017 we spent approx 27,500$. Much less than our FIRE budget of 50,000$. I didn't change the FIRE budget though, because we count on having some big expenses every couple of years and I think on average it might be that high. Our main car won't live forever, or some major future home renovation. The 50000$ in the scheme is not bare bones. We can live comfortably on a lot less.
Beside the FIRE stash we have another 40,000$ reserved for buying another house after FIRE. We can always decide to rent and eat up the house. There are many houses for sale in my country for a much lower price. So we can always just live in a cheaper place. As we intend to rent a house first after FIRE, to figure out which area we might like to live in, I calculated the difference between renting and putting the 40,000$ in the stock market. It pays off to rent if the rent isn't too high. And we have seen a couple of acceptably looking rentals for low prices.
We expect to inherit 3-400,000$ from our parents someday in the future, which is not included in the calculations.
DH has been working as a consultant for all his career. He can do the same thing privately as well. I currently also have a small sidegig, but haven't considered working in my current profession after FIRE. We could also choose to work part time at any kind of job. There are also some ways in this country to earn some money that is free for income tax.
As we are planning to eat up out stash during these 20 years, the swr doesn't have an enormous effect on my calculations. We have tested my excel sheet with a 2% withdrawl rate and DH and I thought it still looked acceptable.
Great to hear that you have lots of contingencies built in - I was feeling very guilty about having possibly depressed you by pointing out a hole in your numbers. Is that really $40,000 for a house or should it be $400,000? If the former then you've found some seriously cheap property up there!
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Is that really $40,000 for a house or should it be $400,000? If the former then you've found some seriously cheap property up there!
That was a typo. I have changed it now. I get confused, because I am already dividing by 10 to make it a rough USD number. I obviously divide once too many times.
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Is that really $40,000 for a house or should it be $400,000? If the former then you've found some seriously cheap property up there!
That was a typo. I have changed it now. I get confused, because I am already dividing by 10 to make it a rough USD number. I obviously divide once too many times.
sounds like a fool proof plan. with living in (presumably) norway, thrown on top as a bonus.
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Wow, you weren't kidding. At least one person over there arguing for assuming 0% real returns going forward others for sub 2% withdrawal rates (which if you don't retire until your 60s means you're assuming less than 0% real returns or that you'll live past 110).
That just Boggles the mind! They are cunning though all those extra years of work mean they'll die with fewer years of FIRE to fund.
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Wow, you weren't kidding. At least one person over there arguing for assuming 0% real returns going forward others for sub 2% withdrawal rates (which if you don't retire until your 60s means you're assuming less than 0% real returns or that you'll live past 110).
That just Boggles the mind! They are cunning though all those extra years of work mean they'll die with fewer years of FIRE to fund.
0% real returns; How crazy is that? Even TIPs pay better than that nothing.
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0% real returns; How crazy is that? Even TIPs pay better than that nothing.
Not crazy at all if you were looking for an excuse to OMY a whole bunch. ;-)
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what is OMY
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what is OMY
One More Year aka OMY Syndrome aka If I die at my desk I can never run out of money in retirement. ;-)
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Contingency plan:
In 2017 we spent approx 27,500$. Much less than our FIRE budget of 50,000$. I didn't change the FIRE budget though, because we count on having some big expenses every couple of years and I think on average it might be that high. Our main car won't live forever, or some major future home renovation. The 50,000$ in the scheme is not bare bones. We can live comfortably on a lot less.
Then you're totally set. Go for it. Given that pension is gonna be the spendy $50k, any tighter than you want to years you may have will not last long.
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Wow, you weren't kidding. At least one person over there arguing for assuming 0% real returns going forward others for sub 2% withdrawal rates (which if you don't retire until your 60s means you're assuming less than 0% real returns or that you'll live past 110).
That just Boggles the mind! They are cunning though all those extra years of work mean they'll die with fewer years of FIRE to fund.
0% real returns; How crazy is that? Even TIPs pay better than that nothing.
I don't know if we here at the MMM forums are too optimistic, but it's almost as if the bogleheads (at least the vocal ones about the risks moving forward) are planning for some sort of black swan event.
Also I've upgraded the tool to be much more mobile friendly. Anyone want to take a look on a mobile device and let me know if it becomes unusable or any issues they have? I've tested on a few small devices but can't test everything obviously. This is my first attempt at responsive web design so it's not perfect, but should make it better on a phone. I think tablets were fine before. Desktop/laptop is still the ideal way to view the tool, since it allows for hovering with the cursor (and still easiest to enter data into the calculator).
thanks!
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Wow, you weren't kidding. At least one person over there arguing for assuming 0% real returns going forward others for sub 2% withdrawal rates (which if you don't retire until your 60s means you're assuming less than 0% real returns or that you'll live past 110).
That just Boggles the mind! They are cunning though all those extra years of work mean they'll die with fewer years of FIRE to fund.
0% real returns; How crazy is that? Even TIPs pay better than that nothing.
I don't know if we here at the MMM forums are too optimistic, but it's almost as if the bogleheads (at least the vocal ones about the risks moving forward) are planning for some sort of black swan event.
Also I've upgraded the tool to be much more mobile friendly. Anyone want to take a look on a mobile device and let me know if it becomes unusable or any issues they have? I've tested on a few small devices but can't test everything obviously. This is my first attempt at responsive web design so it's not perfect, but should make it better on a phone. I think tablets were fine before. Desktop/laptop is still the ideal way to view the tool, since it allows for hovering with the cursor (and still easiest to enter data into the calculator).
thanks!
Personally, it's not that I don't think black swan can't happen. It's just that I don't think there's a good way to plan for it. Saving for a 0% real return isn't really going to help you if capitalism collapses or an asteroid hits or something like that. Even with preppers, I think they are probably prepping for the wrong event. Unless you have a crystal ball, I lean towards cautious optimism
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Wow, you weren't kidding. At least one person over there arguing for assuming 0% real returns going forward others for sub 2% withdrawal rates (which if you don't retire until your 60s means you're assuming less than 0% real returns or that you'll live past 110).
That just Boggles the mind! They are cunning though all those extra years of work mean they'll die with fewer years of FIRE to fund.
0% real returns; How crazy is that? Even TIPs pay better than that nothing.
I don't know if we here at the MMM forums are too optimistic, but it's almost as if the bogleheads (at least the vocal ones about the risks moving forward) are planning for some sort of black swan event.
Also I've upgraded the tool to be much more mobile friendly. Anyone want to take a look on a mobile device and let me know if it becomes unusable or any issues they have? I've tested on a few small devices but can't test everything obviously. This is my first attempt at responsive web design so it's not perfect, but should make it better on a phone. I think tablets were fine before. Desktop/laptop is still the ideal way to view the tool, since it allows for hovering with the cursor (and still easiest to enter data into the calculator).
thanks!
Personally, it's not that I don't think black swan can't happen. It's just that I don't think there's a good way to plan for it. Saving for a 0% real return isn't really going to help you if capitalism collapses or an asteroid hits or something like that. Even with preppers, I think they are probably prepping for the wrong event. Unless you have a crystal ball, I lean towards cautious optimism
And how do " bogleheads and preppers" not acknoledge that is 1929 Not a black swan? The 1970s*** were spread over a decade, but that's probably a black swan too. The 4% "rule" does work with these to say that you would still have 95% (19 in20) success.
*** If it gets worse than Disco, no amount of ammo and firepower is enough.
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It's reasonably possible for 0% returns over a decade or longer when the next bear market hits. There were negative returns in the S&P500 over a 13+ year period not too many years ago.
https://forum.mrmoneymustache.com/investor-alley/why-not-do-100-allocation-draw-4-at-retirement-and-yolo-it/msg2023973/#msg2023973
And that's not even the longest period historically.
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It's reasonably possible for 0% returns over a decade or longer when the next bear market hits. There were negative returns in the S&P500 over a 13+ year period not too many years ago.
https://forum.mrmoneymustache.com/investor-alley/why-not-do-100-allocation-draw-4-at-retirement-and-yolo-it/msg2023973/#msg2023973
And that's not even the longest period historically.
There is a big difference between 0% real returns for a decade if you pick exactly the right starting point and negative real returns over five decades. And that's putting aside that if you're in your sixties and retiring with a sub 2% withdrawal rate, there is really no need to be invested in the stock market at all vs something like TIPS.*
*I'd argue there also wasn't a need to work to the point where you have 50 years worth of expenses saved in the first place, but that's a separate discussion.
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It's reasonably possible for 0% returns over a decade or longer when the next bear market hits. There were negative returns in the S&P500 over a 13+ year period not too many years ago.
https://forum.mrmoneymustache.com/investor-alley/why-not-do-100-allocation-draw-4-at-retirement-and-yolo-it/msg2023973/#msg2023973
And that's not even the longest period historically.
There is a big difference between 0% real returns for a decade if you pick exactly the right starting point and negative real returns over five decades.
Who said anything about 50 years? 20 years was mentioned in recent posts and so was a "decade". Not everyone has 50 years of retirement ahead of them, especially before their pension/SS kicks in and pays most of the bills. I believe negative real returns have run close to 20 years during one historical time period, but a negative return over 13 years as happened more recently is significant as well, even if your retirement horizon is longer. Read up on sequence of returns risk. And also consider SS and possible pension income that might kick in for many after a decade or so of drawing more heavily from the stash.
And that's putting aside that if you're in your sixties and retiring with a sub 2% withdrawal rate, there is really no need to be invested in the stock market at all vs something like TIPS.*
I never said anything about sub 2%. But remember, when you sell your stock funds in your taxable brokerage account to invest in TIPS, you'll be paying federal and state capital gains taxes. Also, general good investing advice isn't investing in 100% TIPS either before or during retirement.
*I'd argue there also wasn't a need to work to the point where you have 50 years worth of expenses saved in the first place, but that's a separate discussion.
I never commented regarding years of expenses or SWR in my post that you replied to. But since you mentioned it, saving just enough to pay barebones expenses doesn't sound like a good way to FIRE to me. I saved significantly more than my barebones expenses primarily so that I can enjoy far more travel and entertainment than I have during my working years. After paying for necessary expenses, the additional savings allows more dollars for unbudgeted discretionary spending than it does paying required living expenses.
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Ah, my mistake. I naturally assumed your post about 0% returns was related to our existing discussion in this thread about the sub zero percent returns being assumed by folks on bogleheads. Now that I know it was an unrelated non sequitur, carry on.
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Personally, it's not that I don't think black swan can't happen. It's just that I don't think there's a good way to plan for it. Saving for a 0% real return isn't really going to help you if capitalism collapses or an asteroid hits or something like that. Even with preppers, I think they are probably prepping for the wrong event. Unless you have a crystal ball, I lean towards cautious optimism
Exactly. The Black Swan by definition is the thing you don't foresee happening. I'm planning that over the next 40 years or so, capitalism will continue working basically the way it has, there will be a number of wars, but nothing too dramatic, a number of economic recessions and market crashes...just like we've seen for a long time in the past.
Nuclear war, asteroid strikes, pandemic plague, zombie apocalypse, etc. could happen, but it is just too much trouble to try to plan for all those things. I'll just call it good when I have 25X expenses and let the chips fall where they may.
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There was an interesting comment on bogleheads the other day that I will poorly paraphrase.
When the market returns are strong people find themselves in a good position and retire early. This usually will occur in a nice bull market as we have today. This increases the chance of a recession coming in early retirement since after a long bull market historically a bear market will follow.
Does that mean that many of us who just retired or are looking to retire very soon are more likely to experience sequence of returns risk and therefor stress on their portfolio? I don't want to use portfolio failure since most sane people will cut spending significantly and/or find income to sustain their portfolio during those bad times.
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The effect appears to be real, although as long as you're saving at least 50% of your income each year, it shouldn't create a dramatically large bias in failure rates.
@gerardc did some nice calculations that showed that the failure rate of a 90%/10% portfolio with a 50% savings rate until you hit 25x expenses and 4% withdrawal rate thereafter might decline by a couple of percentage points if you account for the fact people are more likely to hit their magic number during market run ups than at other times.
https://forum.mrmoneymustache.com/welcome-to-the-forum/cfiresim-severely-overestimates-success-rates-for-mustachians/msg1625045/#msg1625045
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The effect appears to be real, although as long as you're saving at least 50% of your income each year, it shouldn't create a dramatically large bias in failure rates.
@gerardc did some nice calculations that showed that the failure rate of a 90%/10% portfolio with a 50% savings rate until you hit 25x expenses and 4% withdrawal rate thereafter might decline by a couple of percentage points if you account for the fact people are more likely to hit their magic number during market run ups than at other times.
https://forum.mrmoneymustache.com/welcome-to-the-forum/cfiresim-severely-overestimates-success-rates-for-mustachians/msg1625045/#msg1625045
Thanks for the link. The few percentage points are legit and not insignificant. This is just one more reason for us to go part time instead of FIRE completely.
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Made a couple of small updates to the calculator:
- added a >5x initial starting balance wedge as well. This is the largest wedge in most scenarios after about 45 years at 4% withdrawal rate (not counting the death wedge of course).
- added a Generate URL button to save the parameters into the URL so you can share your scenarios with other folks.
In other news, I shared these calculators with friends and family and a friend starting a new business said he needed some interactive visualizations done for his website. So I've now got a small side gig of web programmer (after just learning this web stuff earlier this year).
This tool was already great when I last checked it, and it just keeps getting better! I'm starting to think I may have built a teensy bit too much of a safety margin into my plans given the embarrassingly large size of my 5x wedge even on the inflation adjusted basis. I'm too scared to look how bad it will be if I stop budgeting for a 10% spending increase over my pre retirement budget (which most years I've been beating by 10%). I've worked too long haven't I? Doh!
This tool is the reason I moved from the 2027 FIRE group to 2025, with a stretch goal of 2023.
2027 is when I can start drawing a pension (with medical) if I keep working there until retirement date.
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Made a couple of small updates to the calculator:
- added a >5x initial starting balance wedge as well. This is the largest wedge in most scenarios after about 45 years at 4% withdrawal rate (not counting the death wedge of course).
- added a Generate URL button to save the parameters into the URL so you can share your scenarios with other folks.
In other news, I shared these calculators with friends and family and a friend starting a new business said he needed some interactive visualizations done for his website. So I've now got a small side gig of web programmer (after just learning this web stuff earlier this year).
This tool was already great when I last checked it, and it just keeps getting better! I'm starting to think I may have built a teensy bit too much of a safety margin into my plans given the embarrassingly large size of my 5x wedge even on the inflation adjusted basis. I'm too scared to look how bad it will be if I stop budgeting for a 10% spending increase over my pre retirement budget (which most years I've been beating by 10%). I've worked too long haven't I? Doh!
This tool is the reason I moved from the 2027 FIRE group to 2025, with a stretch goal of 2023.
2027 is when I can start drawing a pension (with medical) if I keep working there until retirement date.
Awesome! Glad it helped in framing your thinking.
Regarding black swans, I guess some critical questions are:
1. Does a large stache still have much of it's value afterwards?
2. Would having a job (i.e. not being retired) help during this black swan?
I think both of these questions cannot adequately be answered, so it's not clear that prepping with more money or not being retired will help. In the 99% probability that the black swan doesn't happen, then you'd probably be better off by pulling the plug at 25-30x your annual spending.
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In the 99% probability that the black swan doesn't happen, then you'd probably be better off by pulling the plug at 25-30x your annual spending.
I know that your guess is as good as mine (and you probably didn't literally mean 99% anyway), but the US alone has had 2 financial black swans in the last 18 years -- really two in an ~8-9 year period followed by the very long ~9-10 bull market we're currently in. Decades from now this might look like an odd statistical aberration, or it might be the new normal where financial black swans happen every decade or so.
What to do about it? For those lucky enough to have a "safe" job that they enjoy, part-time work is not a bad strategy IMO. Of course a lot of people really don't like their jobs, or don't have the flexibility to work part time. Those folks can choose a lower SWR or just rely on their ingenuity, work ethic, and way-larger-than-average nest eggs to make it through financial black swans.
As @Telecaster says, other types of black swans are not really things we can reasonably mitigate with personal financial planning anyway.
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In the 99% probability that the black swan doesn't happen, then you'd probably be better off by pulling the plug at 25-30x your annual spending.
I know that your guess is as good as mine (and you probably didn't literally mean 99% anyway), but the US alone has had 2 financial black swans in the last 18 years -- really two in an ~8-9 year period followed by the very long ~9-10 bull market we're currently in. Decades from now this might look like an odd statistical aberration, or it might be the new normal where financial black swans happen every decade or so.
But are these black swans? It's too early to know for sure but so far looks like someone who retired in 2000 using the 4% rule may well turn out to be fine. People do these analyses every couple of years, but here's the most recent analysis I could find: https://www.bogleheads.org/forum/viewtopic.php?t=237334
Here is a somewhat older analysis (2015) which looked at both the 2000 and 2008 retiree and how they are doing today: https://www.kitces.com/blog/how-has-the-4-rule-held-up-since-the-tech-bubble-and-the-2008-financial-crisis/
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In the 99% probability that the black swan doesn't happen, then you'd probably be better off by pulling the plug at 25-30x your annual spending.
I know that your guess is as good as mine (and you probably didn't literally mean 99% anyway), but the US alone has had 2 financial black swans in the last 18 years -- really two in an ~8-9 year period followed by the very long ~9-10 bull market we're currently in. Decades from now this might look like an odd statistical aberration, or it might be the new normal where financial black swans happen every decade or so.
But are these black swans? It's too early to know for sure but so far looks like someone who retired in 2000 using the 4% rule may well turn out to be fine. People do these analyses every couple of years, but here's the most recent analysis I could find: https://www.bogleheads.org/forum/viewtopic.php?t=237334 (https://www.bogleheads.org/forum/viewtopic.php?t=237334)
Here is a somewhat older analysis (2015) which looked at both the 2000 and 2008 retiree and how they are doing today: https://www.kitces.com/blog/how-has-the-4-rule-held-up-since-the-tech-bubble-and-the-2008-financial-crisis/ (https://www.kitces.com/blog/how-has-the-4-rule-held-up-since-the-tech-bubble-and-the-2008-financial-crisis/)
I agree with Maizeman. I don't really consider these to be black swans. Just bad instances of normal economic variability. Like a monte carlo where your random draw is from the bad tail. The black swans I'm talking about where there's some event that causes a significant economic collapse and it's not going to recover anytime soon.
But yes, if the new normal is low to negative average economic growth with significant drops every once in awhile, then yes, it's going to be hard to retire in that context as well.
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I agree with Maizeman. I don't really consider these to be black swans. Just bad instances of normal economic variability. Like a monte carlo where your random draw is from the bad tail. The black swans I'm talking about where there's some event that causes a significant economic collapse and it's not going to recover anytime soon.
I see your point -- I guess it depends on what you consider a black swan. Personally I view the DotCom bust and the 2008 events as quite a bit outside normal economic variability. But it is true that the market recovery after each of those occurred much faster than it did after the Great Depression, or even the late 60's to early 80's doldrums.
I'll have to go and review Maizeman's links to see what they say about SORR for a Y2K retiree. As he mentioned, the picture is incomplete (with respect to SWR) because we haven't reached 30 years yet.
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Considering what the definition of a black swan is, dot com and the Great Recession do not qualify.
Maybe the Great Depression does, the long collapse of the Japanese market does. The collapse of the Soviet Union is a great example. Maybe what is occuring in Venezuela will qualify. Aliens landing on Earth and enslaving is will be a Black Swan.
The last two recessions are far cries from Black Swans.
The theory was developed by Nassim Nicholas Taleb to explain:
1) The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
2) The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).
3) The psychological biases that blind people, both individually and collectively, to uncertainty and to a rare event's massive role in historical affairs.
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EnjoyIt I agree, something like Venezuela today, or France in 1940, or the Incan empire when Pizarro showed up is not something that can be successfully mitigated by saving enough money and are true black swans.
I'd tend to say the great depression of japan's lost decade(s?) shouldn't count as black swans, but just the extreme edge of the normal range of volatility in modern economic systems at a national level.
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Considering what the definition of a black swan is, dot com and the Great Recession do not qualify.
Maybe the Great Depression does, the long collapse of the Japanese market does. The collapse of the Soviet Union is a great example. Maybe what is occuring in Venezuela will qualify. Aliens landing on Earth and enslaving is will be a Black Swan.
The last two recessions are far cries from Black Swans.
I'd say the last recession was a Black Swan. There was a general belief that we were experiencing a housing bubble, but almost no one realized that complex financial instruments like credit default swaps had become highly leveraged and were poised to topple--and would have toppled--the entire financial system except for swift, massive, and unprecidented government intervention in world financial markets. Even so, major Wall Street banks like Bear Stearns and Lehman Brothers went bankrupt (the largest bankruptcy filing in history) and even big non-Wall Street banks like Washington Mutual and IndyMac closed their door. The collapse of the banking industry claimed, or almost claimed other victims like General Motors and Chrysler, who only survived thanks to government intervention.
One hallmark of a Black Swan is that everyone saw it coming in hindsight. In hindsight, yes of course this was going to happen. But very few people saw it ahead of time.
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Considering what the definition of a black swan is, dot com and the Great Recession do not qualify.
Maybe the Great Depression does, the long collapse of the Japanese market does. The collapse of the Soviet Union is a great example. Maybe what is occuring in Venezuela will qualify. Aliens landing on Earth and enslaving is will be a Black Swan.
The last two recessions are far cries from Black Swans.
I'd say the last recession was a Black Swan. There was a general belief that we were experiencing a housing bubble, but almost no one realized that complex financial instruments like credit default swaps had become highly leveraged and were poised to topple--and would have toppled--the entire financial system except for swift, massive, and unprecidented government intervention in world financial markets. Even so, major Wall Street banks like Bear Stearns and Lehman Brothers went bankrupt (the largest bankruptcy filing in history) and even big non-Wall Street banks like Washington Mutual and IndyMac closed their door. The collapse of the banking industry claimed, or almost claimed other victims like General Motors and Chrysler, who only survived thanks to government intervention.
One hallmark of a Black Swan is that everyone saw it coming in hindsight. In hindsight, yes of course this was going to happen. But very few people saw it ahead of time.
Regardless of whether 2008 is a black swan or not, it seems like "obvious in hindsight" should not be a defining characteristic of black swans, at least as the term is currently used and understood. An alien invasion, or crazy sunspot, or other external event that is not predictable seems like the obvious example where "obvious" isn't applicable.
However, I think the overall point is whether people generally think the future will be like the past or not. Given the pace of technological change in the world, it's definitely possible that financial markets, capitalism and our political/social structures could change rapidly too as a result. Or they may not.
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JL Collins sums it up very well in his stock series: The market has never failed us yet. It has ALWAYS gone up with any type of X(20 year? 40 year? I can't remember...) span in the history of the market it has gone up. If you are concerned that there will be a black swan event and the market crashes, we have bigger issues to worry about - and there won't be a way to prepare. If Aliens enslave us, your 'stache won't matter. If Iran bombs us to smithereens, your 'stache won't matter. If US breaks into a crazy civil/nuclear war, the size of your 'stache won't matter.
As long as you believe that the US economy won't collapse (e.g. Black Swan catastrophe), the market will continue to grow.
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I prefer to switch the order around but the conclusion is the same: if the market fails to provide a positive return for multiple decades, then our society (and by extension each of us individually) is going to have much bigger problems than worrying about haven’t spent down all of our principle.
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Regardless of whether 2008 is a black swan or not, it seems like "obvious in hindsight" should not be a defining characteristic of black swans, at least as the term is currently used and understood. An alien invasion, or crazy sunspot, or other external event that is not predictable seems like the obvious example where "obvious" isn't applicable.
Well, it kind of is. When Nassim Taleb introduced the concept of black swan events, a central point was that we don't often see them ahead of time because our cognitive biases. Perhaps the event is actually far more likely than we believed. We use those same cognitive biases to convince ourselves that the black swan was obvious the whole time, even when that may not have been the case. In case when an event was completely random, for example. We're fooling ourselves, in other words. Hence the name of the book "Fooled by Randomness."
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Regardless of whether 2008 is a black swan or not, it seems like "obvious in hindsight" should not be a defining characteristic of black swans, at least as the term is currently used and understood. An alien invasion, or crazy sunspot, or other external event that is not predictable seems like the obvious example where "obvious" isn't applicable.
Well, it kind of is. When Nassim Taleb introduced the concept of black swan events, a central point was that we don't often see them ahead of time because our cognitive biases. Perhaps the event is actually far more likely than we believed. We use those same cognitive biases to convince ourselves that the black swan was obvious the whole time, even when that may not have been the case. In case when an event was completely random, for example. We're fooling ourselves, in other words. Hence the name of the book "Fooled by Randomness."
Is that correct? Here's the definition I was able to find by Taleb for black swans:
"First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."
That makes it sound not like the we fail to predict individual black swans because of cognitive biases, but that after the fact our cognitive biases lead us to we convince ourselves they could have been predicted. However, I haven't read Taleb's books in any depth. I attempted Antifragile once but simply disliked his writing style too much to make it through to the end, even though I think there were some useful ideas contained within. Anyway, please do tell me if I'm misunderstanding the core concept by taking the one quote from him out of context.
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Regardless of whether 2008 is a black swan or not, it seems like "obvious in hindsight" should not be a defining characteristic of black swans, at least as the term is currently used and understood. An alien invasion, or crazy sunspot, or other external event that is not predictable seems like the obvious example where "obvious" isn't applicable.
Well, it kind of is. When Nassim Taleb introduced the concept of black swan events, a central point was that we don't often see them ahead of time because our cognitive biases. Perhaps the event is actually far more likely than we believed. We use those same cognitive biases to convince ourselves that the black swan was obvious the whole time, even when that may not have been the case. In case when an event was completely random, for example. We're fooling ourselves, in other words. Hence the name of the book "Fooled by Randomness."
Is that correct? Here's the definition I was able to find by Taleb for black swans:
"First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."
That makes it sound not like the we fail to predict individual black swans because of cognitive biases, but that after the fact our cognitive biases lead us to we convince ourselves they could have been predicted. However, I haven't read Taleb's books in any depth. I attempted Antifragile once but simply disliked his writing style too much to make it through to the end, even though I think there were some useful ideas contained within. Anyway, please do tell me if I'm misunderstanding the core concept by taking the one quote from him out of context.
I haven’t read Taleb either but since j was the one who originally brought up black swans I guess I meant it more as generic unpredictable and improbable event rather than a specific subset of these events.
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i tried to listen to the author speak once on youtube, he was intolerable
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I've been having fun using this tool to visualize certain scenarios. It makes me realize how resilient the plan can be in later years. Factoring in SS as soon as possible and assuming some terrible health event that is going to make me spend $50k more/year from 70 onto death at 90 or some number I probably won't hit. It barely budges the thin sliver of broke.
It also reinforces that even a minor amount of income early in FIRE can mitigate and increase success chances, especially if you have a relatively small expenses number compared to the population/forum at large.
CCCA just wanted to say thanks again. This is a cool tool.
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Is that correct? Here's the definition I was able to find by Taleb for black swans:
"First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."
That makes it sound not like the we fail to predict individual black swans because of cognitive biases, but that after the fact our cognitive biases lead us to we convince ourselves they could have been predicted. However, I haven't read Taleb's books in any depth. I attempted Antifragile once but simply disliked his writing style too much to make it through to the end, even though I think there were some useful ideas contained within. Anyway, please do tell me if I'm misunderstanding the core concept by taking the one quote from him out of context.
It is nuanced, he's written a couple books on the topic, and it is hard to explain or unpack in a few sentences. You're pretty much right. The reason why I said "don't often see them ahead of time" because cognitive bias is part of the definition.* For example, many people assume that stock returns are normal, because that's how they learned how to calculate standard deviations. But they aren't normal. That's an example of a cognitive bias blinding you to a potential problem.
There is a parallel discussion to this in another thread. A poster is trying to reduce risk by reducing volatility--which lots of people do. Even Michael Kitces who I think is great does this. However, that's wrong. Taleb points out that real risk comes from things like the banking crisis, which is totally outside the "volatility is risk model." So if you are say, selecting a portfolio of low-volatility banking stocks, thinking lower volatility is safer, your cognitive biases will cause you to over look the possibility of real risks. Some people saw the banking crisis coming so it wasn't impossible to predict, but most people didn't.
Edit: Of course, this is all hair splitting anyway. I'm sure we're all in agreement there are risks out there that we don't know about. If we don't know about them, it is hard to plan for them. I'm personally just putting the possibility of a Black Swan event in the "too hard" pile and calling it good.
And I agree with you. I don't really like his writing style either.
"not often" probably wasn't the right phrase. Maybe "very rarely" would have been better.
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Back to the issue of longevity data for differnet populations, someone on reddit suggested looking at the Society of Actuaries. It looks like they have data on different populations including Blue Collar vs White Collar and Bottom Quartile and Top Quartile and split by sex. It's in an excel doc on this website:
https://www.soa.org/experience-studies/2014/research-2014-rp/ (https://www.soa.org/experience-studies/2014/research-2014-rp/)
Unfortunately, it looks almost perfect but not quite. For these populations there's an employee number that goes to 80 and a healthy annuitant number that goes from 50-120. From the report: The term “Healthy Annuitant Tables” refers to tables based on the combined populations of Healthy Retirees and Beneficiaries.
First of all the rates are very different for the years that overlap. Second, it seems like having the beneficiaries in there then conflates male mortality with female surviving mortality and vice versa as well as age differences between beneficiaries and primaries.
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Back to the issue of longevity data for differnet populations, someone on reddit suggested looking at the Society of Actuaries. It looks like they have data on different populations including Blue Collar vs White Collar and Bottom Quartile and Top Quartile and split by sex. It's in an excel doc on this website:
https://www.soa.org/experience-studies/2014/research-2014-rp/ (https://www.soa.org/experience-studies/2014/research-2014-rp/)
Unfortunately, it looks almost perfect but not quite. For these populations there's an employee number that goes to 80 and a healthy annuitant number that goes from 50-120. From the report: The term “Healthy Annuitant Tables” refers to tables based on the combined populations of Healthy Retirees and Beneficiaries.
First of all the rates are very different for the years that overlap. Second, it seems like having the beneficiaries in there then conflates male mortality with female surviving mortality and vice versa as well as age differences between beneficiaries and primaries.
It looks like by working as long as possible I have about a 50% less chance of dying in any given year. Is that true?
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[...]
First of all the rates are very different for the years that overlap. Second, it seems like having the beneficiaries in there then conflates male mortality with female surviving mortality and vice versa as well as age differences between beneficiaries and primaries.
I haven't looked at the SOA study recently, but two quick points IIRC:
1. Each of the tables should have a separate Male and Female version.
2. Yes, mortality does show an increase for people that quick working.
Personally, I don't get too caught up in projecting mortality very exactly. I just can't figure out what it adds to my projections that is helpful for actual planning purposes. Longevity risk is real, but the steps to mitigate it wouldn't change that much for me based on these probabilities. Ask me if I feel the same way when I am a bit older, and get into the relatively higher mortality rates.
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Personally, I don't get too caught up in projecting mortality very exactly. I just can't figure out what it adds to my projections that is helpful for actual planning purposes. Longevity risk is real, but the steps to mitigate it wouldn't change that much for me based on these probabilities. Ask me if I feel the same way when I am a bit older, and get into the relatively higher mortality rates.
I think it's less about getting people worried about the risk of extensive longevity and more about making people feel "better" (in quotes intentionally) because, particularly if you FIRE in middle age or later, you're much less likely to go broke than you think if you run all your numbers assuming you're going to live to 90 or 100.
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[...]
First of all the rates are very different for the years that overlap. Second, it seems like having the beneficiaries in there then conflates male mortality with female surviving mortality and vice versa as well as age differences between beneficiaries and primaries.
I haven't looked at the SOA study recently, but two quick points IIRC:
1. Each of the tables should have a separate Male and Female version.
2. Yes, mortality does show an increase for people that quick working.
Personally, I don't get too caught up in projecting mortality very exactly. I just can't figure out what it adds to my projections that is helpful for actual planning purposes. Longevity risk is real, but the steps to mitigate it wouldn't change that much for me based on these probabilities. Ask me if I feel the same way when I am a bit older, and get into the relatively higher mortality rates.
Are they concluding that's there's a causal relationship between leaving work and mortality rates, or just a correlation between them?
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] Are they concluding that's there's a causal relationship between leaving work and mortality rates, or just a correlation between them?
The thing to bear in mind here is that retiree mortality is driven by averages. Historically most early retirees do so for health reasons or some type of incapacity so they are arguably substandard as a population. While a general causal relationship may be evident historically - extrapolating that to a specific case today is likely to be inappropriate.
Actuarial data generally is all about large population averages - it is really up to the underwriters to manage specific case deviation from the mean in practice.
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] Are they concluding that's there's a causal relationship between leaving work and mortality rates, or just a correlation between them?
The thing to bear in mind here is that retiree mortality is driven by averages. Historically most early retirees do so for health reasons or some type of incapacity so they are arguably substandard as a population. While a general causal relationship may be evident historically - extrapolating that to a specific case today is likely to be inappropriate.
Actuarial data generally is all about large population averages - it is really up to the underwriters to manage specific case deviation from the mean in practice.
Unfortunately, I'm not sure how to use the SOA data in a way that makes sense. It would have been nice to prove some different survival curves based upon different demographic attributes or even just the users expectations. If someone has any thoughts or suggestions to get this data in a useable format, let me know.
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Great job CCCA - very useful, and very easy to use.
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Unfortunately, I'm not sure how to use the SOA data in a way that makes sense. It would have been nice to prove some different survival curves based upon different demographic attributes or even just the users expectations. If someone has any thoughts or suggestions to get this data in a useable format, let me know.
I think you will probably find it difficult to source the type of data you're after - since life insurers, in general, don't have any profit motive to aggregate it.
Intuitively I feel like what you need is a mix of health lives mortality up to somewhere between 60 and 70 and annuitant mortality thereafter, maybe graduating in the crossover so you get 90% healthy mortality 10% annuitant @61, 80% healthy mortality 20% annuitant @62 and so on.
That said the deviation from the mean which likely arises through enhanced activity levels and healthier lifestyle of the types of early retirees you are projecting for, (based on the assumption they're mainly coming from FIRE sources around the web) would suggest to me that any enhancement you might make in terms of mortality table selection might not enhance the overall accuracy of the projection meaningfully.
To me, the function of this tool is to highlight the size of the mortality wedge relative to the other potential outcomes. It does that well. If you were considering putting more work in I'd think more about adding a wedge for morbidity / general ill health as opposed to tweaking the mortality assumptions.
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Unfortunately, I'm not sure how to use the SOA data in a way that makes sense. It would have been nice to prove some different survival curves based upon different demographic attributes or even just the users expectations. If someone has any thoughts or suggestions to get this data in a useable format, let me know.
I think you will probably find it difficult to source the type of data you're after - since life insurers, in general, don't have any profit motive to aggregate it.
Intuitively I feel like what you need is a mix of health lives mortality up to somewhere between 60 and 70 and annuitant mortality thereafter, maybe graduating in the crossover so you get 90% healthy mortality 10% annuitant @61, 80% healthy mortality 20% annuitant @62 and so on.
That said the deviation from the mean which likely arises through enhanced activity levels and healthier lifestyle of the types of early retirees you are projecting for, (based on the assumption they're mainly coming from FIRE sources around the web) would suggest to me that any enhancement you might make in terms of mortality table selection might not enhance the overall accuracy of the projection meaningfully.
To me, the function of this tool is to highlight the size of the mortality wedge relative to the other potential outcomes. It does that well. If you were considering putting more work in I'd think more about adding a wedge for morbidity / general ill health as opposed to tweaking the mortality assumptions.
Thanks for the feedback. Other folks in this thread and elsewhere were calling for more fine-grained control over the mortality parameters, but I think I agree that the percentage is not going to be super accurate but good enough for the eyeball test. The challenge for a morbidity wedge is that it is not mutually exclusive to the other wedges. You can be in any of the various money categories and be sick (and I'm sure people will then want the calculator to have the illness affect your financial picture, via increased healthcare costs).
The good thing with the death wedge is that even though it's not technically mutually exclusive to having different amounts of money, the amount of money you have while being dead is not important. Also death is a one time event while being sick can last for a long time and the amount of money you have can be very important.
On another note, I made another visualization that is related to this issue of longevity, though much simpler.
https://engaging-data.com/age-calculator/?nav=2
it's based on a Wait But Why post visualizing your life in weeks (https://waitbutwhy.com/2014/05/life-weeks.html). I thought it was interesting so I thought I'd make one for people to see their own age.
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Time to bump this back up! :)
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Time to bump this back up! :)
Thanks! I needed this reminder as I contemplate OMY. I think working OMY
OMY?
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One More Year
I am supposed to go in 2019.
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Time to bump this back up! :)
Thanks! I needed this reminder as I contemplate OMY. I think working OMY may take 5 years off the end of my life; the job is grinding on me hard. I can't even enjoy a long holiday vacation because I am already dreading going back in on January 2nd. It is a shadow on my brain constantly. Maybe I have a "brain cloud" just like Joe vs. the Volcano, an underrated movie with some excellent messages. Other parts are unforgivably goofy.
ugh, I gotta figure some shit out.
If you're on the edge of FIRE, you certainly have FU* money.
So tell 'em FU** and post a story in the epic FU money thread. If you need another job, you can get another job. The economy is still red hot, unemployment is WAY low.
*For the acronym challenged, say it out loud. "Eff You!"
**Or just tell them you're not putting up with the shitty portions of the job anymore. Hate TPS reports? Tell 'em you won't write anymore. Hate long, useless meetings? Decline the invite and don't show up. Seize an empty manager office/conference room with a window, move your stuff and abandon your cube. Whatever.
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Maybe I have a "brain cloud" just like Joe vs. the Volcano, an underrated movie with some excellent messages. Other parts are unforgivably goofy.
I recently (re)discovered this movie, although I must have seen it at least once as a child as I had the striking luggage scene from the end in my head. I agree it has some very powered (and FIRE related) messages, definitely glad to have done the re-viewing.
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Time to bump this back up! :)
Oh am I dead already?
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Maybe I have a "brain cloud" just like Joe vs. the Volcano, an underrated movie with some excellent messages. Other parts are unforgivably goofy.
I recently (re)discovered this movie, although I must have seen it at least once as a child as I had the striking luggage scene from the end in my head. I agree it has some very powered (and FIRE related) messages, definitely glad to have done the re-viewing.
I definitely enjoyed this movie in college and it's probably worth a re-watch soon!
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I just added the ability for a very simplistic spending reduction in the model. You specify a % reduction in your inflation adjusted spending (e.g. 5%) and if your portfolio is below the inflation-adjusted starting value, then your spending will be reduced by this much, otherwise it will be what you stated.
This level of flexibility significantly decreases the probability of failure. Between 0% spending flexibility and 20% spending flexibility, the change of failure drops from 18% over 50years to 0% over 50 years.
0% spending flexibility:
(https://engaging-data.com/pages/scripts/deadandbroke/0pct.png) (https://engaging-data.com/will-money-last-retire-early/?spend=40000&initsav=1000000&age=40&yrs=50&stockpct=80&bondpct=18&cashpct=2&sex=0&infl=1&taxrate=0&fees=0.3&income=0&incstart=50&incend=70&expense=0&expstart=50&expend=70&showdeath=0&showlow=1&show2x=1&show5x=1&flexpct=0)
5% spending flexibility:
(https://engaging-data.com/pages/scripts/deadandbroke/5pct.png) (https://engaging-data.com/will-money-last-retire-early/?spend=40000&initsav=1000000&age=40&yrs=50&stockpct=80&bondpct=18&cashpct=2&sex=0&infl=1&taxrate=0&fees=0.3&income=0&incstart=50&incend=70&expense=0&expstart=50&expend=70&showdeath=0&showlow=1&show2x=1&show5x=1&flexpct=5)
10% spending flexibility:
(https://engaging-data.com/pages/scripts/deadandbroke/10pct.png) (https://engaging-data.com/will-money-last-retire-early/?spend=40000&initsav=1000000&age=40&yrs=50&stockpct=80&bondpct=18&cashpct=2&sex=0&infl=1&taxrate=0&fees=0.3&income=0&incstart=50&incend=70&expense=0&expstart=50&expend=70&showdeath=0&showlow=1&show2x=1&show5x=1&flexpct=10)
15% spending flexibility:
(https://engaging-data.com/pages/scripts/deadandbroke/15pct.png) (https://engaging-data.com/will-money-last-retire-early/?spend=40000&initsav=1000000&age=40&yrs=50&stockpct=80&bondpct=18&cashpct=2&sex=0&infl=1&taxrate=0&fees=0.3&income=0&incstart=50&incend=70&expense=0&expstart=50&expend=70&showdeath=0&showlow=1&show2x=1&show5x=1&flexpct=15)
20 spending flexibility:
(https://engaging-data.com/pages/scripts/deadandbroke/20pct.png) (https://engaging-data.com/will-money-last-retire-early/?spend=40000&initsav=1000000&age=40&yrs=50&stockpct=80&bondpct=18&cashpct=2&sex=0&infl=1&taxrate=0&fees=0.3&income=0&incstart=50&incend=70&expense=0&expstart=50&expend=70&showdeath=0&showlow=1&show2x=1&show5x=1&flexpct=20)
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Excellent addition. Thank you for continuing to improve this great tool. I really appreciate the perspective it gives me.
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Love the spending flexibility! Thanks for the update @CCCA !
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+1 on adding the flexible spending addition. It would be interesting to have a metric for how much/often reduced spending was implemented over the course of the simulation run. Is it one year or 10? It is easier to reduce spending for one year than multiple successive years.
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Very nice added feature!
Not that you need it by I can independently confirm that I've played around with reduced spending simulations and also see that 4%, dropping to 3.2% when you're below your original inflation adjusted starting net worth never fails in my sims as well.
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Very cool update. Thank you.
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Cool update - might be interesting to add a reduced mortality (positive lifestyle effect?) option. The impact of something like a 20% reduction in mortality v population average might be worth considering based on data from https://actuaries.asn.au/Library/Opinion/2018/AIExploringRetireeMortalityFINAL.pdf (https://actuaries.asn.au/Library/Opinion/2018/AIExploringRetireeMortalityFINAL.pdf).
The thing I particularly like about this tool is the visual impact of the size of the wedges - I guess I just want to be able to tweak the death one in the same way as the others. I suspect that probably says more about my mindset than the application.....
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I'd like the option to add more fields for Extra Income (right now there is only 1) - some of us have more than 1 source of extra income expected at different times in our life.
I'd also like an option to input Decreased Spending - for example, paying off your mortgage.
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Thanks to everyone for posting positive feedback on the model addition and analysis. I'm super happy that people are finding it useful.
I'd like the option to add more fields for Extra Income (right now there is only 1) - some of us have more than 1 source of extra income expected at different times in our life.
I'd also like an option to input Decreased Spending - for example, paying off your mortgage.
You can already add more income streams. Enter multiple values separated by semicolons: e.g. 50000;15000;5000 in the extra income box and then make sure you add 3 start ages and 3 end ages (also separated by semicolons) in the appropriate boxes
[/size]Cool update - might be interesting to add a reduced mortality (positive lifestyle effect?) option. The impact of something like a 20% reduction in mortality v population average might be worth considering based on data from https://actuaries.asn.au/Library/Opinion/2018/AIExploringRetireeMortalityFINAL.pdf (https://actuaries.asn.au/Library/Opinion/2018/AIExploringRetireeMortalityFINAL.pdf).
The thing I particularly like about this tool is the visual impact of the size of the wedges - I guess I just want to be able to tweak the death one in the same way as the others. I suspect that probably says more about my mindset than the application.....
I will take a look at the pdf you linked to and see if it's possible/makes sense to add it in. I know that was a big discussion point earlier in this thread.
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Great Resource!!!!
One thing that I like though, is the flexibility you have in a mere 20% spending fluctuation. I've never been able to find a great mathematical resource that shows how powerful it is to just be able to 'turn down' the spending (or alternatively slightly increase earnings to the tune of 20% annual spending). Having flexibility (especially if you have a very early crash, within about 5 years or so after FIRE) adds a MASSIVE safety buffer into FIRE.
This thing is pretty cool. Nice work.
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I just added the ability for a very simplistic spending reduction in the model. You specify a % reduction in your inflation adjusted spending (e.g. 5%) and if your portfolio is below the inflation-adjusted starting value, then your spending will be reduced by this much, otherwise it will be what you stated.
This level of flexibility significantly decreases the probability of failure. Between 0% spending flexibility and 20% spending flexibility, the change of failure drops from 18% over 50years to 0% over 50 years.
GREAT addition!
And if you rejigger to 100% stocks and a 0.1% for investment fees (very doable), the flexibility needed for 0% failure rate drops to 15% on the 50 year horizon.
Basically if you can trim (or replace) $6k from your $40k spending in "down" years, the prediction is no failure.
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That is one of my most sought after features (currently missing) from the likes of FIRECALC and cFIREsim.
Thank you!
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That is one of my most sought after features (currently missing) from the likes of FIRECALC and cFIREsim.
Thank you!
If I remember correctly EarlyRetirementNow has a really nice article on this in his early retirement series. The whole series is an excellent read if you have the time.
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It's always nice to hear feedback that this is a useful feature.
One issue I had with the Early Retirement Now series (which I'll admit, i've only read a few of and it was awhile ago, so I should probably re-read it) is how he focuses on the one or two worst scenarios for FIRE and when a plan doesn't work with those scenarios, he concludes it is not a good plan. It seems to be an exceptionally conservative way to plan for the future.
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It's a fabulous visualizer.
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It's always nice to hear feedback that this is a useful feature.
One issue I had with the Early Retirement Now series (which I'll admit, i've only read a few of and it was awhile ago, so I should probably re-read it) is how he focuses on the one or two worst scenarios for FIRE and when a plan doesn't work with those scenarios, he concludes it is not a good plan. It seems to be an exceptionally conservative way to plan for the future.
Indeed, it is work like his that gets people to not realize that all this historical data shows 4% as a SAFE withdrawal rate and not an average rate of withdrawal. They then start thinking the only way to be safe is to go lower and all of a sudden you start having discussion of 2.5% withdrawal rates which are ludicrous in my mind.
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It's always nice to hear feedback that this is a useful feature.
One issue I had with the Early Retirement Now series (which I'll admit, i've only read a few of and it was awhile ago, so I should probably re-read it) is how he focuses on the one or two worst scenarios for FIRE and when a plan doesn't work with those scenarios, he concludes it is not a good plan. It seems to be an exceptionally conservative way to plan for the future.
Indeed, it is work like his that gets people to not realize that all this historical data shows 4% as a SAFE withdrawal rate and not an average rate of withdrawal. They then start thinking the only way to be safe is to go lower and all of a sudden you start having discussion of 2.5% withdrawal rates which are ludicrous in my mind.
Good I’m glad I’m not the only one. But I will take a look again anyways.
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One thing I'd like to see, and maybe it's requested above, I haven't read the whole thread, is to have the ability to have two people in the model and have it show the probability for one or both being dead. I mean, the odds of my making it to 95 are pretty slim, but the odds of both my wife and I making it that far are really long (although one set of my grandparents did it). I suspect the visual would get pretty murky, but it would be interesting to see.
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One thing I'd like to see, and maybe it's requested above, I haven't read the whole thread, is to have the ability to have two people in the model and have it show the probability for one or both being dead. I mean, the odds of my making it to 95 are pretty slim, but the odds of both my wife and I making it that far are really long (although one set of my grandparents did it). I suspect the visual would get pretty murky, but it would be interesting to see.
Not built into the calculator on this thread, but this should help you do some rough calculations based on you and your spouse's age.
https://www.finder.com/life-insurance/odds-of-dying
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Indeed, it is work like his that gets people to not realize that all this historical data shows 4% as a SAFE withdrawal rate and not an average rate of withdrawal. They then start thinking the only way to be safe is to go lower and all of a sudden you start having discussion of 2.5% withdrawal rates which are ludicrous in my mind.
Hey, easy does it, that's the SWR I selected as a non-US based 46 year old FIRE'ee. :-) It was the lower of that or 85% of dividends received + 3 years spending in cash. Psychology is a wonderful thing and I know I'd be incapable of selling down wealth to eat.
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Indeed, it is work like his that gets people to not realize that all this historical data shows 4% as a SAFE withdrawal rate and not an average rate of withdrawal. They then start thinking the only way to be safe is to go lower and all of a sudden you start having discussion of 2.5% withdrawal rates which are ludicrous in my mind.
Hey, easy does it, that's the SWR I selected as a non-US based 46 year old FIRE'ee. :-) It was the lower of that or 85% of dividends received + 3 years spending in cash. Psychology is a wonderful thing and I know I'd be incapable of selling down wealth to eat.
I’m not sure how much seriousness you have in that statement. But I think you need to understand how dividends work since taking the dividend devalues the company by the amount of the dividend. If you use that dividend to eat instead of reinvest, then you are in fact selling down wealth to eat. This is a fact and not really subject to argument. But, we hope that investment growth is higher than that dividend and other withdrawals and therefor we do not deplete our wealth in the process. Expected returns are definitely subject to debate as seen on every finance forum in existence.
Those who subscribe to the 4% theory believe that future returns will be no worse than the very worst of history. If we are right then our wealth will grow over the decades. If we are wrong we will have to make a few changes to make things work. We understand that it is impossible to eliminate all risk and have decided that working longer to decrease that risk a tiny fraction is not worth our very limited time we have left on this Earth.
Edit: I just realized you are non-US based. I have no clue what historical returns and SWR you have investing in your country therefor my comments above are geared towards US investors.
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I’m not sure how much seriousness you have in that statement. But I think you need to understand how dividends work since taking the dividend devalues the company by the amount of the dividend. If you use that dividend to eat instead of reinvest, then you are in fact selling down wealth to eat. This is a fact and not really subject to argument. But, we hope that investment growth is higher than that dividend and other withdrawals and therefor we do not deplete our wealth in the process. Expected returns are definitely subject to debate as seen on every finance forum in existence.
Those who subscribe to the 4% theory believe that future returns will be no worse than the very worst of history. If we are right then our wealth will grow over the decades. If we are wrong we will have to make a few changes to make things work. We understand that it is impossible to eliminate all risk and have decided that working longer to decrease that risk a tiny fraction is not worth our very limited time we have left on this Earth.
Edit: I just realized you are non-US based. I have no clue what historical returns and SWR you have investing in your country therefor my comments above are geared towards US investors.
Yes, I do understand how dividends work and what companies do with those retained earnings if they don't give them back to the shareholders - some create value and some waste it. That's all quantitative where I understand what matters is total return at the end of the day. I'm more talking qualitative/psychological. What's easier to do when the market has fallen by 50%. Sell some of those equities/bonds to eat or withdraw the dividends that have accrued in the account plus possibly some of the 3 year cash buffer (dividends historically seem to fall less than the asset itself). Of course we're all wired differently, including our risk profiles, so I expect some would have no issue with the former. I accepted I had to work longer but now looking back in FIRE I'm glad I did that.
I'm UK based and have used the Wade Pfau work looking at what he called SAFEMAX (100% success) vs the 4% SWR which didn't have 100% success historically even in the US. He found for a UK investor, 30 years duration and 50:50 local bonds/equities that the SAFEMAX was 3.05%. You need to eat and pay investment expenses from that which in the UK are still more expensive than the US. Switch from local to global and the SAFEMAX increased to 3.26%. My expenses currently run to 0.22% and at age 46 I expect to be retired for a lot longer than 30 years so I settled on 2.5% plus expenses.
The worst years to start were 1900 and 1907 respectively where I think from a US view the typical worst start year is 1966. Therefore both went through the 1907 Panic which I guess is not unlike our recent GFC so that could easily (will?) happen again. It also included a World War which I hope never happens again.
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I’m not sure how much seriousness you have in that statement. But I think you need to understand how dividends work since taking the dividend devalues the company by the amount of the dividend. If you use that dividend to eat instead of reinvest, then you are in fact selling down wealth to eat. This is a fact and not really subject to argument. But, we hope that investment growth is higher than that dividend and other withdrawals and therefor we do not deplete our wealth in the process. Expected returns are definitely subject to debate as seen on every finance forum in existence.
Those who subscribe to the 4% theory believe that future returns will be no worse than the very worst of history. If we are right then our wealth will grow over the decades. If we are wrong we will have to make a few changes to make things work. We understand that it is impossible to eliminate all risk and have decided that working longer to decrease that risk a tiny fraction is not worth our very limited time we have left on this Earth.
Edit: I just realized you are non-US based. I have no clue what historical returns and SWR you have investing in your country therefor my comments above are geared towards US investors.
Yes, I do understand how dividends work and what companies do with those retained earnings if they don't give them back to the shareholders - some create value and some waste it. That's all quantitative where I understand what matters is total return at the end of the day. I'm more talking qualitative/psychological. What's easier to do when the market has fallen by 50%. Sell some of those equities/bonds to eat or withdraw the dividends that have accrued in the account plus possibly some of the 3 year cash buffer (dividends historically seem to fall less than the asset itself). Of course we're all wired differently, including our risk profiles, so I expect some would have no issue with the former. I accepted I had to work longer but now looking back in FIRE I'm glad I did that.
I'm UK based and have used the Wade Pfau work looking at what he called SAFEMAX (100% success) vs the 4% SWR which didn't have 100% success historically even in the US. He found for a UK investor, 30 years duration and 50:50 local bonds/equities that the SAFEMAX was 3.05%. You need to eat and pay investment expenses from that which in the UK are still more expensive than the US. Switch from local to global and the SAFEMAX increased to 3.26%. My expenses currently run to 0.22% and at age 46 I expect to be retired for a lot longer than 30 years so I settled on 2.5% plus expenses.
The worst years to start were 1900 and 1907 respectively where I think from a US view the typical worst start year is 1966. Therefore both went through the 1907 Panic which I guess is not unlike our recent GFC so that could easily (will?) happen again. It also included a World War which I hope never happens again.
May I ask you a question and I hope it doesn’t come off as rude. What is the infatuation with a 100% success rate especially for someone young who can easily adapt if sequence of early returns is similar to some of the worst in history?
Basically by going for 3% you are preparing yourself that the next 5 years have a chance of being worst in history or close to it. If you can survive the first 5 years, you are set even if the worst comes thereafter. While young it is just so easy to adapt for a few years so why strive for 100% if realistically it is impossible to mitigate all risk?
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May I ask you a question and I hope it doesn’t come off as rude. What is the infatuation with a 100% success rate especially for someone young who can easily adapt if sequence of early returns is similar to some of the worst in history?
Basically by going for 3% you are preparing yourself that the next 5 years have a chance of being worst in history or close to it. If you can survive the first 5 years, you are set even if the worst comes thereafter. While young it is just so easy to adapt for a few years so why strive for 100% if realistically it is impossible to mitigate all risk?
I can't answer for RIT, but I think there are some valid reasons. Any combination of dependents, lean-fire, a high-paid career that requires regular certifications to continue to practice, FIRE for much longer than a 30 year timeframe, lack of skills outside one's career, a current fantastic job that one enjoys, or a personality/risk tolerance that wouldn't allow one to sleep well at night without extreme safety could do it. For instance, I have a friend who has a young child with significant developmental challenges; they will definitely require significant lifelong care. If I were in that situation, had a career that was exceptionally difficult to get back into after being out for 5 years, and I loved my job then I'd stick around until I hit 100% and then stay a little longer.
We're all in different situations. Some of us can afford to be flexible while others, for any number of reasons, simply can't take significant risks with their FIRE plans.
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Fire 20/20 is spot on. It is a great big world and some situations and life choices mean bailing out a bit later. One is aged parents who require help, and yes, I have delayed the RE part to help my dad, the guy taught me how to use a spoon. That said, time and tide waits for none, I really do need to quit piddling around and pull the trigger. This is one of the most powerful calculators I have ever seen and I should hit it every single day until I bolt from work with two middle fingers in the air for Forever Freedom! Incidentally, if you want a second stream of income, such a SS or rentals, just enter the expense as a negative and the calculator works just fine.
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I'm UK based and have used the Wade Pfau work looking at what he called SAFEMAX (100% success) vs the 4% SWR which didn't have 100% success historically even in the US. He found for a UK investor, 30 years duration and 50:50 local bonds/equities that the SAFEMAX was 3.05%. You need to eat and pay investment expenses from that which in the UK are still more expensive than the US. Switch from local to global and the SAFEMAX increased to 3.26%. My expenses currently run to 0.22% and at age 46 I expect to be retired for a lot longer than 30 years so I settled on 2.5% plus expenses.
Whenever I've dug into Wade's numbers, he has sneakily thrown in some significant additional drag to show the 4% rule "doesn't work"
Are you sure he didn't already put in a hefty management fee on top of the withdrawal amount? Or handicap projected returns to 25% worse than historical? These are both actual examples.
So yeah - if you calculate the 4% rule as "4% withdrawals, and in addition a 1% management fee every year" - it doesn't work. Because it isn't 4%, it's 5%.
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I just stubled on this and realized I was not the only one who appreciate Maizeman genius!
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I just stubled on this and realized I was not the only one who appreciate Maizeman genius!
nope, we should all appreciate @maizeman
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I relayed some of this information to @maizeman n his journal (since this visualization was originally his idea) but I thought I'd put it here as well for those of you interested in this tool, and my experience with hosting this tool on my website:
It's been featured on several blogs:
https://www.gocurrycracker.com/you-will-die-before-you-run-out-of-money/ (https://www.gocurrycracker.com/you-will-die-before-you-run-out-of-money/)
https://www.mymoneyblog.com/longevity-risk-tool.html (https://www.mymoneyblog.com/longevity-risk-tool.html)
It's been discussed on a number of forums including this one (of course), ERE's, early-retirement.org, bogleheads, reddit r/financialindependence, etc. . . Anyway, just looking at the google analytics of my site, it's gotten over 70,000 page views since I uploaded it last year. See the attachment for more detail. Anyway, it's been hugely popular and lots of comments in various places about how people find it useful, so I'm happy about that.
The peaks and spikes are when things get picked up on various forums or message boards or it gets linked from other blogs.
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That's awesome! And yes, it's a great tool.
You might want to put a space between the two links--they look like a single link
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That's awesome! And yes, it's a great tool.
You might want to put a space between the two links--they look like a single link
thanks for the kind words.
The forum posting software always seems to cause me problems (chrome on mac os x) with font sizes and other weirdness.
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HELP! I'm confused about what to enter in the tax box if not my marginal tax.
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Enter your expected average tax rate (i.e. total tax/income)
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Enter your expected average tax rate (i.e. total tax/income)
How is that different from your marginal tax rate?
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Enter your expected average tax rate (i.e. total tax/income)
How is that different from your marginal tax rate?
Usually it'll be lower. A single person with $60,000 a year in income would be in the 22% tax bracket (so 22% marginal rate), but their total federal tax liability is only ~$6,500, so their average tax rate is $6,500/$60,000 = ~11%
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Enter your expected average tax rate (i.e. total tax/income)
How is that different from your marginal tax rate?
Marginal tax rate is what your last dollar gets taxed at, so someone with total income in the 35% bracket has a marginal rate of 35%. Not all of their income is taxed at 35% though - the first XXX dollars are taxed at 0%, then 10%, 12%, etc. The average rate after factoring that in will almost always be lower than the marginal rate.
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Here's another of my tools that lets you see the tax implications of different amounts of regular income vs long-term capital gainsidends and calculate your average tax rate.
https://engaging-data.com/tax-brackets/ (https://engaging-data.com/tax-brackets/)
If you are married, you'll generally be in good shape when it comes to your average tax rate because the standard deduction is double, tax bracket sizes are double but expenses generally aren't doubled.
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Thanks everyone for you help!
CCCA, I put my numbers into your calculator and it gave me two numbers. Which average tax rate do I use in the RBD calculator, gross or taxable?
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Thanks everyone for you help!
CCCA, I put my numbers into your calculator and it gave me two numbers. Which average tax rate do I use in the RBD calculator, gross or taxable?
If you pull out $40k for spending, that is your gross income. The tax you pay, divided by the gross income, is your average tax rate. This calculator only looks at Federal tax. State tax will also add more taxes (depending on the state) so you can also bump it up a little more.
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Here's another of my tools that lets you see the tax implications of different amounts of regular income vs long-term capital gainsidends and calculate your average tax rate.
https://engaging-data.com/tax-brackets/ (https://engaging-data.com/tax-brackets/)
If you are married, you'll generally be in good shape when it comes to your average tax rate because the standard deduction is double, tax bracket sizes are double but expenses generally aren't doubled. [size=78%] [/size]
Wow, hadn't seen that one before. Really cool.
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Here's another of my tools that lets you see the tax implications of different amounts of regular income vs long-term capital gainsidends and calculate your average tax rate.
https://engaging-data.com/tax-brackets/ (https://engaging-data.com/tax-brackets/)
If you are married, you'll generally be in good shape when it comes to your average tax rate because the standard deduction is double, tax bracket sizes are double but expenses generally aren't doubled.
This is great. I assume I put qualified dividends in the capital gains area and non-qualified in the regular wage area?
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i tried to listen to the author speak once on youtube, he was intolerable
Taleb *is* indeed intolerable, but he's still worth listening to IMO.
A lot of fucking brilliant people are completely insufferable because they know how goddamn brilliant they are. If you really can't stand Taleb though, there are many more palatable people who've discussed him extensively.
I originally learned about Taleb through the wildly pleasant and digestible work of Malcolm Gladwell, who frames Taleb in a downright enchanting narrative and implores the reader to tolerate his arrogance.
I doubt I would have enjoyed Taleb without Gladwell's take as an intellectual fluffer so to speak, but thanks to that framing, I'm able to actually enjoy Taleb's particular flair as a fundamental part of who he is and *why* he thinks and behaves the way he does.
It's so important to remember that more conservative withdrawal rates generally result in significantly more money at death, not significantly more security during life.
The market can recover from a lot, so flexibility is really key in the event of a sustained drop, but if something takes it out irreversibly, it won't matter how much you used to have saved.
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Nice tool. I like that I can increase my planned retirement spending by $10,000/yr in this tool and still get 99% success rate while leaving my flexibility at 0% and a conservative AA. My 3.5% SWR that I have planned for my drawdown is on the conservative side. I have a lot of flexibility, though, due to roughly half of my FIRE budget being discretionary spending. Details in my case study.
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Nice tool. I like that I can increase my planned retirement spending by $10,000/yr in this tool and still get 99% success rate while leaving my flexibility at 0% and a conservative AA. My 3.5% SWR that I have planned for my drawdown is on the conservative side. I have a lot of flexibility, though, due to roughly half of my FIRE budget being discretionary spending. Details in my case study.
Me too! that was a pleasant surprise. I'll probably leave it grow anyway, I don't need it to live comfortably and maybe I can help my grand daughter with college one day.
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The most incredible result to me in my latest use of this tool was noticing, after wondering how worried I (at 47) should be of the 5% broke wedge I got 33 years from now at 80, that the death wedge hits that same rate (5%) for me in like 6 years from now.....eh....wow.... seems like running out of money should be way down the list on my worries ;-)
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The most incredible result to me in my latest use of this tool was noticing, after wondering how worried I (at 47) should be of the 5% broke wedge I got 33 years from now at 80, that the death wedge hits that same rate (5%) for me in like 6 years from now.....eh....wow.... seems like running out of money should be way down the list on my worries ;-)
Same here. I have effectively zero chance of running out of money ever, but I have a 20% chance of being dead at 70.
One nice thing about this is that dying early is another method to ensure portfolio survival ;-P In fact, if you factor in life expectancy, the safe withdrawal rates are even safer:
http://retireearlyhomepage.com/swrlife.html
The above is an oldie but a goodie.
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The most incredible result to me in my latest use of this tool was noticing, after wondering how worried I (at 47) should be of the 5% broke wedge I got 33 years from now at 80, that the death wedge hits that same rate (5%) for me in like 6 years from now.....eh....wow.... seems like running out of money should be way down the list on my worries ;-)
It's an interesting thought experiment. Hopefully you get some indications if you are slowly going broke though, you typically don't get a lot of warning about a terminal illnesses or death (unless self inflicted, which I guess is another option if you are broke and miserable). So it's kind of hard to plan around mortality since it can happen suddenly, but technically there should be zero chance of going from FI to broke.
To be honest, I really don't factor mortality in to any of my FIRE decision making, other than I should probably retire before I die or if work starts to cause health issues.
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The most incredible result to me in my latest use of this tool was noticing, after wondering how worried I (at 47) should be of the 5% broke wedge I got 33 years from now at 80, that the death wedge hits that same rate (5%) for me in like 6 years from now.....eh....wow.... seems like running out of money should be way down the list on my worries ;-)
Yeah, it's a tough one to get one's head around :-) I guess it's because we feel we have some control over the risk of going broke vs (perhaps) less control over when the grim reaper comes a calling.
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The most incredible result to me in my latest use of this tool was noticing, after wondering how worried I (at 47) should be of the 5% broke wedge I got 33 years from now at 80, that the death wedge hits that same rate (5%) for me in like 6 years from now.....eh....wow.... seems like running out of money should be way down the list on my worries ;-)
Yeah, it's a tough one to get one's head around :-) I guess it's because we feel we have some control over the risk of going broke vs (perhaps) less control over when the grim reaper comes a calling.
Maybe so, but you have a lot of control over how well you live in that time.
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Is there any way to enter an income stream which will NOT inflation adjust?
I will have a fixed pension (ie, it would start at $40k and stay at $40k until I die) - plus later on another $24k from social security which will inflation adjust.
Maybe add a flag to keep the income fixed instead of allowing it to adjust? For example instead of 40000;24000 I would enter 40000*;24000 - the 40000 would be kept fixed, the 24000 would inflation adjust.
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Is there any way to enter an income stream which will NOT inflation adjust?
I will have a fixed pension (ie, it would start at $40k and stay at $40k until I die) - plus later on another $24k from social security which will inflation adjust.
Maybe add a flag to keep the income fixed instead of allowing it to adjust? For example instead of 40000;24000 I would enter 40000*;24000 - the 40000 would be kept fixed, the 24000 would inflation adjust.
I don't think you can do that presently. I thought you could put it as negative "extra income" but it looks like that inflation adjusts too...
I think you should just turn off inflation adjustment for the $24k... At least for the past few years it's been hovering below 3%.
I think i'd be conservative in this calculator. Depending on your age, the 24k inflation adjusted over 2 decades might end up only being like an extra $20,000. I don't think the math will get TOO off by $20k over 20 years.
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Is there any way to enter an income stream which will NOT inflation adjust?
I will have a fixed pension (ie, it would start at $40k and stay at $40k until I die) - plus later on another $24k from social security which will inflation adjust.
Maybe add a flag to keep the income fixed instead of allowing it to adjust? For example instead of 40000;24000 I would enter 40000*;24000 - the 40000 would be kept fixed, the 24000 would inflation adjust.
Thanks for the suggestion. I will put it on the list of things to add, though I'm not sure when I will be able to get to it. Hopefully soon-ish.
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I appreciate the responsiveness!
I'm not planning on pulling the FIRE trigger in 2020, so timeframe is flexible for me.
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I appreciate the responsiveness!
I'm not planning on pulling the FIRE trigger in 2020, so timeframe is flexible for me.
I, on the other hand, demand immediate satisfaction. What kind of business are you running here anyways? I want my money back!
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I appreciate the responsiveness!
I'm not planning on pulling the FIRE trigger in 2020, so timeframe is flexible for me.
I, on the other hand, demand immediate satisfaction. What kind of business are you running here anyways? I want my money back!
I understand there are people you can pay who will provide "immediate satisfaction". Be sure to use protection.
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This is such a fantastic tool! @CCCA , 2 questions for you:
1. The “additional income” section - is that intended to be pre-tax or post-tax? In other words, if I am assuming that I’ll make an extra 100,000 for a few years, will the 100k be added to the investment total, or will it be 100k*tax rate (for example, assuming a 25% tax rate, only 75k added instead?
2. Likewise - if we assume spending is 50k per year, with a 20% tax rate, does that mean that the portfolio is reduced by 50k in year 1 (not factoring in projected stock returns), or is it reduced by 60k (50k plus 10k due to 20% taxes)?
Thanks for clarifying!
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This is such a fantastic tool! @CCCA , 2 questions for you:
1. The “additional income” section - is that intended to be pre-tax or post-tax? In other words, if I am assuming that I’ll make an extra 100,000 for a few years, will the 100k be added to the investment total, or will it be 100k*tax rate (for example, assuming a 25% tax rate, only 75k added instead?
2. Likewise - if we assume spending is 50k per year, with a 20% tax rate, does that mean that the portfolio is reduced by 50k in year 1 (not factoring in projected stock returns), or is it reduced by 60k (50k plus 10k due to 20% taxes)?
Thanks for clarifying!
Obviously OP will give the right answers, but my gut says: Spending is spending - so post tax, and the calculator would reduce portfolio by spending + tax, and extra income is pre-tax, so will only impact spending after taking out tax.
That is my "intuitive" guess.
I tried to figure it out by putting everything in cash and using easy numbers, but the growing death percentage was throwing my ability to make a guesstimate on this.
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Obviously OP will give the right answers, but my gut says: Spending is spending - so post tax, and the calculator would reduce portfolio by spending + tax, and extra income is pre-tax, so will only impact spending after taking out tax.
That is my "intuitive" guess.
I tried to figure it out by putting everything in cash and using easy numbers, but the growing death percentage was throwing my ability to make a guesstimate on this.
Thanks! So, in other words, just working through an example.. (removing market gains from the picture, just to understand how it's calculated):
Let's use a 20% tax rate, 50k of spending, 100k of additional income, and a 1mil stache.
So for year 1: the 1mil stache would be subtracted by 60k (50k spending + 10k of taxes due to 20% rate), which yields 1mil - 60k = 940k. However, you also add 100k of income to that - so, 940k + 100k = 1.04mil. Is this correct? So the 100k is not first deducted by the tax rate (20%), and in other words, the calculation is NOT 940k + 80k (100k-20k) = 1.02mil?
Just want to make sure I understand it correctly, so I can plug in some numbers accordingly :)
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Obviously OP will give the right answers, but my gut says: Spending is spending - so post tax, and the calculator would reduce portfolio by spending + tax, and extra income is pre-tax, so will only impact spending after taking out tax.
That is my "intuitive" guess.
I tried to figure it out by putting everything in cash and using easy numbers, but the growing death percentage was throwing my ability to make a guesstimate on this.
Thanks! So, in other words, just working through an example.. (removing market gains from the picture, just to understand how it's calculated):
Let's use a 20% tax rate, 50k of spending, 100k of additional income, and a 1mil stache.
So for year 1: the 1mil stache would be subtracted by 60k (50k spending + 10k of taxes due to 20% rate), which yields 1mil - 60k = 940k. However, you also add 100k of income to that - so, 940k + 100k = 1.04mil. Is this correct? So the 100k is not first deducted by the tax rate (20%), and in other words, the calculation is NOT 940k + 80k (100k-20k) = 1.02mil?
Just want to make sure I understand it correctly, so I can plug in some numbers accordingly :)
Oh hmm... I guess i didn't account for additional income to be above and beyond spending number... so i have no idea. Need to wait for OP...
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PTF
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I wonder if we will have to update the database with 'post Coronavirus' data.... and what will go up faster, probability of going broke or probability of dying?
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I would be willing to bet that the coronavirus data will still be a relatively small blip compared to common causes of death and larger economic issues.
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I think the tool overestimates chance of death. Let’s just do a rudimentary experiment here. When you either go broke or die, post here. I have a feeling way more people are gonna go broke first!
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This is an excellent idea! I'll bet hardly anyone posts if they die before they go broke, though. They'll probably be too embarrassed about dying and don't want to admit it.
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Damn survivorship bias.
Joking aside - I still think this is the best tool I've found for visualizing the probabilites that await post-Fire. I share it with others often, even if not interested in FIRE, just to let them see where they stand in regards to potential retirement at any age.
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Damn survivorship bias.
Joking aside - I still think this is the best tool I've found for visualizing the probabilites that await post-Fire. I share it with others often, even if not interested in FIRE, just to let them see where they stand in regards to potential retirement at any age.
Is your opening something like - 'hey, you probably never realized that you'll die with money in your bank account. You should retire too soon so you can beat the odds and die broke instead.'
Seriously, other than Mustachians / FIRE ppl, I don't think the general population would know what to do with this chart and an unexpected discussion on FI and ER, and would likely freak them out that there is a fixation on death being a motivator to do something. Most people like to ignore the death part of life as much as possible.
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Haha - Fair question. I know a hospice nurse and a couple Actuaries, so discussions of morbidity, mortality, longevity, etc. are not completely out of nowhere.
It is usually good to start with the Death Toggle off, though.
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It is usually good to start with the Death Toggle off, though.
I think that's terrible advice. The massive advantage of this tool compared to other FIRE tools is showing how likely you are to die before enjoying your retirement (or going broke)
The chart I'm looking at - by age 90 I have a 2% chance of being broke - and an 85% chance of being dead.
Throw in social security at age 70 and a 10% spending flexibility - "broke" goes away. But I still have an 85% chance of being dead.
Good thing I went out and got some exercise today ;)
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It is usually good to start with the Death Toggle off, though.
I think that's terrible advice. The massive advantage of this tool compared to other FIRE tools is showing how likely you are to die before enjoying your retirement (or going broke)
The chart I'm looking at - by age 90 I have a 2% chance of being broke - and an 85% chance of being dead.
Throw in social security at age 70 and a 10% spending flexibility - "broke" goes away. But I still have an 85% chance of being dead.
Good thing I went out and got some exercise today ;)
Yes. If going broke in retirement is infinitely times more worse than anything else, then one should turn off the death toggle. But I think the entire intriguing value of this graph over the other ones I see is the inclusion of the death curve. It throws in your face that, at some point, the greatest barrier against a long successful retirement is not running out of money...but failing to retire early enough that it will be a long one.
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It is usually good to start with the Death Toggle off, though.
I think that's terrible advice.
I think it's brilliant! I didn't realize a simple toggle could enable immortality.
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It is usually good to start with the Death Toggle off, though.
I think that's terrible advice. The massive advantage of this tool compared to other FIRE tools is showing how likely you are to die before enjoying your retirement (or going broke)
The chart I'm looking at - by age 90 I have a 2% chance of being broke - and an 85% chance of being dead.
Throw in social security at age 70 and a 10% spending flexibility - "broke" goes away. But I still have an 85% chance of being dead.
Good thing I went out and got some exercise today ;)
You can always toggle it as a natural part of the conversation when you get to that point. And I was only being half serious.
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Hi all,
A small update, based on the discussion in the first couple pages in this thread.
I added two additional mortality curves, from data from the Society of Actuaries Tables - https://www.soa.org/resources/experience-studies/2015/2017-cso-tables/. They have a bunch of different curves (for non-smokers there are 3 categories: super preferred, preferred and residual and for smokers, 2 curves: preferred and residual curves).
So the best life expectancy curve is the super preferred non-smoker and the worst life expectancy curve is the residual smoker and I used those as upper and lower bounds to the average which is the social security one.
https://engaging-data.com/will-money-last-retire-early/ (https://engaging-data.com/will-money-last-retire-early/)
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Very cool! I had no idea that dataset existed, and it lets people incorporate more of their known priors about their own health.
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Sweet! Thank you for the update!
Any thoughts on the life expectancy for couples? ie - even if I'm dead, I don't want my wife to run out of money (and vice-versa)
While I'm asking... According to the site, it seems to only have market data through 2016. Is it reasonably easy to incorporate 2017-2019 data?
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I wonder if we will have to update the database with 'post Coronavirus' data.... and what will go up faster, probability of going broke or probability of dying?
Still thinking this will become more and more relevant. 2017 datasets? bwahahah
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Sweet! Thank you for the update!
Any thoughts on the life expectancy for couples? ie - even if I'm dead, I don't want my wife to run out of money (and vice-versa)
While I'm asking... According to the site, it seems to only have market data through 2016. Is it reasonably easy to incorporate 2017-2019 data?
Hi Tom,
The calculator was previously updated to include data through 2019 but I forgot to update the text to reflect that.
Life expectancy for couples is something that I had beta tested (i.e. written the code) but I wasn't sure if it made sense since the death wedge would show the probability that both of you are dead. But things like social security, pensions and overall spending should also change as a result of whether one spouse is dead or not. I guess what I'm trying to say is that it seems like the issue of two people is complicated and difficult to represent in this simple calculator.
Glad that you are finding the updates useful.
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Makes, sense - thanks!
Upon reflection, it doesn't really matter. Broke or not will almost certainly be decided long before the "couples longevity" really matters.
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I just wanted to say that I love this calculator. I have been using it since you put it out and I really appreciate that you keep updating it and making it better. I have shared it with several coworkers and friends that are pursuing FIRE and it really helped them with some never enough hurdles.
You are awesome and quite talented.
LV
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This is amazing, thank you! The highest chance I get going broke is 2%. Death, on the other hand, seems totally certain!
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I think i'm surprised that at 65 the average male is dead 17% of the time, but a smoker is dead only 19% of the time.
I know the average includes the smoker, and that the "Healthy" (which is at 7%) which IS significantly different doesn't, but i don't know that I'd call myself super healthy, but it's weird to know that if i started ripping darts / puffing heaters, i'd only be 2% more dead by 65 years old.
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I think i'm surprised that at 65 the average male is dead 17% of the time, but a smoker is dead only 19% of the time.
I know the average includes the smoker, and that the "Healthy" (which is at 7%) which IS significantly different doesn't, but i don't know that I'd call myself super healthy, but it's weird to know that if i started ripping darts / puffing heaters, i'd only be 2% more dead by 65 years old.
It's mostly that it's not that smoking just kills people suddenly at 65. It's usually slow painful deaths due to cancer or respiratory problems which drag on for 5-10 years sometime in your 60's or 70's. Then you die. :D
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I think i'm surprised that at 65 the average male is dead 17% of the time, but a smoker is dead only 19% of the time.
I know the average includes the smoker, and that the "Healthy" (which is at 7%) which IS significantly different doesn't, but i don't know that I'd call myself super healthy, but it's weird to know that if i started ripping darts / puffing heaters, i'd only be 2% more dead by 65 years old.
It's mostly that it's not that smoking just kills people suddenly at 65. It's usually slow painful deaths due to cancer or respiratory problems which drag on for 5-10 years sometime in your 60's or 70's. Then you die. :D
Yeah, you could be right - at 85 years old average is 67% dead and smokers are 76%
It looks like you are 50% dead at 80 years old if you don't smoke, but if you do smoke you are 50% dead at 77, so that makes me feel like smoking kills more. 3 years of your life gone at 50% dead. I guess it's probably not worth taking it up.
When I saw it was only 2% death difference at 65, I figured, "Well geez, I might as well try smoking, 2% ain't nothing!"
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Yeah I'm only breaking out the whiskey and smokes (maybe some sweet black tar heroin) when I'm diagnosed with a terminal issue and have <1 year to go. Because then who gives a crap about the influence of the bad stuff in your body on your percent death chance for a given time?
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Great tool! Although dead being gray and broke being red seems weird. I'd rather be broke than dead.
Also it would be cool if you could bake in one of those "life estimate" calculators based on risk factors like being overweight or smoking, family history, etc.
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Come to think of it, superimposing general US mortality data and 'SWR' data together might simply be misleading. Mortality data is what the general US population experiences. As Mustachians know, a vast majority of the general population are not FI and the lower 50% (85% maybe) socioeconomic classes generally lead unhealthy lifestyles - fast food & low exercise diets, money and life stress, long hours doing things they hate into their later years, underemployment, obesity, etc.
On the other hand, SWR represents the educated / higher income household, expenses under control and feelings of purpose, control, and actualization. Maybe a small portion still go broke or only end up at 2x their initial stache after 30+ years and some spending flexibility - but they also experience significantly less early mortality during all this.
What I'm saying is, if the source of the mortality data were all FI, then we would have a more representative sample of what ages FI people die. Or, in other words, rich, educated, happy people statistically live longer than the general population.
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Sure which is what the new option is for.
But keep in mind that it is solely a generalization to assume that FIRE pursuants = above average health.
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Come to think of it, superimposing general US mortality data and 'SWR' data together might simply be misleading. Mortality data is what the general US population experiences. As Mustachians know, a vast majority of the general population are not FI and the lower 50% (85% maybe) socioeconomic classes generally lead unhealthy lifestyles - fast food & low exercise diets, money and life stress, long hours doing things they hate into their later years, underemployment, obesity, etc.
On the other hand, SWR represents the educated / higher income household, expenses under control and feelings of purpose, control, and actualization. Maybe a small portion still go broke or only end up at 2x their initial stache after 30+ years and some spending flexibility - but they also experience significantly less early mortality during all this.
What I'm saying is, if the source of the mortality data were all FI, then we would have a more representative sample of what ages FI people die. Or, in other words, rich, educated, happy people statistically live longer than the general population.
On the other hand, you might be wrong. We might all be digging ourselves an early grave: https://www.nber.org/papers/w24127
I'm happy with the options presented for death in the calculator
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That's an even shakier position to maintain. The 2% increase in mortality at 62 makes it about 1.02*0.134=0.1367 not the scariest number I've seen. 13.4 comes from the calculator.
Also just applying that to FIRE pursuants is possibly an apples to oranges comparison. FIREies will have more time to pursue a healthier lifestyle than a 62 year old. Also consider the types of people who take social security at the earliest point. How healthy are they? What kind of jobs do you think they had?
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One thing I do with the calculator that I find very useful is to turn off the 'death' (if only life were so easy, eh). The truth of the matter is, I don't care where my finances are when I'm dead, I could be headed toward broke for years and death would 'save me'. But when I'm alive (the no-death graph), going broke is now much more likely and it is more representative of how we actually live our lives and make financial plans.
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One thing I do with the calculator that I find very useful is to turn off the 'death' (if only life were so easy, eh). The truth of the matter is, I don't care where my finances are when I'm dead, I could be headed toward broke for years and death would 'save me'. But when I'm alive (the no-death graph), going broke is now much more likely and it is more representative of how we actually live our lives and make financial plans.
Sure, and I understand what you said here and in your previous post.
On the other hand, the fact that "death will save us" is a fact of life (heh). If you take 100 MMM'ers mechanically taking 4% for 30 years, their success rate will be higher than what the Trinity study says, because while 95% of the time their money would have lasted, some other percent of the time they die early and become a sad sort of success case. Depending on the death curve one assumes (there are ultra-preferred life insurance curves out there that are probably in the ballpark for MMMers), it's probably more like 99% safe.
If you want to ignore that additional margin of safety, you can. You can also use it to dial your risk factor back up to 5% if you want by spending more.
Another thing the death wedge has done for me has been to make me spend more focus and energy on maintaining my health than my wealth. With my sub-1% WR, I'm literally about 100 times more likely to die in the next twenty years than I am to run out of money (assuming historical patterns, blah blah blah). That makes the relative risks quite different for me and changes my focus.
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That's an even shakier position to maintain. The 2% increase in mortality at 62 makes it about 1.02*0.134=0.1367 not the scariest number I've seen. 13.4 comes from the calculator.
Also just applying that to FIRE pursuants is possibly an apples to oranges comparison. FIREies will have more time to pursue a healthier lifestyle than a 62 year old. Also consider the types of people who take social security at the earliest point. How healthy are they? What kind of jobs do you think they had?
I'm not dying for either camp. We will all die. The best way to guess is to look at our own specific scenario. Am I healthy? Do I smoke? Risky behavior? etc.
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But, but, the differential mortality statistics based on lifestyle is vital information that we need to know. The more we sit on the couch drinking beer, the less we have to save! This could change my whole FIRE strategy!
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I loved this when it came out and have returned to it to find the flex option which makes me love it even more as that makes it much more useful with my plans. Given my barebone needs are much less than my planned spending, that I like the concept behind the Bernicke spending models (I've seen this in the in laws and my parents), the lack of longevity in mine and spouses families, and the inherent over-conservative need of equity portfolio spending limits for survival, I am planning on allowing for a 5% WR at the start and then cutting that when portfolio is down 20% or more from the (inflation based) starting portfolio. Its amazing to be able to see such a complicated (well, different more than complicated I guess) plan in such a simple graph!
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Great tool!
PTF so I can find it easily :-)
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I continue to run across people using this tool both on the forum and elsewhere. CCCA you made a real hit here.
The thing that amazes me though, even more than the wide uptake and adoption is how many people say they use the engaging-tool but first toggle off the death feature.
... if only it were that simple in real life ...
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It's an awesome tool, and I agree - turning off the death toggle is a head-scratcher. That's a key feature you won't find on other common FIRE calculators.
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I continue to run across people using this tool both on the forum and elsewhere. CCCA you made a real hit here.
The thing that amazes me though, even more than the wide uptake and adoption is how many people say they use the engaging-tool but first toggle off the death feature.
... if only it were that simple in real life ...
I've run into a surprising number of people who think we'll be able to stop aging in the next few decades.
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I continue to run across people using this tool both on the forum and elsewhere. CCCA you made a real hit here.
The thing that amazes me though, even more than the wide uptake and adoption is how many people say they use the engaging-tool but first toggle off the death feature.
... if only it were that simple in real life ...
Are you suggesting a curt "No, thank you." isn't enough to dispense with the unwanted advances of Mr Reaper? The calculator is amazing though. Thank you CCCA!
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The flex spending is a key assumption. Studies show spending actually decreases with age in retirement. Probably only have of my retirement expenses would be truly fixed.
Sent from my iPhone using Tapatalk
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I continue to run across people using this tool both on the forum and elsewhere. CCCA you made a real hit here.
The thing that amazes me though, even more than the wide uptake and adoption is how many people say they use the engaging-tool but first toggle off the death feature.
... if only it were that simple in real life ...
@maizefolk I've said this before but I'll say it again. You are the one with the brilliant idea for this and I incrementally improved upon it.
I think one of the reasons people turn off the death feature is that it's a relatively simple version of cfiresim/firecalc that lets you see results visually and instantaneously.
And thanks to everyone who uses it and shares it. I'm very happy it's a useful tool for educating people about FIRE and planning for FIRE.
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Thank you for making it, this is my favorite calculator.
My wife finds it depressing though but I think that having that grey area staring in your face is a good reminder that life is finite.
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Thank you for making it, this is my favorite calculator.
My wife finds it depressing though but I think that having that grey area staring in your face is a good reminder that life is finite.
Why is it depressing?
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When I was planning fire, I calculated our death with online calculators. Not precise, but it's what insurance companies use to determine their risk when offering life insurance. I figure it's better to make an educated estimate than nothing at all. When deciding to FIRE, lifespan is certainly a variable to consider when trying to avoid running out of money prior to death.
Once you obtain your "number," it provides you one of the variables needed when using online FIRE calculators.
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Thank you for making it, this is my favorite calculator.
My wife finds it depressing though but I think that having that grey area staring in your face is a good reminder that life is finite.
Why is it depressing?
Because we all gonna die
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Thank you for making it, this is my favorite calculator.
My wife finds it depressing though but I think that having that grey area staring in your face is a good reminder that life is finite.
Why is it depressing?
Because we all gonna die
Memento Mori
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I thought I'd update everyone here that I've added two new features to the Rich, Broke or Dead calculator:
(1) is the ability to include income and expense streams that are not adjusted for inflation. To make an income or expense stream constant in nominal dollars, you will need to add an asterisk '*' after the number.
(2) You can download all the yearly data on income, spending and portfolio balance for all historical cycles by pressing the download CSV button.
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Awesome!
My pension will be non-inflation adjusted (not so awesome...)
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Awesome!
My pension will be non-inflation adjusted (not so awesome...)
Inflation has been pretty low for awhile so hopefully the pension being non-inflation adjusted won't be too bad. Unless you are trying to build a house.
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I might have said it before, but thanks so much for creating and maintaining this calculator. It was eye opening and a major catalyst for me being able to finally "pull the trigger" on FIRE almost 2 years ago.
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Outstanding tool, absolutely destroys the tool that the "Professionals" at Fidelity use.
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I might have said it before, but thanks so much for creating and maintaining this calculator. It was eye opening and a major catalyst for me being able to finally "pull the trigger" on FIRE almost 2 years ago.
I'll second that as well. I find I tend to consult this tool along with a compound interest calculator when I'm thinking about coast FIRE numbers.
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I might have said it before, but thanks so much for creating and maintaining this calculator. It was eye opening and a major catalyst for me being able to finally "pull the trigger" on FIRE almost 2 years ago.
I'll second that as well. I find I tend to consult this tool along with a compound interest calculator when I'm thinking about coast FIRE numbers.
I'll pile on. I still use this all the time and really enjoy the updates. The spending flex/threshold fits into what my plans have always been but I had never had an easy way to factor it into a calculator. And I've always wanted some sort confirmation that not only my chance of success (not running out of money) was greater than some very high X% (which every calc does), but also that my inflation adjusted starting balance would at some decent % chance hold its value over time, and the Bal<start option is amazing for not only giving that at the end but for actually visualizing over the entire retirement span.
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So, how hard would it be to model a "bond tent" strategy?
ie: go into retirement at something like a 50:50 stock:bond ratio, but incrementally convert to something like 80:20 or 90:10 over the course of 5-10 years.
I've seen claims it reduces failure probability, but I'm not aware of a retirement calculator that includes it as an option - just a perpetual fixed ratio. I'd be interested in fiddling around with different ratios and different timeframes.
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One think I'd like to be able to do with this model is add more than one extra income stream. Basically, I would like to be able to model a period of low income work at the beginning of my "retirement" and then a second period of income modelling receiving my social security pension later in life.
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Thanks for all the kind words. It makes me happy that people are using it and finding it so useful. Also hoping that it doesn't lead anyone astray. :)
One think I'd like to be able to do with this model is add more than one extra income stream. Basically, I would like to be able to model a period of low income work at the beginning of my "retirement" and then a second period of income modelling receiving my social security pension later in life.
There is already an option to do this. Just separate your income streams (and start and end ages) by semicolons (;).
So, how hard would it be to model a "bond tent" strategy?
ie: go into retirement at something like a 50:50 stock:bond ratio, but incrementally convert to something like 80:20 or 90:10 over the course of 5-10 years.
I've seen claims it reduces failure probability, but I'm not aware of a retirement calculator that includes it as an option - just a perpetual fixed ratio. I'd be interested in fiddling around with different ratios and different timeframes.
Probably wouldn't be too hard, but it's not something I've really heard about. Maybe I'll read more about it at some point and then think about it some more.
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Thanks for all the kind words. It makes me happy that people are using it and finding it so useful. Also hoping that it doesn't lead anyone astray. :)
One think I'd like to be able to do with this model is add more than one extra income stream. Basically, I would like to be able to model a period of low income work at the beginning of my "retirement" and then a second period of income modelling receiving my social security pension later in life.
There is already an option to do this. Just separate your income streams (and start and end ages) by semicolons (;).
!!!! You're awesome!
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So, how hard would it be to model a "bond tent" strategy?
ie: go into retirement at something like a 50:50 stock:bond ratio, but incrementally convert to something like 80:20 or 90:10 over the course of 5-10 years.
I've seen claims it reduces failure probability, but I'm not aware of a retirement calculator that includes it as an option - just a perpetual fixed ratio. I'd be interested in fiddling around with different ratios and different timeframes.
Probably wouldn't be too hard, but it's not something I've really heard about. Maybe I'll read more about it at some point and then think about it some more.
The general idea is that one fairly large source of portfolio risk is a stock market crash shortly after retiring, which is mitigated by having more bonds/cash. The flip side is the long-term inflation risk from having a lower stock allocation, which is mitigated by having more stock.
The idea of the "bond tent" is to mitigate both of these risks: As you get close to retirement, shift to a heavier bond/cash position - then slowly unwind it in your early years of retirement by shifting back to a heavier stock allocation to mitigate the inflation risk of a long retirement.
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Just a quick note to say I just used this and found it really useful to illustrate trade offs with my SO.
Thanks for your time in making it.