Page 1 of 1

Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 8:28 pm
by dvd7e
I enjoy using online portfolio simulation tools like www.portfoliovisualizer.com and https://www.retirementsimulation.com/.

But I entered some data for a scenario that is between conservative and realistic at this second site.....and it says that by the time I hit about 70 years old my portfolio will be somewhere between $0 (worst case) and $19 million dollars (90th percentile). That is....quite the spread to say the least.

I feel like I’m a pretty agggressive saver (tough competition within the bogleheads community tho) so I initially felt like i was in good shape. But here’s the thing....these results still show a 30% chance of being broke if I have a long life, which taken at face value suggests I need to be saving even more.

How much weight should I be giving to calculators like this?

I understand they assume fixed/“blind” decision making, eg that if I actually were in a worst case returns scenario then I probably wouldn’t still retire at 55 and if/when I did I’d probably dial down the 60k spending. But still....

Inputs....
Age: 33
Current Savings: 750k
Annual Savings: 58k
Retirement Withdrawal: 60k
Retire at 55
50/50 Allocation (Edit: My current actual allocation is 85/15, but after not much thought at all I used 50/50 in the calculator because there is no glide path option available, and 50/50 seemed like a decent long term average over a lifetime)

I made Stocks and Bonds both be -3% returns relative to their historical returns, due to all sorts of opinions that long term returns are expected to be lower than historical returns. Just trying to be conservative here.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 8:42 pm
by bb
If you continue to be a decent saver and not a big spending I don't see how you won't make out ok unless there is a doomsday scenario. But if that happens how exactly do you think you could protect yourself?

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 8:44 pm
by dvd7e
Does anyone know of a tool that lets you have more dynamic/realistic “decision making” in a portfolio simultation? For example...

* work until get 25-40x desired retirement income and then retire, rather than retire at a fixed age no matter what
* Sprnd more/less in retirement if portfolio is particularly large/small, but with realistic upper and lower bounds
* “Glide path” on retirement spending...I hear you typically spend less as you get older, as opposed to a fixed value throughout
* Glide path Stock/Bond allocation instead of fixed

I know portfoliovisualizer.com does some of these, but not all

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 8:50 pm
by ResearchMed
dvd7e wrote: Thu Sep 20, 2018 8:44 pm Does anyone know of a tool that lets you have more dynamic/realistic “decision making” in a portfolio simultation? For example...

* work until get 25-40x desired retirement income and then retire, rather than retire at a fixed age no matter what
* Sprnd more/less in retirement if portfolio is particularly large/small, but with realistic upper and lower bounds
* “Glide path” on retirement spending...I hear you typically spend less as you get older, as opposed to a fixed value throughout
* Glide path Stock/Bond allocation instead of fixed

I know portfoliovisualizer.com does some of these, but not all
Are you thinking in part (for the spending) on a Variable Withdrawal Strategy?

That helps avoid the "zero" or "20 million".
It helps one to spend more or less, depending upon how the portfolio is holding up.

We plan to use something like that, but will have a "floor" of Social Security, plus at least some additional lifetime income from a life annuity (which is like a pension).
Then the "rest" can be used for "the rest" plus more or less of discretionary spending.

One serious problem, in our minds anyway, with most spending models is that they don't account for whether the portfolio value is going up or down, and make adjustments as needed, to avoid either heading too low, or leaving too much on the table. That's what the Variable software is for, but it doesn't help as much to determine the "amount needed for retirement".

RM

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 8:51 pm
by dvd7e
bb wrote: Thu Sep 20, 2018 8:42 pm If you continue to be a decent saver and not a big spending I don't see how you won't make out ok unless there is a doomsday scenario. But if that happens how exactly do you think you could protect yourself?
Well.....If your “doomsday” scenario is a long sequence of bad returns leading up to target retirement age then you could protect yourself by working longer. But the real Doomsday scenario is when that long sequence of bad returns happens when you’re already committed to retirement and “past the point of no return” (if there were such a thing; maybe for medical reasons you couldn’t return)....only hope is dog food while you wait for the powerball

(Or an annuity, or real estate, or a big inheritance from your rich uncle)

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 9:00 pm
by JoMoney
Most Monte Carlo simulations are essentially randomizing and replaying past results as if those were the possible future outcomes.
Unfortunately, the range of future outcomes is not limited to whats happened in the past, so it's problematic.
It's a probability axiom that if you cannot precisely define the whole sample space, then the probability of any subset cannot be defined either... but if you want to attempt some sort of estimation, you don't really have much to go on but some hope through inductive reasoning that the future will be like the past. :?

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 9:02 pm
by Taylor Larimore
dvd7e:

Any investment for something that is as important as being financially secure in retirement should not be a gamble. Instead, pick a suitable stock/bond allocation that becomes more conservative as you age.

It is very important in and near retirement not to lose what we've got.

Best wishes.
Taylor

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 9:03 pm
by Phineas J. Whoopee
The longer the time horizon the greater the dispersion of potential financial outcomes. That's all there is to that.

Save, invest, stick to your plan, and each of us will die eventually.

PJW

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 9:05 pm
by AlohaJoe
dvd7e wrote: Thu Sep 20, 2018 8:28 pm I feel like I’m a pretty agggressive saver (tough competition within the bogleheads community tho) so I initially felt like i was in good shape. But here’s the thing....these results still show a 30% chance of being broke if I have a long life, which taken at face value suggests I need to be saving even more.

How much weight should I be giving to calculators like this?
Most calculators are overly conservative because it tends to require multiple unlikely events all happening at the same time. For instance,

if you live to 95 and keep your spending constant then there's a 30% chance of having a stock market so bad you run out of money. But you only have a 25% chance of living that long. So you need to have bad stock market returns and long life. Which will only happen 7.5% of the time.

And that's still assuming that you have constant spending, despite living through a financial crisis. Which we know that people don't. Even if things go perfectly, people reduce their expenses. We know from airline ticketing data, that people rarely travel long distance after age 70.

So take the results with a grain of salt.

That said, where the calculators work best isn't when used as a point-in-time estimate but when they are used iteratively over a period of years. If you run the calculator every year and in five years it is saying you now have a 35% chance of being broke...you probably want to think about making changes to your saving or spending. On the other hand, if it says you now have a 10% chance of being broke...maybe you can think about evaluating some scenarios where you retire early or buy a vacation home.

FWIW, I think that using a "funded ratio" (and tracking it over time) is probably a better way for people to see their progress towards retirement. If you search of Bogleheads you'll see a series of posts from bobcat2 on how to do that.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 10:03 pm
by Olemiss540
[(removed) --admin LadyGeek] With 750k at 33, you are in the .1%. Quit reading financial forums, running portfolio visualizers, and humble bragging to a bunch of strangers. You could probably retire at 40.

If you cant retire at 55, most won't be able to retire at 90. I am done with this place for a few weeks, some sunshine will be good for my complection.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 20, 2018 10:13 pm
by Ron Scott
dvd7e wrote: Thu Sep 20, 2018 8:51 pm
bb wrote: Thu Sep 20, 2018 8:42 pm If you continue to be a decent saver and not a big spending I don't see how you won't make out ok unless there is a doomsday scenario. But if that happens how exactly do you think you could protect yourself?
Well.....If your “doomsday” scenario is a long sequence of bad returns leading up to target retirement age then you could protect yourself by working longer. But the real Doomsday scenario is when that long sequence of bad returns happens when you’re already committed to retirement and “past the point of no return” (if there were such a thing; maybe for medical reasons you couldn’t return)....only hope is dog food while you wait for the powerball

(Or an annuity, or real estate, or a big inheritance from your rich uncle)
Yeah, there is a strange logic around here that says “the calculators” show us there are 2 alternatives in the future. The first, the most likely scenario, is that you’ll be fine and shouldn’t worry about anything. The second is absolute disaster that affects everyone—war or pestilence or something rare and horrible—that you can’t plan for or control and shouldn’t try to. This is a false dichotomy that makes no sense to follow for planning purposes.

One “third alternative” is a prolonged period of low or no growth that has inflation eating away at spending power. Protection against the full range of alternatives, including the third, could involve working longer, following a “3% Rule” or some other conservative approach.

I am not sure why the zeitgeist is to discount the third alternative but, yes, you’re going to die with funds between 0 and $20M. Don’t ness it up.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 12:30 am
by daveydoo
dvd7e wrote: Thu Sep 20, 2018 8:28 pm
But I entered some data for a scenario that is between conservative and realistic at this second site.....and it says that by the time I hit about 70 years old my portfolio will be somewhere between $0 (worst case) and $19 million dollars (90th percentile).
It's not the range; it's the distribution of possible outcomes. Not a normal distribution (I don't think?) but not too dissimilar. The small "tails" (in your case at 0 or less, and at $19 million) are not too important, imo.

if you have a choice later on, I would definitely go with the $19 million, though. :D

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 8:01 am
by BogleBoogie
Olemiss540 wrote: Thu Sep 20, 2018 10:03 pm [(removed) --admin LadyGeek] With 750k at 33, you are in the .1%. Quit reading financial forums, running portfolio visualizers, and humble bragging to a bunch of strangers. You could probably retire at 40.

If you cant retire at 55, most won't be able to retire at 90. I am done with this place for a few weeks, some sunshine will be good for my complection.
While he sounds a bit gruff, I think he makes some good points.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 8:25 am
by Dottie57
At 50/50 AA, my chance of bankruptcy was low at both sites mention. Withdrawl rate around 4%, 1 stock market crash.

I think the AA Really help as only 50% was in stock.

Entire portfolio of 1.2 mill. 45k per year withdrawl. Stocks 4%, Bonds 2% return, cash 2%, return, inflation 2%.

Age 61. Shorter retirement than op.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 8:32 am
by CyclingDuo
dvd7e wrote: Thu Sep 20, 2018 8:28 pm Inputs....
Age: 33
Current Savings: 750k
Annual Savings: 58k
Retirement Withdrawal: 60k
Retire at 55
50/50 Allocation
I made Stocks and Bonds both be -3% returns relative to their historical returns, due to all sorts of opinions that long term returns are expected to be lower than historical returns. Just trying to be conservative here.
If you keep saving $58K a year between now and age 55 on top of your current $750K - you're going to be just fine in 22 years. :moneybag :moneybag :moneybag :moneybag :moneybag :moneybag :moneybag

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 9:04 am
by nisiprius
It's telling you the truth. The variability of financial asset returns is just that big.

To be sure, you probably should not be looking at the actual extreme cases--you don't say if you are looking at the literal entire range shown by the simulations; usually they will show something like the 10% and 90% percentiles, which is probably better to look at.

These simulations can help you rule out the near-impossible. For example, they can warn you of the danger of a famous guru's claim that 8% withdrawals are safe. But they can't immunize you against the future uncertainty that is the human condition. The honest magic eight ball always says "reply hazy, try again."

Here are some things about these simulations.

1) They are very sensitive to the assumed withdrawal rate. A small change in the withdrawal rate will create a large upward boost in the near-worst-case situation. Try 3% with any stock-bond allocation between 75/25 and 25/75. I bet that lifts your simulation clear of the "bankruptcy" line. Vanguard's simulator, with spending cut to $30,000/year but everything else left at the default, shows me this:

https://retirementplans.vanguard.com/VG ... ggCalc.jsf

Image

2) If you decide first what you think is an appropriate failure rate for planning, you will probably find changes in the stock/bond allocation make amazingly little difference in the near-worst-case situation, as long as you aren't close to 100% stocks or 100% bonds. As you increase stock allocation, the bottom end of the range stays in about the same place while the range of outcomes spreads upwards from it. That is, increasing stock allocation does not lower the risk of running out of money, but it does greatly increase the amounts of money you will have if you have "ordinary" good luck. My mental model is that I think of stocks as free lottery tickets--free because they don't lower the low end--that have a quite decent change of hitting a quite-worthwhile jackpot.

3) In real life, just about the uniform experience is that all attempts to estimate the probability of low-probability events underestimate them--badly. The risk model for a meltdown at Three Mile Island suggests that what happened should have only happened once in 30,000 years. The events that led to the collapse of Long Term Capital Management and almost brought down the US financial system in 1998 were stated to be "a ten-sigma event," meaning it should have happened no more often than about 1,000,000,000,000,000,000,000 years.

The implications of point #1 are interesting, because it suggests that there's only a thin difference between a safe withdrawal rate and a very risky one. But it is only in simulations with a fixed set of assumed data that you can tell whether that borderline would have been at 3.69% or 4.03%. In real life, we are strolling down the Newport Cliff Walk (no railing), blindfolded, with no precise way to know how just far back from the edge we are. (Every time I've walked it there have been a few places where erosion had only only removed the margin, but had cut a few inches into the edge of the pavement. Those could be an analogy for the "ten-sigma events" that are near-impossible on paper but merely rare in real life).

As for points 1 and 2 together, there's no substitute for trying it for yourself, but I think you'll find what I've always found with my own chosen numbers: the prudent planning, near-words-case outcome is very sensitive to withdrawal rate, and very insensitive to stock/bond allocation.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 9:08 am
by Tamalak
nisiprius wrote: Fri Sep 21, 2018 9:04 am 3) In real life, just about the uniform experience is that all attempts to estimate the probability of low-probability events underestimate them--badly. The risk model for a meltdown at Three Mile Island suggests that what happened should have only happened once in 30,000 years. The events that led to the collapse of Long Term Capital Management and almost brought down the US financial system in 1998 were stated to be "a ten-sigma event," meaning it should have happened no more often than about 1,000,000,000,000,000,000,000 years.
Are we underestimating the probability of low-probability events, or are there just a lot of them? If there are 1,000,000,000,000,000,000,000 potential ten-sigma events, we should have about one a year.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 9:12 am
by wolf359
CyclingDuo wrote: Fri Sep 21, 2018 8:32 am
dvd7e wrote: Thu Sep 20, 2018 8:28 pm Inputs....
Age: 33
Current Savings: 750k
Annual Savings: 58k
Retirement Withdrawal: 60k
Retire at 55
50/50 Allocation
I made Stocks and Bonds both be -3% returns relative to their historical returns, due to all sorts of opinions that long term returns are expected to be lower than historical returns. Just trying to be conservative here.
If you keep saving $58K a year between now and age 55 on top of your current $750K - you're going to be just fine in 22 years. :moneybag :moneybag :moneybag :moneybag :moneybag :moneybag :moneybag
I agree with the above.

Several observations:

1) At your age and contribution rate, I'd be 90/10 or 100/0 stocks/bonds. You're putting roughly 7% of your balance into your portfolio as new money. If the market declines that much, your portfolio will appear to be breaking even. A 20% market decline won't feel as bad to you if you keep dumping money in at that rate throughout.

2) Your Retirement withdrawal is probably wrong. I say this because I am 51 now. When I was 30, I projected my expenses at 50, and I can honestly say I had absolutely no idea what would be important to me or what those costs would really be like. This included things I could not know (like how many kids I would have, their ages, or what schools they would be going to), or even where I was going to be living. In addition, the inflation rate is unpredictable, so you don't know if 60K is sufficient or ridiculously low. My advice is to just keep plugging away at saving, and when you get within a few years of throwing in the towel, project based on your current assets and expenses. 22 years is too far ahead to be accurate. Projecting expenses 5 years out will have much more realistic results.

3) Just keep saving and shoot for Financial Independence. Keep going until you have a sufficient buffer, then start deciding if you will keep working if you enjoy it when you no longer have to. You will then have the flexibility to take mini-retirements, extended vacations, enjoy your life, or simply retire if appropriate.

The financial calculators are fun, but they're only good for telling you if you're on track. There are no certainties. Markets are variable. You'll get there when you get there. The schedule will not be precise. At your savings rate and current asset value, you should get there sooner than 55.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 11:41 am
by dvd7e
wolf359 wrote: Fri Sep 21, 2018 9:12 am
The financial calculators are fun, but they're only good for telling you if you're on track. There are no certainties. Markets are variable. You'll get there when you get there. The schedule will not be precise. At your savings rate and current asset value, you should get there sooner than 55.
On paper I would probably have enough to retire sooner, but to me the biggest constraints seem to be 1) access to funds in a retirement account and 2) health insurance.

To address the first issue, I am saving some money in a taxable account to give me some flexibility. (And I'm aware of the Roth IRA conversion ladder). But if I delay retirement until 55 then I get both issues taken care of at once....I'll be able to withdraw money from my employer's 401k penalty free, and I'll have access to the company group health insurance (I have to carry 100% of the premium, there's no subsidy, but presumably it would be cheaper than getting coverage on the open market. Tough to say what will happen in 20+ years though.) If I retire before 55 then I lose both of these benefits.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 11:42 am
by daveydoo
nisiprius wrote: Fri Sep 21, 2018 9:04 am
3) In real life, just about the uniform experience is that all attempts to estimate the probability of low-probability events underestimate them--badly. The risk model for a meltdown at Three Mile Island suggests that what happened should have only happened once in 30,000 years. The events that led to the collapse of Long Term Capital Management and almost brought down the US financial system in 1998 were stated to be "a ten-sigma event," meaning it should have happened no more often than about 1,000,000,000,000,000,000,000 years.
The problem isn't so much that unlikely events are unexpectedly common -- they're not. It's that the model breaks down and/or fails to capture some external unforeseen event.

I've hit the brakes in my car millions of times and each time my head moves forward anywhere between 0 and 12 inches. The likelihood that my head (along with rest of me) will move forward 50 feet seems impossibly small, based on that distribution. Yet people are thrown yards from their car every day -- in high-speed collisions.

My painstakingly-collected and seemingly comprehensive data set is completely blind to events other than my pushing the brake pedal in run-of-the-mill traffic -- the only circumstance that I thought to include in my model.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 11:54 am
by beyou
Taylor Larimore wrote: Thu Sep 20, 2018 9:02 pm dvd7e:

Any investment for something that is as important as being financially secure in retirement should not be a gamble. Instead, pick a suitable stock/bond allocation that becomes more conservative as you age.

It is very important in and near retirement not to lose what we've got.

Best wishes.
Taylor
There are lots of posters who argue against age-in-bonds, as too conservative.
But I tend to agree with above, the reward for being more aggressive comes with risks.
Vanguard's own published returns for various stock/bond allocations shows that
the difference between 40/60 and 60/40 is not that large an upside, so why take more risk than
age-in-bonds or some other conservative allocation (stable 40/60 instead of a sliding scale).

https://personal.vanguard.com/us/insigh ... ns?lang=en

I can see 60/40 in accumulation years then 40/60 in retirement or some target fund type sliding scale every five years,
or age-in-bonds, but nothing wrong with being conservative when you get close to retirement.
I really don't want to do what is often suggested, to greatly reduce my expenses down to the SWR when there is a downturn
that severely impacts an 80/20 retirement portfolio.

I may not reach $20 million but I wont go bankrupt and I don't need a Ferrari anyway :-)

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 12:23 pm
by dkb140
dvd7e wrote: Thu Sep 20, 2018 8:28 pm How much weight should I be giving to calculators like this?

Age: 33
Current Savings: 750k
Annual Savings: 58k
Retirement Withdrawal: 60k
Retire at 55
50/50 Allocation
I made Stocks and Bonds both be -3% returns relative to their historical returns, due to all sorts of opinions that long term returns are expected to be lower than historical returns. Just trying to be conservative here.
So first, I think you're doing great, keep it up! I think you're either a lot closer to the finish line than you realize or you will finish with a lot more than you realize. Either way, you're doing great.

You seem pretty risk-adverse. One thought, price out a $60k annuity at your current age, in 2 years, 7 years, etc. I'm guessing it would run in the $1M to $1.5M range. At your current pace you should hit that in like 7-10 years, so you really don't have much to worry about!

Note I'm not actually suggesting buying the annuity right now, but using that as a "cash out" benchmark and maybe adjust your goal up from there.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 12:34 pm
by dkb140
dvd7e wrote: Fri Sep 21, 2018 11:41 am On paper I would probably have enough to retire sooner, but to me the biggest constraints seem to be 1) access to funds in a retirement account and 2) health insurance.

To address the first issue, I am saving some money in a taxable account to give me some flexibility. (And I'm aware of the Roth IRA conversion ladder). But if I delay retirement until 55 then I get both issues taken care of at once....I'll be able to withdraw money from my employer's 401k penalty free, and I'll have access to the company group health insurance (I have to carry 100% of the premium, there's no subsidy, but presumably it would be cheaper than getting coverage on the open market. Tough to say what will happen in 20+ years though.) If I retire before 55 then I lose both of these benefits.
Couple thoughts on healthcare: If your health plan allows a HSA I'd max that out & save every healthcare receipt until retirement. 20 years of $3450/year (or whatever it goes up to) plus earnings could easily be your healthcare buffer in early retirement. Also check out the health-share plans out there. I've seen some FIRE posts raving about those.

And yes, roth laddering might be your access answer if you decide to retire earlier than 55. That or ramping up your taxable savings as you get closer to whatever date you choose.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 12:36 pm
by JoMoney
dkb140 wrote: Fri Sep 21, 2018 12:23 pm
dvd7e wrote: Thu Sep 20, 2018 8:28 pm How much weight should I be giving to calculators like this?

Age: 33
Current Savings: 750k
Annual Savings: 58k
Retirement Withdrawal: 60k
Retire at 55
50/50 Allocation
I made Stocks and Bonds both be -3% returns relative to their historical returns, due to all sorts of opinions that long term returns are expected to be lower than historical returns. Just trying to be conservative here.
So first, I think you're doing great, keep it up! I think you're either a lot closer to the finish line than you realize or you will finish with a lot more than you realize. Either way, you're doing great.

You seem pretty risk-adverse. One thought, price out a $60k annuity at your current age, in 2 years, 7 years, etc. I'm guessing it would run in the $1M to $1.5M range. At your current pace you should hit that in like 7-10 years, so you really don't have much to worry about!

Note I'm not actually suggesting buying the annuity right now, but using that as a "cash out" benchmark and maybe adjust your goal up from there.
Actually, they are already beyond the point of an annuity to withdraw $60k at age 55.
The quotes available at the link below suggests a 40 year old could buy annuity paying $5k a month in 15 years for $640,172
For a 33 year old that would add another 7 years lowering the cost even more (but the quote tool doesn't go below 40)
https://www.immediateannuities.com/annu ... rs/?sce=hc
... the real problem, is that $60k in 15+ years won't have the purchasing power it does today :?

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 7:33 pm
by dvd7e
dkb140 wrote: Fri Sep 21, 2018 12:23 pm So first, I think you're doing great, keep it up! I think you're either a lot closer to the finish line than you realize or you will finish with a lot more than you realize. Either way, you're doing great.

You seem pretty risk-adverse. One thought, price out a $60k annuity at your current age, in 2 years, 7 years, etc. I'm guessing it would run in the $1M to $1.5M range. At your current pace you should hit that in like 7-10 years, so you really don't have much to worry about!

Note I'm not actually suggesting buying the annuity right now, but using that as a "cash out" benchmark and maybe adjust your goal up from there.

I dont actually have a 50/50 portfolio, I’m actually at 85/15. I used 50/50 in the calculator because I had to go with a static allocation forever, there was no glide path option....and also...I didn’t really put too much thought into the calculator input. Also, the annual savings rate and withdrawal amount is in today’s dollars, and indexed for inflation.

But for getting an estimate on the annuity, what information is that telling me? Is that information being used to make a decision? And if so what does that look like?

To AlohaJoe: I’m not familiar with the funded ratio idea, I’ll have to look into that. Thanks for passing along

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Fri Sep 21, 2018 11:10 pm
by dvd7e
dkb140 wrote: Fri Sep 21, 2018 12:34 pm
dvd7e wrote: Fri Sep 21, 2018 11:41 am On paper I would probably have enough to retire sooner, but to me the biggest constraints seem to be 1) access to funds in a retirement account and 2) health insurance.

To address the first issue, I am saving some money in a taxable account to give me some flexibility. (And I'm aware of the Roth IRA conversion ladder). But if I delay retirement until 55 then I get both issues taken care of at once....I'll be able to withdraw money from my employer's 401k penalty free, and I'll have access to the company group health insurance (I have to carry 100% of the premium, there's no subsidy, but presumably it would be cheaper than getting coverage on the open market. Tough to say what will happen in 20+ years though.) If I retire before 55 then I lose both of these benefits.
Couple thoughts on healthcare: If your health plan allows a HSA I'd max that out & save every healthcare receipt until retirement. 20 years of $3450/year (or whatever it goes up to) plus earnings could easily be your healthcare buffer in early retirement. Also check out the health-share plans out there. I've seen some FIRE posts raving about those.

And yes, roth laddering might be your access answer if you decide to retire earlier than 55. That or ramping up your taxable savings as you get closer to whatever date you choose.
A little off topic, but now that you mention it...what’s the preferred strategy for HSAa when I actually have a qualified expense and am able to pay out of pocket: a) use the HSA or b) pay out of pocket, invest as much as I can and try to maximize the growth in that account?

And should my allocation in the HSA mirror my overall allocation? (85/15 now at 33, sliding to 50/50 by age 55)

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sat Sep 22, 2018 12:06 am
by AlphaLess
bb wrote: Thu Sep 20, 2018 8:42 pm But if that happens how exactly do you think you could protect yourself?
Get a ranch somewhere in the midwest.
Buy lots of ammo, canned food, and fuel to run own generator.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sat Sep 22, 2018 12:33 am
by HEDGEFUNDIE
dvd7e wrote: Fri Sep 21, 2018 11:10 pm
dkb140 wrote: Fri Sep 21, 2018 12:34 pm
dvd7e wrote: Fri Sep 21, 2018 11:41 am On paper I would probably have enough to retire sooner, but to me the biggest constraints seem to be 1) access to funds in a retirement account and 2) health insurance.

To address the first issue, I am saving some money in a taxable account to give me some flexibility. (And I'm aware of the Roth IRA conversion ladder). But if I delay retirement until 55 then I get both issues taken care of at once....I'll be able to withdraw money from my employer's 401k penalty free, and I'll have access to the company group health insurance (I have to carry 100% of the premium, there's no subsidy, but presumably it would be cheaper than getting coverage on the open market. Tough to say what will happen in 20+ years though.) If I retire before 55 then I lose both of these benefits.
Couple thoughts on healthcare: If your health plan allows a HSA I'd max that out & save every healthcare receipt until retirement. 20 years of $3450/year (or whatever it goes up to) plus earnings could easily be your healthcare buffer in early retirement. Also check out the health-share plans out there. I've seen some FIRE posts raving about those.

And yes, roth laddering might be your access answer if you decide to retire earlier than 55. That or ramping up your taxable savings as you get closer to whatever date you choose.
A little off topic, but now that you mention it...what’s the preferred strategy for HSAa when I actually have a qualified expense and am able to pay out of pocket: a) use the HSA or b) pay out of pocket, invest as much as I can and try to maximize the growth in that account?

And should my allocation in the HSA mirror my overall allocation? (85/15 now at 33, sliding to 50/50 by age 55)
I would use the HSA now, which instantly locks in a 20-30% tax savings (depending on your tax bracket). Saving receipts until retirement has two risks:

1. You don’t actually remember to file for reimbursement 30 years from now, or you are too lazy to bother with the hundreds of receipts that have piled up (are you really going to type in every single $10 condom purchase from Walgreens?)

2. Your rate of return on your HSA doesn’t exceed your personal long term discount rate.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sat Sep 22, 2018 2:44 am
by msk
dvd7e wrote: Thu Sep 20, 2018 8:28 pm Inputs....
I made Stocks and Bonds both be -3% returns relative to their historical returns, due to all sorts of opinions that long term returns are expected to be lower than historical returns. Just trying to be conservative here.
I have used Monte Carlo simulations in my professional life and had decisions running into billions of $ based on those simulations. Yes, you do get surprises, but the decisions made almost always turn out sound. When used sensibly the simulations are great! But then you decided that you can predict the future better than history and slapped a -3%. Obviously you'll get worse results with -5% and better results with 0%. I suggest that you just stick to history since we know no better. Then pay attention to the results range between 25 percentile and 75 percentile. Too long to explain here why Monte Carlo simulations, because they ignore sequence of returns, end up with overly fat tails (i.e. excessively optimistic at 90 percentile and excessively pessimistic at 10 percentile). Keep saving and investing. "Investing" has to be something better than under the mattress. Bonds :confused Make use of your youth and the decades of investment time ahead of you.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sat Sep 22, 2018 6:48 am
by McDougal
I like the title of this thread, Im going to die somewhere between Bankruptcy and $20 million. Aren't we all?

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sat Sep 22, 2018 7:11 am
by dvd7e
msk wrote: Sat Sep 22, 2018 2:44 am I have used Monte Carlo simulations in my professional life and had decisions running into billions of $ based on those simulations. Yes, you do get surprises, but the decisions made almost always turn out sound. When used sensibly the simulations are great! But then you decided that you can predict the future better than history and slapped a -3%. Obviously you'll get worse results with -5% and better results with 0%. I suggest that you just stick to history since we know no better. Then pay attention to the results range between 25 percentile and 75 percentile. Too long to explain here why Monte Carlo simulations, because they ignore sequence of returns, end up with overly fat tails (i.e. excessively optimistic at 90 percentile and excessively pessimistic at 10 percentile).
I agree that we don’t know the future...including whether the past will repeat itself. In a vacuum, or some “steady state” environment then that’s a pretty reasonable assumption. But I think the global economy will be much more dynamic in the next 100 years than it has been in the previous 100 years. These aren’t really my thoughts or insights, they are other peoples, including from the Bohleheads community. I’d also rather err on the side of caution than banking on a 10% return to meet my goals, then fall short when I “only” get an 8% (or whatever) return. This isn’t a “predict the stock market for the next 5 decades” thread but for all of these reasons, making returns be -3% from their historical returns seemed like the prudent thing.
Bonds :confused Make use of your youth and the decades of investment time ahead of you
I’m confused, are you saying my Bond allocation is too high? You may not have seen my follow up post, but my actual allocation is 85/15. I used 50/50 in the calculator because I had to use a single fixed allocation forever, no glide path option available, and after about 2 seconds of thought that seemed like a decent ballpark average over my entire life.

But at the same time.....should I still be (as) aggressive if I’m retiring early? I’m not going to have as much time before I need the money

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sun Sep 23, 2018 4:16 am
by msk
No, I did not miss your other posts. Nevertheless for the past 300 years humans seem fixated at a 5+% REAL return in all the major countries where data have been available. Basically, it's almost ingrained in us humans that we invest effort and treasure only into businesses that promise more (actually promise far more, but real outcomes do not always pan out and the 5+% average includes both successes and failures). It's rather difficult to talk about nominal returns since we have no clue as regards inflation either. But real returns seem to be what humans are fixated about. I and most others were happily investing in the early 1980s when inflation and interest rates were in double digits in many countries. I expect that many Argentinians and Venezuelans are also investing even today with their absurdly high inflation. Because these individuals expect 5+% real returns. My major preference for sticking to history is because it has been so consistent. Each generation believes that this time is different because we have just been through a major war, or the British Empire has waned, or... But overall, despite the major and small yoyos up and down, you can take the Shiller (reconstructed) data from 1871 and withdraw 5% of portfolio p.a. from 1871 till now and your balance portfolio will still be more, in real terms, than what you began with, and your withdrawals will, on average, have more than kept up with inflation. So then we try doing the same with actual data for the past 50 years; ditto. My reference to youth is, indeed an anti-bond sentiment. It's a sad fallacy that investing ends on retirement date, even if that is only one year from today. Nobody spends all his portfolio on retirement date. Withdrawals are small and occur in dribs and drabs and your total investing horizon ends only at death. It's (wishfully) long. Even 100 year-olds hope for yet one more year :greedy Bonds IMHO are to calm nerves and only you can judge how nervous you are. Monte Carlo simulations already incorporate optimistic and pessimistic forecasts anyway (the percentile bands) so sticking in -3% (real?) is doubling up on pessimism. There can always be a Madoff situation that wipes you out... Just keep on saving and investing and you'll smile all the way into your 80s. My mother is still speculating in land, and she is 90 :mrgreen:

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sun Sep 23, 2018 7:54 pm
by JamalJones
BogleBoogie wrote: Fri Sep 21, 2018 8:01 am
Olemiss540 wrote: Thu Sep 20, 2018 10:03 pm [(removed) --admin LadyGeek] With 750k at 33, you are in the .1%. Quit reading financial forums, running portfolio visualizers, and humble bragging to a bunch of strangers. You could probably retire at 40.

If you cant retire at 55, most won't be able to retire at 90. I am done with this place for a few weeks, some sunshine will be good for my complection.
While he sounds a bit gruff, I think he makes some good points.
Age33:

$750,000 - current savings

-----------------------

$58,000 - annual savings

-----------------------
Retire at 55:

22 years of 750,000 staring point + $58,000 yearly savings:

if 3% annual return: $3,261,344.81
if 4% annual return: 3,843,276.63
if 5% annual return: 4,538,913.10

I don't know. Boy, that's gonna be close. I would say that IF you could deal with only a 3,000 sq ft house and ONE Tesla you might be able to make it!

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sun Sep 23, 2018 8:23 pm
by Agggm
dvd7e wrote: Fri Sep 21, 2018 7:33 pm
dkb140 wrote: Fri Sep 21, 2018 12:23 pm So first, I think you're doing great, keep it up! I think you're either a lot closer to the finish line than you realize or you will finish with a lot more than you realize. Either way, you're doing great.

You seem pretty risk-adverse. One thought, price out a $60k annuity at your current age, in 2 years, 7 years, etc. I'm guessing it would run in the $1M to $1.5M range. At your current pace you should hit that in like 7-10 years, so you really don't have much to worry about!

Note I'm not actually suggesting buying the annuity right now, but using that as a "cash out" benchmark and maybe adjust your goal up from there.

I dont actually have a 50/50 portfolio, I’m actually at 85/15. I used 50/50 in the calculator because I had to go with a static allocation forever, there was no glide path option....and also...I didn’t really put too much thought into the calculator input. Also, the annual savings rate and withdrawal amount is in today’s dollars, and indexed for inflation.

But for getting an estimate on the annuity, what information is that telling me? Is that information being used to make a decision? And if so what does that look like?

To AlohaJoe: I’m not familiar with the funded ratio idea, I’ll have to look into that. Thanks for passing along
Static allocation MC results aren't any good if you're portfolio will glide over a long time. Some FAs have such
models.

I don't know of an online calc that glides. But it sounds like a fun weekend project.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sun Sep 23, 2018 8:48 pm
by Church Lady
Hi, OP:

Try this calculator: www.i-orp.com. On this page, click the 'Extended ORP' tab, and have at it. This calculator takes taxes into account, and has a glide path option. The learning curve is long, but once you have it set up, it's easy to experiment with different retirement ages, savings amounts, asset allocations, Roth vs tax deferred vs taxable savings, and so on.

As far as you are from retirement, and given how hard it is to predict the future, you can't take any of these calculators as gospel. However, it can help you make reasonable decisions based on what we know today.

Good luck!

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sun Sep 23, 2018 9:00 pm
by EddyB
AlphaLess wrote: Sat Sep 22, 2018 12:06 am
bb wrote: Thu Sep 20, 2018 8:42 pm But if that happens how exactly do you think you could protect yourself?
Get a ranch somewhere in the midwest.
Buy lots of ammo, canned food, and fuel to run own generator.
I grew up being prepared for pretty much that response to SHTF scenarios, and I’m confident that very few US residents could succeed in that approach without significant advance preparation.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Mon Sep 24, 2018 9:15 am
by Phineas J. Whoopee
EddyB wrote: Sun Sep 23, 2018 9:00 pm ...
I grew up being prepared for pretty much that response to SHTF scenarios, and I’m confident that very few US residents could succeed in that approach without significant advance preparation.
I'm confident that very few US residents would survive the ensuing famine and epidemics.

PJW

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Mon Sep 24, 2018 10:27 pm
by AlphaLess
^^^ Agree with both of you.

But at least one can try.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Tue Sep 25, 2018 7:34 am
by dvd7e
Church Lady wrote: Sun Sep 23, 2018 8:48 pm Hi, OP:

Try this calculator: www.i-orp.com. On this page, click the 'Extended ORP' tab, and have at it. This calculator takes taxes into account, and has a glide path option. The learning curve is long, but once you have it set up, it's easy to experiment with different retirement ages, savings amounts, asset allocations, Roth vs tax deferred vs taxable savings, and so on.

As far as you are from retirement, and given how hard it is to predict the future, you can't take any of these calculators as gospel. However, it can help you make reasonable decisions based on what we know today.

Good luck!
Thanks for passing this along, it looks like it has some good stuff. Yes, it definitely looks like there's a bit of a learning curve to it. Is there an option to save a scenario to make it available later? I couldn't find that anywhere.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Tue Sep 25, 2018 8:24 am
by bornloser
Age 33, Boglehead and 750k invested assets. Nothing short of amazing. Pat yourself on the back and keep it up!

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 27, 2018 5:05 pm
by dkb140
HEDGEFUNDIE wrote: Sat Sep 22, 2018 12:33 am
dvd7e wrote: Fri Sep 21, 2018 11:10 pm A little off topic, but now that you mention it...what’s the preferred strategy for HSAa when I actually have a qualified expense and am able to pay out of pocket: a) use the HSA or b) pay out of pocket, invest as much as I can and try to maximize the growth in that account?

And should my allocation in the HSA mirror my overall allocation? (85/15 now at 33, sliding to 50/50 by age 55)
I would use the HSA now, which instantly locks in a 20-30% tax savings (depending on your tax bracket). Saving receipts until retirement has two risks:

1. You don’t actually remember to file for reimbursement 30 years from now, or you are too lazy to bother with the hundreds of receipts that have piled up (are you really going to type in every single $10 condom purchase from Walgreens?)

2. Your rate of return on your HSA doesn’t exceed your personal long term discount rate.
Assuming you have decent investment options in your HSA I would scan your receipts into a folder on your google drive or somewhere else in the cloud and save them until retirement. HSAs have the best tax treatment of any account that I'm aware of. You put in pre-tax money and you pull out tax-free money. It's got all the benefits of a tIRA and Roth IRA in one account. Why mess that up?

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 27, 2018 6:37 pm
by protagonist
dvd7e wrote: Thu Sep 20, 2018 8:28 pm
How much weight should I be giving to calculators like this?
None.

You are in your 30s so you likely have a 50 year plus investment future.

Even if the calculators are based on 100 years of solid data (doubtful), predicting 50 years into the future based on 100 years of data and no valid underlying scientific testable theory has no statistical validity at all.

It is the statistical equivalent of saying that if it didn't rain on Monday or Tuesday you don't need to take an umbrella on Wednesday. Or if the stock market went up two days in a row it will go up tomorrow. If I could do that with even 51% accuracy I would be rich beyond my wildest dreams. That's how casinos work- they can predict with 51% accuracy (at least). Because they write the rules.

What the world will look like in 2068 is beyond my limited imagination.

Just do what seems sensible and hope for the best. What seems sensible to me is diversification (eliminating the need to waste my time researching stocks in the vain hope that I am smarter and have better technology than the folks at Goldman-Sachs) , staying out of debt, and limiting fees (that one is obvious-the more you spend the less you have).

Bottom line: Don't worry. Be happy.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 27, 2018 7:01 pm
by Taylor Larimore
protagonist:

Nice post containing lots of truth.

Thank you and best wishes.
Taylor

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 27, 2018 7:38 pm
by Church Lady
dvd7e wrote: Tue Sep 25, 2018 7:34 am
Church Lady wrote: Sun Sep 23, 2018 8:48 pm Hi, OP:

Try this calculator: www.i-orp.com. On this page, click the 'Extended ORP' tab, and have at it. This calculator takes taxes into account, and has a glide path option. The learning curve is long, but once you have it set up, it's easy to experiment with different retirement ages, savings amounts, asset allocations, Roth vs tax deferred vs taxable savings, and so on.

As far as you are from retirement, and given how hard it is to predict the future, you can't take any of these calculators as gospel. However, it can help you make reasonable decisions based on what we know today.

Good luck!
Thanks for passing this along, it looks like it has some good stuff. Yes, it definitely looks like there's a bit of a learning curve to it. Is there an option to save a scenario to make it available later? I couldn't find that anywhere.
Yes, there is. On the Extended ORP tab, hit ctrl-f and search for the string Save Form. It should take you to a green square button labeled 'Save Form'. Click that, and Bob's your Uncle! If your browser doesn't have the search page functionality, scroll to the very bottom of the page, then 'page-up' to find the Save Form, Run ORP, and Monte Carlo buttons right above the What's New! header.

Every once in awhile, ORP stops saving my web pages. If this is the case -- perhaps because you are using a different browser -- or perhaps the web master has updated the scripts recently -- contact the web master at the email on the bottom of the page. He is very responsive.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Thu Sep 27, 2018 9:56 pm
by dvd7e
dkb140 wrote: Thu Sep 27, 2018 5:05 pm
HEDGEFUNDIE wrote: Sat Sep 22, 2018 12:33 am
dvd7e wrote: Fri Sep 21, 2018 11:10 pm A little off topic, but now that you mention it...what’s the preferred strategy for HSAa when I actually have a qualified expense and am able to pay out of pocket: a) use the HSA or b) pay out of pocket, invest as much as I can and try to maximize the growth in that account?

And should my allocation in the HSA mirror my overall allocation? (85/15 now at 33, sliding to 50/50 by age 55)
I would use the HSA now, which instantly locks in a 20-30% tax savings (depending on your tax bracket). Saving receipts until retirement has two risks:

1. You don’t actually remember to file for reimbursement 30 years from now, or you are too lazy to bother with the hundreds of receipts that have piled up (are you really going to type in every single $10 condom purchase from Walgreens?)

2. Your rate of return on your HSA doesn’t exceed your personal long term discount rate.
Assuming you have decent investment options in your HSA I would scan your receipts into a folder on your google drive or somewhere else in the cloud and save them until retirement. HSAs have the best tax treatment of any account that I'm aware of. You put in pre-tax money and you pull out tax-free money. It's got all the benefits of a tIRA and Roth IRA in one account. Why mess that up?
Forgive my ignorance, but why save receipts for 30+ years? What’s the benefit? Can you still reimburse yourself after such a long period, even if it was a qualifying event?

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Sun Sep 30, 2018 8:44 pm
by Rowan Oak
This.
protagonist wrote: Thu Sep 27, 2018 6:37 pm
dvd7e wrote: Thu Sep 20, 2018 8:28 pm
How much weight should I be giving to calculators like this?
None.

You are in your 30s so you likely have a 50 year plus investment future.

Even if the calculators are based on 100 years of solid data (doubtful), predicting 50 years into the future based on 100 years of data and no valid underlying scientific testable theory has no statistical validity at all.

It is the statistical equivalent of saying that if it didn't rain on Monday or Tuesday you don't need to take an umbrella on Wednesday. Or if the stock market went up two days in a row it will go up tomorrow. If I could do that with even 51% accuracy I would be rich beyond my wildest dreams. That's how casinos work- they can predict with 51% accuracy (at least). Because they write the rules.

What the world will look like in 2068 is beyond my limited imagination.

Just do what seems sensible and hope for the best. What seems sensible to me is diversification (eliminating the need to waste my time researching stocks in the vain hope that I am smarter and have better technology than the folks at Goldman-Sachs) , staying out of debt, and limiting fees (that one is obvious-the more you spend the less you have).

Bottom line: Don't worry. Be happy.

Re: Im going to die somewhere between Bankruptcy and $20 million

Posted: Mon Oct 01, 2018 1:28 pm
by dkb140
dvd7e wrote: Thu Sep 27, 2018 9:56 pm Forgive my ignorance, but why save receipts for 30+ years? What’s the benefit? Can you still reimburse yourself after such a long period, even if it was a qualifying event?
Yes, you can reimburse yourself for qualified medical expenses at any point in time.

The benefit is that you're loading your HSA with pre-tax funds, letting it grow tax-free for as long as you want, then withdrawing funds in any amount (up to your lifetime limit of medical expenses) at any point in time, tax-free.

HSAs have the best tax treatment of any account that I am aware of. Keeping track of your medical receipts is really the only downside, but I have an app on my phone that takes a picture, converts to PDF, and uploads to a folder on my google drive in a few seconds so its not that big of a problem any more.