The Power of Working Longer

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willthrill81
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Re: The Power of Working Longer

Post by willthrill81 »

jj45 wrote: Tue Jul 03, 2018 2:35 pm
willthrill81 wrote: Sun Jun 10, 2018 11:08 pm Take a look at the graph below. Those life expectancy lines are surprisingly steep.
Do any retirement calculators take into account life expectancy? What I have seen is pick a time frame, say 30 years, and calculate the probability of portfolio survival. A 65 year old man only has a 7% chance of living to 95, so why pick a withdrawal rate pinned to 30 years? Just guessing, I would think that if you took longevity into account and even if you wanted a 99% success rate, the withdrawal rate would be higher than 4%. The math seems like it would be straightforward for someone who knows probabilities well, and the data is out there. Any leads?
I believe that there are some out there that do this, but they are only available to advisers and not the general public. But as you note, the calculation is easy, and the data are available. So for instance, if you have a 7% chance of living to age 95 and your withdrawal strategy has a 5% chance of failure, assuming that those events are independent of each other, there is only a .35% [(.07)*(.05)] chance of both occurring. This calculation could be conducted for every 5 year period (e.g. 15, 20, 25) throughout retirement to determine the real likelihood of failure. Longer retirements increase the risk of withdrawal failure (assuming you aren't using purely flexible withdrawals) but as you age, the likelihood that you'll be dead increases as well.
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Re: The Power of Working Longer

Post by Shallowpockets »

To me, time becomes more valuable than money, especially if you have acquired enough to retire. While we can see concretely the value of our money with percentages and all, we cannot in the same way qualify our years.
Poor health or family issues, laid off, etc, may impinge on those years. Even having good health in the 60 plus age group is no guarantee that will continue.
I'd like to read an article on, The Power of not working longer.
This is me and working longer. If I could make 4x the salary I had made when I exited the workforce at 66, I would not take back the job. I hit my numbers. Anything else would not impact my lifestyle.
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Re: The Power of Working Longer

Post by michaeljc70 »

I keep seeing this come up here and elsewhere. How about the pains of working longer? Agism, stress, boredom, vacations not taken, time missed with friend and family, retiring to old to do certain things, etc.
Last edited by michaeljc70 on Wed Jul 04, 2018 7:38 am, edited 1 time in total.
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Re: The Power of Working Longer

Post by Earl Lemongrab »

I think it is the flip side of saying, "if you save more when you're working, you can retire earlier". Most people wouldn't be surprised by that.
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Re: The Power of Working Longer

Post by willthrill81 »

Shallowpockets wrote: Tue Jul 03, 2018 3:47 pm To me, time becomes more valuable than money, especially if you have acquired enough to retire. While we can see concretely the value of our money with percentages and all, we cannot in the same way qualify our years.
Poor health or family issues, laid off, etc, may impinge on those years. Even having good health in the 60 plus age group is no guarantee that will continue.
I'd like to read an article on, The Power of not working longer.
This is me and working longer. If I could make 4x the salary I had made when I exited the workforce at 66, I would not take back the job. I hit my numbers. Anything else would not impact my lifestyle.
I share your sentiment.

Bogleheads are predominantly a conservative lot. The fear of retirement expenses becoming greater than they can handle is strong with many, even when their portfolios place them in the top 5% of those in their age bracket. But the possibility of an 'early' demise and working longer than necessary is far too often ignored.

There must be a balance between the certainty of 'lost time', which can never be recovered, in working longer versus the possibility of inadequate resources in retirement. Personally, I want to do my best to ensure that I'll have as many healthy years after my career is finished as I reasonably can.
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Re: The Power of Working Longer

Post by CarpeDiem22 »

Without going into the maths part and time-cannot-be-bought part, I have some objections:
1. One major reason for saving more is to use during a rainy day. How am I supposed to use NOW (when I'm 31) any extra money earned in my last 3-6 months of work, retirement still being 20 years away?
2. Another reason of saving more is that source of income may itself be at risk. The last 3-6 months of income from job won't exist when the job doesn't exist.
3. Feeling that spending 1% more is ok can be dangerous behaviour-wise. Who knows in 2 years I may feel that spending 10% more is ok?

I'll continue to save 1% more, thank you.
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Re: The Power of Working Longer

Post by AlohaJoe »

willthrill81 wrote: Tue Jul 03, 2018 3:17 pm
jj45 wrote: Tue Jul 03, 2018 2:35 pm Do any retirement calculators take into account life expectancy?
I believe that there are some out there that do this, but they are only available to advisers and not the general public.
Sure, there are quite a few. Here's one that I like -- I think it is a pretty good overview of current thinking on retirement planning along with modern techniques -- "A Blueprint for Retirement Spending" by Luke Delorme (September 2015, Journal of Financial Planning).

The heart of it is this formula:

Image

which calculates mortality-weighted certainty equivalent withdrawals. That is, it calculates from ages 65 to 115 but weights it based on the chance of you actually still being alive at any given age. So the withdrawal at age 65 is given more weight than the withdrawal at age 115.

Blanchett's "Simple Formulas to Implement Complex Withdrawal Strategies" is another paper that uses mortality numbers.

Moshe Milevsky is probably the person who has the written the most about incorporating mortality into retirement planning, going back nearly 20 years. His "A Sustainable Spending Rate without Simulation" calculates Stochastic Present Values which depends on both investment and mortality dynamics. His "Spending Retirement on Planet Vulcan: The Impact of Longevity Risk Aversion on Optimal Withdrawal Rates" shows much taking mortality into account changes retirement planning.

Milevsky's work is the most academic and mathematical -- he has a book called The Calculus of Retirement Income and most Bogleheads would probably hate his suggestions because he is very pro-annuities. Keep in mind that there's probably under 100 people on the planet who write about retirement planning with any kind of real mathematical/academic rigour. The overwhelming majority are journalists or financial planners that might have mastered some Excel but that's about it.

Dirk Cotton's blog The Retirement Cafe is probably the best mix of academic rigor, for planners, for normal people right now. It also helps that he's an early retiree (retired in 2005 and lived through the 2008 crash) -- who unretired eventually to turn into a financial planner, so he brings a bit of a different perspective.
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Re: The Power of Working Longer

Post by WestUniversity »

azanon wrote: Mon Jan 22, 2018 7:40 am Ok fair enough. Being completely honest about it, that sounds about right to me though. One extra percent saved requires the slightest of living standard adjustment, and to know that buys me 3-6 months of freedom. If anything that validates my choice to have saved a lot.
Ditto...
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Re: The Power of Working Longer

Post by willthrill81 »

AlohaJoe wrote: Wed Jul 04, 2018 2:50 am
willthrill81 wrote: Tue Jul 03, 2018 3:17 pm
jj45 wrote: Tue Jul 03, 2018 2:35 pm Do any retirement calculators take into account life expectancy?
I believe that there are some out there that do this, but they are only available to advisers and not the general public.
Sure, there are quite a few. Here's one that I like -- I think it is a pretty good overview of current thinking on retirement planning along with modern techniques -- "A Blueprint for Retirement Spending" by Luke Delorme (September 2015, Journal of Financial Planning).

The heart of it is this formula:

Image

which calculates mortality-weighted certainty equivalent withdrawals. That is, it calculates from ages 65 to 115 but weights it based on the chance of you actually still being alive at any given age. So the withdrawal at age 65 is given more weight than the withdrawal at age 115.

Blanchett's "Simple Formulas to Implement Complex Withdrawal Strategies" is another paper that uses mortality numbers.

Moshe Milevsky is probably the person who has the written the most about incorporating mortality into retirement planning, going back nearly 20 years. His "A Sustainable Spending Rate without Simulation" calculates Stochastic Present Values which depends on both investment and mortality dynamics. His "Spending Retirement on Planet Vulcan: The Impact of Longevity Risk Aversion on Optimal Withdrawal Rates" shows much taking mortality into account changes retirement planning.

Milevsky's work is the most academic and mathematical -- he has a book called The Calculus of Retirement Income and most Bogleheads would probably hate his suggestions because he is very pro-annuities. Keep in mind that there's probably under 100 people on the planet who write about retirement planning with any kind of real mathematical/academic rigour. The overwhelming majority are journalists or financial planners that might have mastered some Excel but that's about it.

Dirk Cotton's blog The Retirement Cafe is probably the best mix of academic rigor, for planners, for normal people right now. It also helps that he's an early retiree (retired in 2005 and lived through the 2008 crash) -- who unretired eventually to turn into a financial planner, so he brings a bit of a different perspective.
Very interesting.

Are you aware of any publicly available calculators that use this formula?
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Re: The Power of Working Longer

Post by Old Guy »

I’m incapable of doing the kind of math people are talking about above. What I do know is that working into my 70s, and the late 60s for my wife, made a difference in our lives.

After we retired from the feds, I was 61 and spouse was 60. Neither one of us were ready to retire on a permanent basis. I was offered a dream job at the University of Wisconsin-Madison. I felt it was my last chance to have a big adventure. I had a great boss and more authority then I ever had in the federal government. Salary sucked but it was enough. My wife took a job with the state at substantially less then her previous position. But boy did we have fun. Madison is one of the great college towns in the country; theater; dance; lectures; museums; great bike riding; sports; and a Costco. Sometimes I stood in front of Bascom Hall and looked down Bascom Hill over to State Street and said to myself: “how cool is this.”

Although salaries weren’t as much as we previously had we both qualified for social security. My wife gets the full amount she is edible for. We both set up deferred compensation programs; qualified for state pensions; got better medical coverage then we had in the federal government; using the profit we made from the sale of our residence in NoVA we bought the most expensive home we ever had: and used the left over money to buy a condo in downtown Chicago. We also are using some of the money to give to our son now rather then making him wait to inherit it.

Age and cold weather drove us out of Madison. Now in our 70s we have used the five pensions, ss and numerous RMDs to pay for a house a five minute walk from the beach.

Our health is good. So, working longer was the best thing we could have done. Would do it all over again. This was our experience your situation may be different.
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Re: The Power of Working Longer

Post by AlohaJoe »

willthrill81 wrote: Wed Jul 04, 2018 10:23 am Very interesting.

Are you aware of any publicly available calculators that use this formula?
Not that I'm aware of. Are you envisioning something like firecalc where you enter in a bunch of financial details and it calculates how much you can spend per year?
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Re: The Power of Working Longer

Post by davidsorensen32 »

+10000000000000
KlangFool wrote: Mon Jan 22, 2018 7:49 am OP,

2 words response -> Age Discrimination.

For many folks, at a certain age, due to Age Discrimination, they are either unemployed or under-employed. So, working longer bring minimal extra income.

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Re: The Power of Working Longer

Post by willthrill81 »

AlohaJoe wrote: Wed Jul 04, 2018 8:19 pm
willthrill81 wrote: Wed Jul 04, 2018 10:23 am Very interesting.

Are you aware of any publicly available calculators that use this formula?
Not that I'm aware of. Are you envisioning something like firecalc where you enter in a bunch of financial details and it calculates how much you can spend per year?
Yes. Ideally, it would combine historical analysis like FIRECalc or a good Monte Carlo simulation (unlike most out there that don't incorporate mean reversion) with life expectancy information, perhaps from the SSA or another reputable source. The problem with the SSA data is that it's only segmented by gender. Other factors can have a substantial impact as well (e.g. certain behaviors, race).
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Re: The Power of Working Longer

Post by AlohaJoe »

willthrill81 wrote: Wed Jul 04, 2018 10:21 pm The problem with the SSA [Social Security Administration] data is that it's only segmented by gender. Other factors can have a substantial impact as well (e.g. certain behaviors, race).
This is only sort of true. The SSA is basically just republishing data from the National Vital Statistics Reports (which is part of the CDC) which, as you might expect, has ridiculously voluminous amounts of data available.

Of course, they have high level things like the 2013 edition of United States Life Tables[1], which actually includes 18 different life tables, segmented by race & gender (male, female, and combined; white, black, hispanic, non-hispanic white, non-hispanic black, and overall). But they also have per-state life tables[2] in case you wanted to check the mortality of black females in Colorado.

In any case, the best mortality tables to use when it comes to retirement planning (especially amongst Bogleheads) are those from the Society of Actuaries, the latest version of which is RP-2014[3]. I say that the SOA tables are probably the best because they are a bit more targeted at retirement issues. They are specifically designed to help measure retirement plan obligations in the US. They use mortality data from pensions plans (private, public, and federal) instead of "overall" mortality data. They segment data into categories like white collar, blue collar, bottom-quartile salary, and top-quartile salary; disabled retiree; "healthy annuitant" (that is, the kind of person likely to buy an annuity usually believes they will live a long time; they don't have cancer, aren't obese, etc).

[1]: https://www.cdc.gov/nchs/data/nvsr/nvsr66/nvsr66_03.pdf
[2]: https://www.cdc.gov/nchs/nvss/mortality/lewk4.htm
[3]: https://www.soa.org/experience-studies/ ... h-2014-rp/
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Re: The Power of Working Longer

Post by AlohaJoe »

willthrill81 wrote: Wed Jul 04, 2018 10:21 pm
AlohaJoe wrote: Wed Jul 04, 2018 8:19 pm
willthrill81 wrote: Wed Jul 04, 2018 10:23 am Very interesting.

Are you aware of any publicly available calculators that use this formula?
Not that I'm aware of. Are you envisioning something like firecalc where you enter in a bunch of financial details and it calculates how much you can spend per year?
Yes. Ideally, it would combine historical analysis like FIRECalc or a good Monte Carlo simulation (unlike most out there that don't incorporate mean reversion) with life expectancy information
Ah, I just remembered there is one calculator like this. Gordon Imlam's website. He used to post (very, very infrequently) on Bogleheads but I haven't seen a post from him in a while. Likely he's moved on to other interests.

https://www.aacalc.com

It takes into account longevity, Social Security, reverse mortgages, annuities, TIPS ladders, risk aversion and so on.
Several things set this calculator apart:

A balance sheet approach - asset allocation can't be performed in isolation, but must be performed by taking into account the presence and size of Social Security, Pensions, 401(k)'s, income annuities, and home equity. See the FAQ for more details.

A true risk free asset - liability matching bonds, that is inflation indexed zero coupon bonds with a duration matching that of anticipated retirement cash flows, not cash, are used as the true risk free asset. Liability matching bonds might be hard to purchase, but a TIPS ladder, or a TIPS bond fund of appropriate duration, is a close substitute.

Income annuities - income annuities are a valuable tool in the retirement toolbox. This calculator optionally recommends the purchase of inflation indexed income annuities, be they single premium immediate annuities or deferred income annuities.

Home equity - home equity is the largest asset class for many individuals. It is thus important to consider the appropriate role of home equity in the retirement planning process.

Admit what we don't know - returns from the stock market are intrinsically unknown. We generate a range of results for different plausible scenarios.

Cross validated - sample Merton's method recommendations produced by this calculator have been cross validated with a second asset allocator that uses stochastic dynamic programming.

Open source - available under a GNU Affero license on GitHub: https://github.com/gordoni/aacalc
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Re: The Power of Working Longer

Post by longleaf »

How about this formula:

Work smarter not harder

Or in this case, longer
Frugality, indexing, time.
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Re: The Power of Working Longer

Post by SGM »

Conversations concerning working longer seem to come up more frequently. A friend has agreed to work another 3 years at a 35 hour a week job. He could retire now, but he has been offered additional pay which will increase his pension by another $20k yearly. Other conditions will make his job more pleasant including a liberal leave policy.


Others retire and continue with lucrative and interesting consulting work. One retiree examines the books of national banks in exotic locales when he is not fishing off the coast of Miami. Another retiree is a known expert in bottling, quality control and plant start ups. He works at will and then vacations in Europe or travels to either coast to be with his grandchildren. He also testifies in court and get $1k per hour as an expert witness. Neither needs to work due to pensions and good savings habits over a lifetime.

My savings increased greatly with increased income. Also when milestones were reached like children completing college and paying off a mortgage most of the additional available income went into savings. Multiple university studies have shown that most people spend the extra money available after reaching these milestones rather than increase contributions to a 401k. Maybe the subjects had other ways of savings, but I suspect they mostly lived a more expensive lifestyle.
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Re: The Power of Working Longer

Post by dknightd »

Working longer would let me take more expensive vacations (fly first class? etc), or take more vacations. Are they even called vacations after you retire? But it would require me to work longer. I'm not sure it is worth it.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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Re: The Power of Working Longer

Post by TheTimeLord »

dknightd wrote: Thu Jul 05, 2018 6:12 am Working longer would let me take more expensive vacations (fly first class? etc), or take more vacations. Are they even called vacations after you retire? But it would require me to work longer. I'm not sure it is worth it.
The financial benefits for the majority are undeniable, the time component is unknowable and whether it is worth it or not is an individual decision.
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Re: The Power of Working Longer

Post by TheTimeLord »

willthrill81 wrote: Wed Jul 04, 2018 10:23 am
AlohaJoe wrote: Wed Jul 04, 2018 2:50 am
willthrill81 wrote: Tue Jul 03, 2018 3:17 pm
jj45 wrote: Tue Jul 03, 2018 2:35 pm Do any retirement calculators take into account life expectancy?
I believe that there are some out there that do this, but they are only available to advisers and not the general public.
Sure, there are quite a few. Here's one that I like -- I think it is a pretty good overview of current thinking on retirement planning along with modern techniques -- "A Blueprint for Retirement Spending" by Luke Delorme (September 2015, Journal of Financial Planning).

The heart of it is this formula:

Image

which calculates mortality-weighted certainty equivalent withdrawals. That is, it calculates from ages 65 to 115 but weights it based on the chance of you actually still being alive at any given age. So the withdrawal at age 65 is given more weight than the withdrawal at age 115.

Blanchett's "Simple Formulas to Implement Complex Withdrawal Strategies" is another paper that uses mortality numbers.

Moshe Milevsky is probably the person who has the written the most about incorporating mortality into retirement planning, going back nearly 20 years. His "A Sustainable Spending Rate without Simulation" calculates Stochastic Present Values which depends on both investment and mortality dynamics. His "Spending Retirement on Planet Vulcan: The Impact of Longevity Risk Aversion on Optimal Withdrawal Rates" shows much taking mortality into account changes retirement planning.

Milevsky's work is the most academic and mathematical -- he has a book called The Calculus of Retirement Income and most Bogleheads would probably hate his suggestions because he is very pro-annuities. Keep in mind that there's probably under 100 people on the planet who write about retirement planning with any kind of real mathematical/academic rigour. The overwhelming majority are journalists or financial planners that might have mastered some Excel but that's about it.

Dirk Cotton's blog The Retirement Cafe is probably the best mix of academic rigor, for planners, for normal people right now. It also helps that he's an early retiree (retired in 2005 and lived through the 2008 crash) -- who unretired eventually to turn into a financial planner, so he brings a bit of a different perspective.
Very interesting.

Are you aware of any publicly available calculators that use this formula?
You know why individual health insurance is so much more expensive than group plans? Because if the group is large enough predicting the cost per person can be done in a fairly accurate manner, whereas predicting the costs for an individual is impossible. Personally I think that this is worth remembering when trying to apply group statistics to an individual situation. You are but a single data point and quite possibly uncorrelated.
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Re: The Power of Working Longer

Post by KlangFool »

Folks,

Some additional considerations:

1) Do you early retire before the kids left for college?

Please note that for those years, if you early retire, you will be the stay-at-home spouse/parent. You do not really retire. You just spend more time parenting.

2) Mortality rate/life expectancy

Those numbers do not forecast your healthy years. And/or, the limitation to your activity if you retire older. For example, one of my retired friends can no longer drink coffee except once per week. And, he can no longer eat spicy foods.

KlangFool

P.S.: My older brother early retired at 49 years old. It was the perfect time for him since both of his children had left for college.
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Re: The Power of Working Longer

Post by nisiprius »

I've done some work on a spreadsheet, and if I plan on working just an extra 684.2 months, when I will be 126 years, 3 months old the numbers come out really well, and even better if I plan on multiplying my salary by 2.64, winning a medium-sized lottery jackpot in 2026. I can also cut my dollar expenses by 98.61% by moving to Venezuela and taking advantage of the black-market bolivar exchange rate.
Last edited by nisiprius on Thu Jul 05, 2018 8:23 am, edited 1 time in total.
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Re: The Power of Working Longer

Post by michaeljc70 »

AlohaJoe wrote: Wed Jul 04, 2018 11:30 pm
willthrill81 wrote: Wed Jul 04, 2018 10:21 pm The problem with the SSA [Social Security Administration] data is that it's only segmented by gender. Other factors can have a substantial impact as well (e.g. certain behaviors, race).
This is only sort of true. The SSA is basically just republishing data from the National Vital Statistics Reports (which is part of the CDC) which, as you might expect, has ridiculously voluminous amounts of data available.

Of course, they have high level things like the 2013 edition of United States Life Tables[1], which actually includes 18 different life tables, segmented by race & gender (male, female, and combined; white, black, hispanic, non-hispanic white, non-hispanic black, and overall). But they also have per-state life tables[2] in case you wanted to check the mortality of black females in Colorado.

In any case, the best mortality tables to use when it comes to retirement planning (especially amongst Bogleheads) are those from the Society of Actuaries, the latest version of which is RP-2014[3]. I say that the SOA tables are probably the best because they are a bit more targeted at retirement issues. They are specifically designed to help measure retirement plan obligations in the US. They use mortality data from pensions plans (private, public, and federal) instead of "overall" mortality data. They segment data into categories like white collar, blue collar, bottom-quartile salary, and top-quartile salary; disabled retiree; "healthy annuitant" (that is, the kind of person likely to buy an annuity usually believes they will live a long time; they don't have cancer, aren't obese, etc).

[1]: https://www.cdc.gov/nchs/data/nvsr/nvsr66/nvsr66_03.pdf
[2]: https://www.cdc.gov/nchs/nvss/mortality/lewk4.htm
[3]: https://www.soa.org/experience-studies/ ... h-2014-rp/
When using tools like FIRECalc, there are already a lot of assumptions. I would put in the maximum reasonable life expectancy in general. Even if all your relatives died young or your race or whatever, who wants to be caught without enough money because they live longer than average?? Use an age like 90 or 95 (or 100 if you have people in your family that have lived to that). The truth is unless you are cutting it very close, it won't make much difference in these calculations. When using these tools the failures typically happen more often toward the beginning of a long retirement rather than the end.
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Re: The Power of Working Longer

Post by gotester2000 »

KlangFool wrote: Thu Jul 05, 2018 8:09 am Folks,

Some additional considerations:

1) Do you early retire before the kids left for college?

Please note that for those years, if you early retire, you will be the stay-at-home spouse/parent. You do not really retire. You just spend more time parenting.
I am going through this phase currently. It was great for some time to get that extra family time but not any longer. Without a daily schedule retiring early is a bad idea.
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Re: The Power of Working Longer

Post by dknightd »

TheTimeLord wrote: Thu Jul 05, 2018 8:00 am You are but a single data point and quite possibly uncorrelated.
Yep. As a time lord can you go back and forth and tell me if my plan will work? ;)
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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Re: The Power of Working Longer

Post by davidsorensen32 »

KlangFool wrote: Thu Jul 05, 2018 8:09 am For example, one of my retired friends can no longer drink coffee except once per week. And, he can no longer eat spicy foods.

KlangFool
There is an easy solution for this. Your friend just needs to increase his intake of alkaline foods to balance pH in his system. Google it. There are lots of people with the same problem who have found effective cures.
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Re: The Power of Working Longer

Post by TheTimeLord »

dknightd wrote: Thu Jul 05, 2018 9:09 am
TheTimeLord wrote: Thu Jul 05, 2018 8:00 am You are but a single data point and quite possibly uncorrelated.
Yep. As a time lord can you go back and forth and tell me if my plan will work? ;)
Not without irreparably damaging the timeline.
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Re: The Power of Working Longer

Post by KlangFool »

davidsorensen32 wrote: Thu Jul 05, 2018 9:12 am
KlangFool wrote: Thu Jul 05, 2018 8:09 am For example, one of my retired friends can no longer drink coffee except once per week. And, he can no longer eat spicy foods.

KlangFool
There is an easy solution for this. Your friend just needs to increase his intake of alkaline foods to balance pH in his system. Google it. There are lots of people with the same problem who have found effective cures.
davidsorensen32,

I understand what you are saying. But, my point is with age, you could no longer perform and enjoy some stuff. Some of those things are irreversible.

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dknightd
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Re: The Power of Working Longer

Post by dknightd »

KlangFool wrote: Thu Jul 05, 2018 8:09 am
1) Do you early retire before the kids left for college?

Please note that for those years, if you early retire, you will be the stay-at-home spouse/parent. You do not really retire. You just spend more time parenting.
I did not. One of my kids just finished with school. Except she wants to perhaps teach at one. One is close to getting his first degree. I would have actually liked be more involved with their parenting and schooling. But I had a job, and they went to school. I think I did the best I could in the limited time we had together. I hope they agree

edit: If aliens are watching us, they likely wonder why we send our kids off most days in a big yellow bus.
Retired 2019. So far, so good. I want to wake up every morning. But I want to die in my sleep. Just another conundrum. I think the solution might be afternoon naps ;)
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CyclingDuo
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Re: The Power of Working Longer

Post by CyclingDuo »

KlangFool wrote: Thu Jul 05, 2018 9:19 amI understand what you are saying. But, my point is with age, you could no longer perform and enjoy some stuff. Some of those things are irreversible.

KlangFool
Yup.

Now I know why my golf coach in high school kept emphasizing the need for all of us to practice our mid-irons and long-irons. It's because he was in his upper 50's and needed to use those clubs a lot. At age 56, I'm reaching for those sticks a lot more often than in previous decades. Hitting a 4 iron at a flag sure as heck isn't anything like hitting an 8 iron at the flag. :shock:
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Re: The Power of Working Longer

Post by AlohaJoe »

michaeljc70 wrote: Thu Jul 05, 2018 8:21 am When using these tools the failures typically happen more often toward the beginning of a long retirement rather than the end.
This is categorically, 100% false. Failures always happen towards the end. I don't even really understand how it could be otherwise, actually. In the US, when shortfall occurs it was always in the 28th or 29th year. This table from Javier Estrada show that all around the world, failure always comes late.

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Re: The Power of Working Longer

Post by michaeljc70 »

AlohaJoe wrote: Thu Jul 05, 2018 9:54 am
michaeljc70 wrote: Thu Jul 05, 2018 8:21 am When using these tools the failures typically happen more often toward the beginning of a long retirement rather than the end.
This is categorically, 100% false. Failures always happen towards the end. I don't even really understand how it could be otherwise, actually. In the US, when shortfall occurs it was always in the 28th or 29th year. This table from Javier Estrada show that all around the world, failure always comes late.

Image
First of all, I am not concerned with the rest of the world and their results. Failures do not always happen at the end, so that is false. I should have qualified it and stated using less conservative figures. Of course if you use 4%, 50/50 and 30 year retirement everyone knows it will almost always work. If you are conservative enough, there is no chance of failure (at least in these tools). Sequence of returns risk most often hits you toward the beginning. I am looking at a 50 year retirement, so I guess mine isn't typical and my "beginning" is longer than most.

If you use FireCalc with "normal" retirement scenarios changing the length of the retirement a few years makes little difference in the success rate.
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Re: The Power of Working Longer

Post by willthrill81 »

michaeljc70 wrote: Thu Jul 05, 2018 8:21 am
AlohaJoe wrote: Wed Jul 04, 2018 11:30 pm
willthrill81 wrote: Wed Jul 04, 2018 10:21 pm The problem with the SSA [Social Security Administration] data is that it's only segmented by gender. Other factors can have a substantial impact as well (e.g. certain behaviors, race).
This is only sort of true. The SSA is basically just republishing data from the National Vital Statistics Reports (which is part of the CDC) which, as you might expect, has ridiculously voluminous amounts of data available.

Of course, they have high level things like the 2013 edition of United States Life Tables[1], which actually includes 18 different life tables, segmented by race & gender (male, female, and combined; white, black, hispanic, non-hispanic white, non-hispanic black, and overall). But they also have per-state life tables[2] in case you wanted to check the mortality of black females in Colorado.

In any case, the best mortality tables to use when it comes to retirement planning (especially amongst Bogleheads) are those from the Society of Actuaries, the latest version of which is RP-2014[3]. I say that the SOA tables are probably the best because they are a bit more targeted at retirement issues. They are specifically designed to help measure retirement plan obligations in the US. They use mortality data from pensions plans (private, public, and federal) instead of "overall" mortality data. They segment data into categories like white collar, blue collar, bottom-quartile salary, and top-quartile salary; disabled retiree; "healthy annuitant" (that is, the kind of person likely to buy an annuity usually believes they will live a long time; they don't have cancer, aren't obese, etc).

[1]: https://www.cdc.gov/nchs/data/nvsr/nvsr66/nvsr66_03.pdf
[2]: https://www.cdc.gov/nchs/nvss/mortality/lewk4.htm
[3]: https://www.soa.org/experience-studies/ ... h-2014-rp/
When using tools like FIRECalc, there are already a lot of assumptions. I would put in the maximum reasonable life expectancy in general. Even if all your relatives died young or your race or whatever, who wants to be caught without enough money because they live longer than average?? Use an age like 90 or 95 (or 100 if you have people in your family that have lived to that). The truth is unless you are cutting it very close, it won't make much difference in these calculations. When using these tools the failures typically happen more often toward the beginning of a long retirement rather than the end.
We certainly shouldn't place too much weight on estimates. But if we take this too literally, we may be led to believe that more information from a planning perspective is not advantageous. Obviously, this is false.

The notion that the likelihood of you dying increasing as time goes on is pretty undeniable. Why should this not be combined with something like Monte Carlo estimates of portfolio withdrawal success?

No matter what we do when it comes to investing, accumulation, decumulation, etc., we must make assumptions about the future because there is no alternative.
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willthrill81
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Re: The Power of Working Longer

Post by willthrill81 »

michaeljc70 wrote: Thu Jul 05, 2018 10:08 amFailures do not always happen at the end, so that is false. I should have qualified it and stated using less conservative figures. Of course if you use 4%, 50/50 and 30 year retirement everyone knows it will almost always work. If you are conservative enough, there is no chance of failure (at least in these tools). Sequence of returns risk most often hits you toward the beginning. I am looking at a 50 year retirement, so I guess mine isn't typical and my "beginning" is longer than most.
Failure of a retirement withdrawal plan is almost universally defined as running out of money. Historically, a balanced portfolio like 50/50 combined with '4% rule' withdrawals has never run out of money in the first two decades. Your statement that "failures do not always happen at the end" is totally baseless. If you believe otherwise, then please provide some specific instances backing up your statement.

What I think you may be getting mixed up with is the idea that the success of something like the '4% rule' over a 30 year period is largely determined by the sequence of returns in the first 10-15 years. This is true. But a poor sequence of returns in the first decade of retirement does not mean that the retiree runs out of money in that decade. Historically, it would take more than another decade for their portfolio to actually be exhausted.
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Re: The Power of Working Longer

Post by michaeljc70 »

willthrill81 wrote: Thu Jul 05, 2018 11:14 am
michaeljc70 wrote: Thu Jul 05, 2018 10:08 amFailures do not always happen at the end, so that is false. I should have qualified it and stated using less conservative figures. Of course if you use 4%, 50/50 and 30 year retirement everyone knows it will almost always work. If you are conservative enough, there is no chance of failure (at least in these tools). Sequence of returns risk most often hits you toward the beginning. I am looking at a 50 year retirement, so I guess mine isn't typical and my "beginning" is longer than most.
Failure of a retirement withdrawal plan is almost universally defined as running out of money. Historically, a balanced portfolio like 50/50 combined with '4% rule' withdrawals has never run out of money in the first two decades. Your statement that "failures do not always happen at the end" is totally baseless. . If you believe otherwise, then please provide some specific instances backing up your statement.

What I think you may be getting mixed up with is the idea that the success of something like the '4% rule' over a 30 year period is largely determined by the sequence of returns in the first 10-15 years. This is true. But a poor sequence of returns in the first decade of retirement does not mean that the retiree runs out of money in that decade. Historically, it would take more than another decade for their portfolio to actually be exhausted.
There are many different retirement calculators/simulators with many inputs. You are saying you cannot get early failures with any simulator no matter what values you use? You aren't trying hard enough. An example: retire age 48, 5% withdrawal rate, 1948, 25/75= broke at age 67- 19 years into a 50 year planned retirement. Obviously higher swrs, longer retirements and lower stock allocations will typically trigger this. As I stated, if you use conservative inputs you will rarely ever run out of money early if ever.
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Re: The Power of Working Longer

Post by willthrill81 »

michaeljc70 wrote: Thu Jul 05, 2018 11:41 am
willthrill81 wrote: Thu Jul 05, 2018 11:14 am
michaeljc70 wrote: Thu Jul 05, 2018 10:08 amFailures do not always happen at the end, so that is false. I should have qualified it and stated using less conservative figures. Of course if you use 4%, 50/50 and 30 year retirement everyone knows it will almost always work. If you are conservative enough, there is no chance of failure (at least in these tools). Sequence of returns risk most often hits you toward the beginning. I am looking at a 50 year retirement, so I guess mine isn't typical and my "beginning" is longer than most.
Failure of a retirement withdrawal plan is almost universally defined as running out of money. Historically, a balanced portfolio like 50/50 combined with '4% rule' withdrawals has never run out of money in the first two decades. Your statement that "failures do not always happen at the end" is totally baseless. . If you believe otherwise, then please provide some specific instances backing up your statement.

What I think you may be getting mixed up with is the idea that the success of something like the '4% rule' over a 30 year period is largely determined by the sequence of returns in the first 10-15 years. This is true. But a poor sequence of returns in the first decade of retirement does not mean that the retiree runs out of money in that decade. Historically, it would take more than another decade for their portfolio to actually be exhausted.
There are many different retirement calculators/simulators with many inputs. You are saying you cannot get early failures with any simulator no matter what values you use? You aren't trying hard enough. An example: retire age 48, 5% withdrawal rate, 1948, 25/75= broke at age 67- 19 years into a 50 year planned retirement. Obviously higher swrs, longer retirements and lower stock allocations will typically trigger this. As I stated, if you use conservative inputs you will rarely ever run out of money early if ever.
A 5% withdrawal rate is a bit on the aggressive side, especially if you're using fixed plus inflation nominal withdrawals such as used in the '4% rule'. But even then I wouldn't call 19 years of retirement an early failure.

Of course it's possible to find years with poor sequences that an aggressive withdrawal strategy will fail. No one would dispute that. But unless they're crazily aggressive, they aren't going to bankrupt you in a decade.
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