Done saving for retirement according to firecalc?

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am
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Done saving for retirement according to firecalc?

Post by am » Tue Aug 28, 2018 9:04 pm

Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
Last edited by am on Tue Aug 28, 2018 9:08 pm, edited 1 time in total.

sambb
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Re: Done saving for retirement according to firecalc?

Post by sambb » Tue Aug 28, 2018 9:08 pm

I wouldnt. I would give yourself a larger cushion. Past performance does not predict future results, and we have had a long bullrun,

HEDGEFUNDIE
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Re: Done saving for retirement according to firecalc?

Post by HEDGEFUNDIE » Tue Aug 28, 2018 9:13 pm

Do it. You’re not getting any younger

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Re: Done saving for retirement according to firecalc?

Post by sailaway » Tue Aug 28, 2018 9:16 pm

Everyone needs to make their own decisions, but I prefer to save a bit more now and just retire. But then, I haven't been able to find any fulfilling part time jobs.

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GerryL
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Re: Done saving for retirement according to firecalc?

Post by GerryL » Tue Aug 28, 2018 9:18 pm

Have you considered healthcare?

I was seriously considering officially leaving Megacorp when I became eligible for early retirement at age 60. The idea was that I could leave the stress of that job and just work for subsistance until later, leaving my retirement savings to grow with no new contributions. Then I thought about the cost of healthcare -- or if I could even get insurance (this was pre-ACA). Decided to keep working until at least Medicare eligibility.
(Good thing I talked myself out of it because I would have been looking for a new job in 2008 -- or moaning about my inability to quit.)

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Re: Done saving for retirement according to firecalc?

Post by willthrill81 » Tue Aug 28, 2018 9:19 pm

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
FIRECalc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

It seems very likely that you could just 'coast', as you put it, toward retirement. Another possibility could be that you keep working full time and reach financial independence sooner than 15 years from now.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

am
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Re: Done saving for retirement according to firecalc?

Post by am » Tue Aug 28, 2018 9:28 pm

I could achieve the same level of retirement spending in 7 yrs saving what I do now every year. But I wouldn’t have easy access to retirement funds and may get bored.

letsgobobby
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Re: Done saving for retirement according to firecalc?

Post by letsgobobby » Tue Aug 28, 2018 9:46 pm

You didn't tell us your annual expenses... Do you want us to just guess?

:)

am
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Re: Done saving for retirement according to firecalc?

Post by am » Tue Aug 28, 2018 9:50 pm

letsgobobby wrote:
Tue Aug 28, 2018 9:46 pm
You didn't tell us your annual expenses... Do you want us to just guess?

:)
Think 100k after taxes will do it (wants + needs). Healthcare covered after 62 from state pension.

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willthrill81
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Re: Done saving for retirement according to firecalc?

Post by willthrill81 » Tue Aug 28, 2018 9:59 pm

am wrote:
Tue Aug 28, 2018 9:28 pm
I could achieve the same level of retirement spending in 7 yrs saving what I do now every year. But I wouldn’t have easy access to retirement funds and may get bored.
Well you don't need easy access to retirement funds, you just need access. It's not difficult to hire a CPA to help you set up the substantially equal periodic payments according to rule 72(t). That will allow you to access traditional IRA and 401(k) assets without the penalty (assuming you're separated from the employer). And you can withdraw contributions made to Roth IRAs if needed as well.

If you're afraid that you'll get bored, then you may have a bigger problem than retirement funds. That problem isn't likely to go away in 15 years. You need to find something that you find meaningful to do with your time. It may require some soul searching, but it's something you probably need to do.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Watty
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Re: Done saving for retirement according to firecalc?

Post by Watty » Tue Aug 28, 2018 10:18 pm

Two questions I would consider.

1) Would you be OK with living on $75K a year instead of $125K if you had to?

2) If you wanted to go back to work if five years then how hard would that be in your field? In some jobs that would be next to impossible.

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bligh
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Re: Done saving for retirement according to firecalc?

Post by bligh » Tue Aug 28, 2018 11:06 pm

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.

I am in a similar boat. In my situation Firecalc shows that in the past I could have made zero contributions to retirement from this point on and planned on retiring at my spending level at 56-57, with a 100% success rate, assuming no social security income. (My spending rate is lower than yours, I am excluding social security as a safety margin).

I am currently working on getting that number lower (ie. Retire at 52-53 with a similar situation .. and perhaps build in a bit more of a cushion. I will continue to push to get myself into that state over the next ~3 years.

After that I dont know. Technically my wife's salary can completely support us we just wouldn't be saving anything on top. I am toying with the idea of going part time to just coast through till 52-53. Another option (that is currently the front runner for me) is to take a 2-3 year sabbatical/mini retirement and come back recharged to resume my career until I am ready to call it quits for good.

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Re: Done saving for retirement according to firecalc?

Post by Ron Scott » Wed Aug 29, 2018 4:56 am

willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

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Re: Done saving for retirement according to firecalc?

Post by Grt2bOutdoors » Wed Aug 29, 2018 5:11 am

Firecalc comes with no guarantee, not does the markets. You’re not done saving until you’ve actually gotten there.
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Re: Done saving for retirement according to firecalc?

Post by randomizer » Wed Aug 29, 2018 5:25 am

I would coast. Not quit my job, but take it easier.
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Re: Done saving for retirement according to firecalc?

Post by marcopolo » Wed Aug 29, 2018 6:29 am

willthrill81 wrote:
Tue Aug 28, 2018 9:59 pm
am wrote:
Tue Aug 28, 2018 9:28 pm
I could achieve the same level of retirement spending in 7 yrs saving what I do now every year. But I wouldn’t have easy access to retirement funds and may get bored.
Well you don't need easy access to retirement funds, you just need access. It's not difficult to hire a CPA to help you set up the substantially equal periodic payments according to rule 72(t). That will allow you to access traditional IRA and 401(k) assets without the penalty (assuming you're separated from the employer). And you can withdraw contributions made to Roth IRAs if needed as well.

If you're afraid that you'll get bored, then you may have a bigger problem than retirement funds. That problem isn't likely to go away in 15 years. You need to find something that you find meaningful to do with your time. It may require some soul searching, but it's something you probably need to do.
I would second this thought about finding what you want to do. Retire to something, not away from work.

Once you have identified that, I would lean towards working and contributing to retirement savings until goals are hit rather than part timer foir much longer period, but that is as personal choice.

As for accessing retirement funds, you could alsoo look into a Roth conversion ladder.
Once in a while you get shown the light, in the strangest of places if you look at it right.

amitb00
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Re: Done saving for retirement according to firecalc?

Post by amitb00 » Wed Aug 29, 2018 7:00 am

I would work so that I become FI sooner. After that if I quit, work part time or full time will be my choice.

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Re: Done saving for retirement according to firecalc?

Post by lostdog » Wed Aug 29, 2018 7:23 am

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.

Go for it. Life is short. Get a part time job that you're passionate about but offers health insurance. Make sure this job has ZERO stress.

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camillus
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Re: Done saving for retirement according to firecalc?

Post by camillus » Wed Aug 29, 2018 7:32 am

A few philosophical issues:

1) What degree of certainty is required to retire to a life of wealth?

2) How much is your time worth to yourself?

3) Re "coasting." What meaning will your retired life add to the world?

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Re: Done saving for retirement according to firecalc?

Post by Snowjob » Wed Aug 29, 2018 7:45 am

I say coast and enjoy life a bit more.

I'm ahead of target on the retirement side even with some conservative modeling and keep shifting more of my paycheck away from retirement savings and towards consumption today. Another option for you, if you are still wired to save. Is to start building a CD/Ibond cushion with some extra savings and also maybe a few defered annuities -- then just keep lookiing for the opportunity to shift into part time or early retirement. when you find the right path forward that extra stash of fixed income and annuity products will help ease the burden of down shifting early.

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Re: Done saving for retirement according to firecalc?

Post by Mr.BB » Wed Aug 29, 2018 7:48 am

Whatever you calculated for your budget In retirement, add another $3,000-$4,000 a year. It will help cover unexpected things in your life medical/ dental bills, new garage door, dishwasher breaking down..etc. If you don't use the extra money you can roll into the next year or put into a taxable account for general savings.
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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Re: Done saving for retirement according to firecalc?

Post by flyingaway » Wed Aug 29, 2018 7:55 am

amitb00 wrote:
Wed Aug 29, 2018 7:00 am
I would work so that I become FI sooner. After that if I quit, work part time or full time will be my choice.
This is my approach. Get to FI first, then see what you can and want to do.

cherijoh
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Re: Done saving for retirement according to firecalc?

Post by cherijoh » Wed Aug 29, 2018 8:23 am

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
One big mistake that is often made with Firecalc (and other retirement planning tools) is that users overlook the fact that taxes need to be paid out of the safe withdrawal amount. Have you accounted for that in your statement that your portfolio "will allow me to spend 125k"?

Figuring the amount of truly "spendable" money accurately is not a trivial exercise since it depends on the placement of the funds - traditional retirement plan, Roth, taxable account (that is a mix of your original investment and embedded capital gains). Then there is the possibility of Roth conversions in early retirement....

How much have you been saving (% of gross income) up to this point? How has it been split between tax-advantaged and after-tax? I was saving aggressively in both a workplace plan (maxing it out) and after-tax up until my mid-40s. Around that time I did a mid-career change going back to school for a Masters degree. When I landed a full-time job (after the Great Recession), I maxed out my workplace plan but stopped after-tax investing. So I would say that I eased up didn't fully take my foot of the gas.

One issue you need to consider is what would you do with the money you would no longer be saving? Would this lead to life-style creep (which in turn would result in leading to a need for a larger nest-egg to keep it up in retirement)? Spending money on travel while you are young enough to enjoy it has a different impact on your future retirement budget than purchasing a vacation home that will have ongoing maintenance costs.

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Re: Done saving for retirement according to firecalc?

Post by ryman554 » Wed Aug 29, 2018 8:27 am

Am I missing something, by my view the OP is *already* FI, at least on the bleeding edge of it.

FIREcalc is nothing more than a restatement of the trinity study using fancy graphs. If you believe in the 4% rule (or 3.x% or whatever), then you believe in FIREcalc. End of story. Regardless of current valuations or market conditions.

If one is at 100% success there and their desired spending level (which includes wants, not needs per the OP), I see no reason to claim they are anything other than done with required work.

I caution the OP, as others have done, to really vet the expenditures going forward well and start looking into a bit more robust retirement planner (like i-orp) to see if thing work out. This is the greatest source of error now.

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Re: Done saving for retirement according to firecalc?

Post by cherijoh » Wed Aug 29, 2018 8:29 am

am wrote:
Tue Aug 28, 2018 9:50 pm
letsgobobby wrote:
Tue Aug 28, 2018 9:46 pm
You didn't tell us your annual expenses... Do you want us to just guess?

:)
Think 100k after taxes will do it (wants + needs). Healthcare covered after 62 from state pension.
Retiree healthcare is not guaranteed, so I certainly wouldn't count on it being available in the future.

gilgamesh
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Re: Done saving for retirement according to firecalc?

Post by gilgamesh » Wed Aug 29, 2018 8:35 am

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
15 years is too long to coast when retirement age is 59. I would reset my plans such that I can retire in 10 years (54), so work a bit more FT until you think you can coast till 54 and then go part time. But, then everyone is different though....

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Re: Done saving for retirement according to firecalc?

Post by wolf359 » Wed Aug 29, 2018 8:44 am

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
What this is telling you is that you're on track to success. However, you aren't actually done saving until your number meets your goal.

"Coast FI" is when your savings are big enough to theoretically meet your goal without any other contributions on your part. It isn't practical, however. If you live an unconstrained lifestyle (stop saving) for 15 years, your values and spending habits will change, and your FI number will be bigger. Your projected spending rate for 15 years from now is also a wild stab in the dark, as is your predicted lifestyle and interests. Are you the same person you were 15 years ago?

Keep saving until you're close to the time you really want to retire, then review your assets and life plans at that point.

Don't count your chickens before they've hatched. Anything can happen in the next 15 years.

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Re: Done saving for retirement according to firecalc?

Post by dknightd » Wed Aug 29, 2018 9:00 am

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
15 years between now and 59 is a long time. I'm curious what your portfolio value is.

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Re: Done saving for retirement according to firecalc?

Post by willthrill81 » Wed Aug 29, 2018 9:35 am

marcopolo wrote:
Wed Aug 29, 2018 6:29 am
willthrill81 wrote:
Tue Aug 28, 2018 9:59 pm
am wrote:
Tue Aug 28, 2018 9:28 pm
I could achieve the same level of retirement spending in 7 yrs saving what I do now every year. But I wouldn’t have easy access to retirement funds and may get bored.
Well you don't need easy access to retirement funds, you just need access. It's not difficult to hire a CPA to help you set up the substantially equal periodic payments according to rule 72(t). That will allow you to access traditional IRA and 401(k) assets without the penalty (assuming you're separated from the employer). And you can withdraw contributions made to Roth IRAs if needed as well.

If you're afraid that you'll get bored, then you may have a bigger problem than retirement funds. That problem isn't likely to go away in 15 years. You need to find something that you find meaningful to do with your time. It may require some soul searching, but it's something you probably need to do.
I would second this thought about finding what you want to do. Retire to something, not away from work.

Once you have identified that, I would lean towards working and contributing to retirement savings until goals are hit rather than part timer foir much longer period, but that is as personal choice.

As for accessing retirement funds, you could alsoo look into a Roth conversion ladder.
I keep forgetting about the Roth conversion ladder. Thanks for mentioning that.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

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Re: Done saving for retirement according to firecalc?

Post by goodenyou » Wed Aug 29, 2018 10:08 am

The closer you get to death (older) without touching your retirement nest egg, the greater the likelihood that your money will outlive you. For those that can tolerate their jobs or are paralyzed by the decision to retire, that can be a winning strategy. Some continue to accumulate for legacy purposes only. Some work because that is their only defining characteristic. It's a personal choice.
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Re: Done saving for retirement according to firecalc?

Post by HEDGEFUNDIE » Wed Aug 29, 2018 10:18 am

goodenyou wrote:
Wed Aug 29, 2018 10:08 am
The closer you get to death (older) without touching your retirement nest egg, the greatly likelihood that your money will outlive you. For those that can tolerate their jobs or are paralyzed by the decision to retire, that can be a winning strategy. Some continue to accumulate for legacy purposes only. Some work because that is their only defining characteristic. It's a personal choice.
A well-informed choice to keep working long after financial independence has been reached is perfectly fine.

But I see a trend on BH of folks critizing OPs who clearly have accumulated enough. Which is worse: the 5% chance of “running out of money” (which is unlikely anyway given SS and flexible withdraw rates) or the 100% chance of lost time at a job you don’t like, time that you can’t get back.

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Re: Done saving for retirement according to firecalc?

Post by Admiral » Wed Aug 29, 2018 10:29 am

Firecalc is a back-test tool. It is predictive only if the future is like the past.

What happens if it isn't? Did you investigate or model a 2008-like drop, but with a 10 year recovery period (and not a one-year recovery followed by an 11 year bull market?)

I also suggest you try Flexible Retirement Planner (Monte Carlo simulation) which will allow you to account for taxes, and various amounts held in what kinds of accounts.

If you want to stop work, would you be able to re-start if needed in 5 years with a salary that would be high enough to replenish your portfolio?

Don't want to be a downer, but you are quite young to be considering retirement or even semi-retirement. And those are just the financial issues, others have stated well the boredom issues.

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Re: Done saving for retirement according to firecalc?

Post by goodenyou » Wed Aug 29, 2018 10:30 am

HEDGEFUNDIE wrote:
Wed Aug 29, 2018 10:18 am
goodenyou wrote:
Wed Aug 29, 2018 10:08 am
The closer you get to death (older) without touching your retirement nest egg, the greatly likelihood that your money will outlive you. For those that can tolerate their jobs or are paralyzed by the decision to retire, that can be a winning strategy. Some continue to accumulate for legacy purposes only. Some work because that is their only defining characteristic. It's a personal choice.
A well-informed choice to keep working long after financial independence has been reached is perfectly fine.

But I see a trend on BH of folks critizing OPs who clearly have accumulated enough. Which is worse: the 5% chance of “running out of money” (which is unlikely anyway given SS and flexible withdraw rates) or the 100% chance of lost time at a job you don’t like, time that you can’t get back.
If you're a martyr, you work through the misery so that you can guarantee that you don't run out of money. Then, your loved ones can talk about your sacrifice when you drop dead the day after you retire. The fear of running out of money and the mental exercise of how to de-accumulate for people who spend many years of saving, investing and planning can be so great that they just keep doing it to the end. That's where the criticism comes from. It's the (keep) working and saving ethic.
Last edited by goodenyou on Wed Aug 29, 2018 12:29 pm, edited 1 time in total.
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Re: Done saving for retirement according to firecalc?

Post by marcopolo » Wed Aug 29, 2018 10:46 am

Ron Scott wrote:
Wed Aug 29, 2018 4:56 am
willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Well, you have to use something, don't you? What alternative would you suggest?
I am all for making conservative assumptions, but in the end past behavior is all we have to rely on to try to get a feel for what the future might hold.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Done saving for retirement according to firecalc?

Post by Admiral » Wed Aug 29, 2018 10:54 am

marcopolo wrote:
Wed Aug 29, 2018 10:46 am
Ron Scott wrote:
Wed Aug 29, 2018 4:56 am
willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Well, you have to use something, don't you? What alternative would you suggest?
I am all for making conservative assumptions, but in the end past behavior is all we have to rely on to try to get a feel for what the future might hold.
See my post above. While nothing is for sure, I think Monte Carlo simulations can be effective (with the usual caveats) for at the very least showing mean, high, and low portfolio values based on the inputs one sets (which should be conservative).

For me, using FRP I am able to see that even if my future portfolio ends up in the lowest 10% value band (with 10,000 simulations) I will be fine. If it's at the mean, I will be great.

marcopolo
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Re: Done saving for retirement according to firecalc?

Post by marcopolo » Wed Aug 29, 2018 11:01 am

Admiral wrote:
Wed Aug 29, 2018 10:54 am
marcopolo wrote:
Wed Aug 29, 2018 10:46 am
Ron Scott wrote:
Wed Aug 29, 2018 4:56 am
willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Well, you have to use something, don't you? What alternative would you suggest?
I am all for making conservative assumptions, but in the end past behavior is all we have to rely on to try to get a feel for what the future might hold.
See my post above. While nothing is for sure, I think Monte Carlo simulations can be effective (with the usual caveats) for at the very least showing mean, high, and low portfolio values based on the inputs one sets (which should be conservative).

For me, using FRP I am able to see that even if my future portfolio ends up in the lowest 10% value band (with 10,000 simulations) I will be fine. If it's at the mean, I will be great.
I use MCS as well. But, I don't kid myself into thinking that this does not rely on past data/information.
As you are well aware, the results of MCS are heavily dependent on the input parameters/assumptions.
I set those based on historical perspectives, and discount them somewhat to be extra conservative, but they are not random numbers.

Where do you get those parameters from?
Once in a while you get shown the light, in the strangest of places if you look at it right.

barnaclebob
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Re: Done saving for retirement according to firecalc?

Post by barnaclebob » Wed Aug 29, 2018 11:02 am

Personally I wouldn't feel comfortable coasting until my "retirement" date was within 5 years. Anything further than that has too much error.
Last edited by barnaclebob on Wed Aug 29, 2018 11:22 am, edited 1 time in total.

Admiral
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Re: Done saving for retirement according to firecalc?

Post by Admiral » Wed Aug 29, 2018 11:10 am

marcopolo wrote:
Wed Aug 29, 2018 11:01 am
Admiral wrote:
Wed Aug 29, 2018 10:54 am
marcopolo wrote:
Wed Aug 29, 2018 10:46 am
Ron Scott wrote:
Wed Aug 29, 2018 4:56 am
willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Well, you have to use something, don't you? What alternative would you suggest?
I am all for making conservative assumptions, but in the end past behavior is all we have to rely on to try to get a feel for what the future might hold.
See my post above. While nothing is for sure, I think Monte Carlo simulations can be effective (with the usual caveats) for at the very least showing mean, high, and low portfolio values based on the inputs one sets (which should be conservative).

For me, using FRP I am able to see that even if my future portfolio ends up in the lowest 10% value band (with 10,000 simulations) I will be fine. If it's at the mean, I will be great.
I use MCS as well. But, I don't kid myself into thinking that this does not rely on past data/information.
As you are well aware, the results of MCS are heavily dependent on the input parameters/assumptions.
I set those based on historical perspectives, and discount them somewhat to be extra conservative, but they are not random numbers.

Where do you get those parameters from?
Yes, of course, from history. There's no avoiding it. But I am not one of those people who believes the markets will return 2% on a 70/30 mixed portfolio in the long term. I try to use high standard deviations for portfolio return. So, for example: 2% inflation with 1% SD, 7% avg return with 10% SD. So, 4-5% actual return.

Certainly if there is wild inflation all bets are off. But I like to think this is fairly conservative but not "hoard gold" type conservative.

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whodidntante
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Re: Done saving for retirement according to firecalc?

Post by whodidntante » Wed Aug 29, 2018 11:14 am

I think expected returns are lower due to valuations, particularly if you're only buying Danish stocks or certain other single countries.

Ron Scott
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Re: Done saving for retirement according to firecalc?

Post by Ron Scott » Wed Aug 29, 2018 11:25 am

marcopolo wrote:
Wed Aug 29, 2018 10:46 am
Ron Scott wrote:
Wed Aug 29, 2018 4:56 am
willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Well, you have to use something, don't you? What alternative would you suggest?
You certainly don't need to use any tool--like FireCalc or monte carlo sims--that rely on historical American market data, to predict the future. I don't do it and I'm fine with that.

I have no suggestion for you or others on this board, but I will tell you what I do.

I have two approaches:

First, I make what I consider a reasoned judgement that in democratic, capitalist countries equities and bonds are highly likely to at least keep pace with inflation when considered over several decades, like a retirement period. A real rate of return of 0% should yield a withdrawal rate of 3.3% during a 30-year retirement. Spending less than that would be "safe".

Second, I set an asset allocation in which I can live how I want to without selling equities in my lifetime.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

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Meg77
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Re: Done saving for retirement according to firecalc?

Post by Meg77 » Wed Aug 29, 2018 11:26 am

am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
Assuming from your post that you are happy and comfortable living on $125k per year, then you have several options.
1. Quit saving now.
1a - If you're saving 50% of your gross income, then you could certainly go part time and take a 50% pay cut.
1b - Keep your job and increase your spending today - give more, travel more, eat better, upgrade belongings, renovate the house, etc.

2. Keep saving at the same level and retire earlier.
2a - You might want to shift some of the savings to taxable accounts so you can access it earlier, or buy rental property for an additional income stream.
2b - Or plan to do a Roth conversion ladder or 72t election to access retirement accounts early.

3. Keep saving at the same level and retire richer.
3a - Upgrade your future retirement lifestyle. Don't downsize the house, travel more, give more, buy nicer clothes and cars, etc.
3b - Leave a bigger bequest to family or charity when you die.
"An investment in knowledge pays the best interest." - Benjamin Franklin

HEDGEFUNDIE
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Re: Done saving for retirement according to firecalc?

Post by HEDGEFUNDIE » Wed Aug 29, 2018 11:38 am

Meg77 wrote:
Wed Aug 29, 2018 11:26 am
am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
Assuming from your post that you are happy and comfortable living on $125k per year, then you have several options.
1. Quit saving now.
1a - If you're saving 50% of your gross income, then you could certainly go part time and take a 50% pay cut.
1b - Keep your job and increase your spending today - give more, travel more, eat better, upgrade belongings, renovate the house, etc.

2. Keep saving at the same level and retire earlier.
2a - You might want to shift some of the savings to taxable accounts so you can access it earlier, or buy rental property for an additional income stream.
2b - Or plan to do a Roth conversion ladder or 72t election to access retirement accounts early.

3. Keep saving at the same level and retire richer.
3a - Upgrade your future retirement lifestyle. Don't downsize the house, travel more, give more, buy nicer clothes and cars, etc.
3b - Leave a bigger bequest to family or charity when you die.
+1 for the MECE framework!

marcopolo
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Re: Done saving for retirement according to firecalc?

Post by marcopolo » Wed Aug 29, 2018 11:41 am

Ron Scott wrote:
Wed Aug 29, 2018 11:25 am
marcopolo wrote:
Wed Aug 29, 2018 10:46 am
Ron Scott wrote:
Wed Aug 29, 2018 4:56 am
willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Well, you have to use something, don't you? What alternative would you suggest?
You certainly don't need to use any tool--like FireCalc or monte carlo sims--that rely on historical American market data, to predict the future. I don't do it and I'm fine with that.

I have no suggestion for you or others on this board, but I will tell you what I do.

I have two approaches:

First, I make what I consider a reasoned judgement that in democratic, capitalist countries equities and bonds are highly likely to at least keep pace with inflation when considered over several decades, like a retirement period. A real rate of return of 0% should yield a withdrawal rate of 3.3% during a 30-year retirement. Spending less than that would be "safe".

Second, I set an asset allocation in which I can live how I want to without selling equities in my lifetime.
That all sounds reasonable, and not that different from my plan.

I think you are kidding yourself when you say you do not rely on historical data to make predictions about the future.
What makes you think equities and bonds are highly likely to keep pace with inflation in the future, other than the fact that they have done so (or better) in the past?
Once in a while you get shown the light, in the strangest of places if you look at it right.

Ron Scott
Posts: 1090
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Re: Done saving for retirement according to firecalc?

Post by Ron Scott » Wed Aug 29, 2018 11:44 am

Admiral wrote:
Wed Aug 29, 2018 11:10 am
I am not one of those people who believes the markets will return 2% on a 70/30 mixed portfolio in the long term. I try to use high standard deviations for portfolio return. So, for example: 2% inflation with 1% SD, 7% avg return with 10% SD. So, 4-5% actual return.

Certainly if there is wild inflation all bets are off. But I like to think this is fairly conservative but not "hoard gold" type conservative.
I'm not quite sure what you're saying here but Bogle believes the coming decade will provide "nominal to zero" real returns. (He gets criticized here and elsewhere for this. Whatever...)

I am very comfortable with his assessment and plan accordingly.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

Ron Scott
Posts: 1090
Joined: Tue Apr 05, 2016 5:38 am

Re: Done saving for retirement according to firecalc?

Post by Ron Scott » Wed Aug 29, 2018 11:57 am

marcopolo wrote:
Wed Aug 29, 2018 11:41 am
Ron Scott wrote:
Wed Aug 29, 2018 11:25 am
marcopolo wrote:
Wed Aug 29, 2018 10:46 am
Ron Scott wrote:
Wed Aug 29, 2018 4:56 am
willthrill81 wrote:
Tue Aug 28, 2018 9:19 pm


FIRECalqc isn't predicting anything. It's simply modeling how the modeled portfolio and withdrawals would have fared in the past.

Exactly. So don’t use it to help you predict how your net worth, portfolio, and spending plan will work during your retirement. Period.
Well, you have to use something, don't you? What alternative would you suggest?
You certainly don't need to use any tool--like FireCalc or monte carlo sims--that rely on historical American market data, to predict the future. I don't do it and I'm fine with that.

I have no suggestion for you or others on this board, but I will tell you what I do.

I have two approaches:

First, I make what I consider a reasoned judgement that in democratic, capitalist countries equities and bonds are highly likely to at least keep pace with inflation when considered over several decades, like a retirement period. A real rate of return of 0% should yield a withdrawal rate of 3.3% during a 30-year retirement. Spending less than that would be "safe".

Second, I set an asset allocation in which I can live how I want to without selling equities in my lifetime.
That all sounds reasonable, and not that different from my plan.

I think you are kidding yourself when you say you do not rely on historical data to make predictions about the future.
What makes you think equities and bonds are highly likely to keep pace with inflation in the future, other than the fact that they have done so (or better) in the past?
I'm not using historical data explicitly or implicitly, kidding myself, or asking you to believe my approach is internally consistent. It works for me.

To answer your question I bolded above, I adopt a theoretical approach that is not based on calculations using historical data. I simply assume that businesses are extraordinarily motivated to produce returns that beat inflation, fearing that their failure to do so would mean being denied the investments they need to flourish. I think this is primal. Not every business is able to do so and those who fail usually don't last.

Of course this only applies in democratic, capitalist countries. Once you leave the reservation all bets are off.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.

Admiral
Posts: 1385
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Re: Done saving for retirement according to firecalc?

Post by Admiral » Wed Aug 29, 2018 12:18 pm

Ron Scott wrote:
Wed Aug 29, 2018 11:44 am
Admiral wrote:
Wed Aug 29, 2018 11:10 am
I am not one of those people who believes the markets will return 2% on a 70/30 mixed portfolio in the long term. I try to use high standard deviations for portfolio return. So, for example: 2% inflation with 1% SD, 7% avg return with 10% SD. So, 4-5% actual return.

Certainly if there is wild inflation all bets are off. But I like to think this is fairly conservative but not "hoard gold" type conservative.
I'm not quite sure what you're saying here but Bogle believes the coming decade will provide "nominal to zero" real returns. (He gets criticized here and elsewhere for this. Whatever...)

I am very comfortable with his assessment and plan accordingly.
I disagree with his prediction, end of story. I consider 4-5% real return to be very conservative in a 70/30 AA. That's my view, others may differ. That said, as long as I maintain my current rate of saving, my portfolio can lose 1% each year and I will still reach FI in 10 years.

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willthrill81
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Re: Done saving for retirement according to firecalc?

Post by willthrill81 » Wed Aug 29, 2018 8:50 pm

Admiral wrote:
Wed Aug 29, 2018 12:18 pm
Ron Scott wrote:
Wed Aug 29, 2018 11:44 am
Admiral wrote:
Wed Aug 29, 2018 11:10 am
I am not one of those people who believes the markets will return 2% on a 70/30 mixed portfolio in the long term. I try to use high standard deviations for portfolio return. So, for example: 2% inflation with 1% SD, 7% avg return with 10% SD. So, 4-5% actual return.

Certainly if there is wild inflation all bets are off. But I like to think this is fairly conservative but not "hoard gold" type conservative.
I'm not quite sure what you're saying here but Bogle believes the coming decade will provide "nominal to zero" real returns. (He gets criticized here and elsewhere for this. Whatever...)

I am very comfortable with his assessment and plan accordingly.
I disagree with his prediction, end of story. I consider 4-5% real return to be very conservative in a 70/30 AA. That's my view, others may differ. That said, as long as I maintain my current rate of saving, my portfolio can lose 1% each year and I will still reach FI in 10 years.
I believe it's worthwhile to point out here that virtually all of the 'experts' were predicting a year ago that U.S. stocks would return 3-4% annually, in nominal dollars, over the next decade. And in the last 12 months, stocks are up over 17%, almost half of the net gains that the experts were predicting over a ten year period. Granted, the rest of the decade could indeed be very poor, but the experts' predictions aren't looking too good right about now.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

Nate79
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Re: Done saving for retirement according to firecalc?

Post by Nate79 » Wed Aug 29, 2018 9:47 pm

Do it. I would be part time and coasting in a heartbeat in your situation. You have to understand that this site is so conservative they would have you work until you are 90 and have a 1% SWR just to be safe.

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willthrill81
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Re: Done saving for retirement according to firecalc?

Post by willthrill81 » Wed Aug 29, 2018 9:49 pm

Nate79 wrote:
Wed Aug 29, 2018 9:47 pm
Do it. I would be part time and coasting in a heartbeat in your situation. You have to understand that this site is so conservative they would have you work until you are 90 and have a 1% SWR just to be safe.
True statement. As a group, Bogleheads are not not known for their optimism.
“It's a dangerous business, Frodo, going out your door. You step onto the road, and if you don't keep your feet, there's no knowing where you might be swept off to.” J.R.R. Tolkien,The Lord of the Rings

cuihang
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Re: Done saving for retirement according to firecalc?

Post by cuihang » Wed Aug 29, 2018 11:25 pm

dknightd wrote:
Wed Aug 29, 2018 9:00 am
am wrote:
Tue Aug 28, 2018 9:04 pm
Assuming I don’t save another penny, my portfolio today will allow me to spend 125k starting at 59 (which is roughly 15 yrs away and would allow access to retirement funds) according to firecalc. Success is nearly 100% when I include ss and small pension. Portfolio would be 60% stocks and 40% bonds with expenses of .06%. I am not including inheritances nor downsizing of my house. Does this mean I can get a part time job and coast until then? Anyone doing this? I don’t think firecalc can predict the future but it seems likely to work.
15 years between now and 59 is a long time. I'm curious what your portfolio value is.
But I thought OP is just thinking of stopping saving and take a less-paid part time job to cover expense until retirement. So, OP doesn't need to spend anything from the portfolio, but just not to contribute to it. Did I get it right? If so, doesn't matter how long it is to retirement as long as the income each year can cover the expense.

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