Likelihood of Success

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midagelawyer
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Joined: Sun Jan 29, 2017 11:37 am

Likelihood of Success

Post by midagelawyer » Thu Sep 13, 2018 7:47 pm

Hi Everyone,

I've been thinking about the appropriate retirement plan to set for myself at this age. As I've been thinking about it, if I'm literally about to retire tomorrow, I should probably do it with a plan that has a 90+% success rate. However, if I think I'm not retiring for 30+ years, years of which I have low predictability of my salary, children, who knows what, plus the ability to make changes , I would think I could pick a plan with a success rate that is lower.

To clarify what I mean by "plan" I mean a comprehensive, monetary plan for the years between now and Financial Independence (or "retirement" if that's different). The plan includes expectations for expenses (down-payment in year x, car purchase in year y, kids, etc.) and income (raises, windfalls, etc.). "success" means probability of running out of money before death. If anyone is familiar with personalcapital, I used their retirement planner.

The question is, how much lower? Is there a good way to determine this, based on certain assumptions (e.g., high/low savings rates, # of children, variance in predicted salaries, etc.)? Curious to hear this board's thoughts. The reason one would expect a lower success rate is because of reaching for higher "returns," except returns are experienced in real life terms, such as retiring one year earlier, or returning with higher expected withdrawals out of the portfolio.

I'm very glad to have found this place.
Last edited by midagelawyer on Sun Sep 16, 2018 10:56 am, edited 1 time in total.

Thesaints
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Re: Likelihood of Success

Post by Thesaints » Thu Sep 13, 2018 7:56 pm

What do you mean by "success" ? And what kind of "plan" do you have in mind ?

delamer
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Re: Likelihood of Success

Post by delamer » Thu Sep 13, 2018 9:08 pm

Why would you ever choose a plan with a lower expected success rate over one with a higher expected success rate, all other things being equal?

Do you actually mean that you are more willing to take more risk when you are younger than when you are older and closer to retirement? If so, that’s pretty normal.

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Watty
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Re: Likelihood of Success

Post by Watty » Thu Sep 13, 2018 9:49 pm

Thesaints wrote:
Thu Sep 13, 2018 7:56 pm
What do you mean by "success" ? And what kind of "plan" do you have in mind ?
+1

And what would failure look like? For some people failure might mean things like not being able to afford to buy a second home but that would not be a dire hardship. Some people plan on just having enough to live a minimalist lifestyle so a shortfall could be pretty bad news.

I'm retired now but years ago when I was planning for retirement I did two things.

1) I planned on retiring when I was 60 so I could likely work few more years if I needed to.

2) I targeted having enough money that I would reduce my spending by maybe 20% if I needed to and still be comfortable.

Mr.BB
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Re: Likelihood of Success

Post by Mr.BB » Fri Sep 14, 2018 5:29 am

Expect less....get less
Expect more....get more
"We are what we repeatedly do. Excellence, then, is not an act, but a habit."

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Devil's Advocate
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Re: Likelihood of Success

Post by Devil's Advocate » Fri Sep 14, 2018 6:01 am

Aim for the stars and miss, you're still doing pretty darn well.

DA

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linenfort
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Re: Likelihood of Success

Post by linenfort » Fri Sep 14, 2018 7:01 am

delamer wrote:
Thu Sep 13, 2018 9:08 pm
Do you actually mean that you are more willing to take more risk when you are younger than when you are older and closer to retirement? If so, that’s pretty normal.
That’s how I interpreted it.
If that’s the case, OP, read up on asset allocation.

https://www.bogleheads.org/wiki/Asset_allocation
bogleheads, don't knock state lotteries. They helped defund the mafia.

midagelawyer
Posts: 55
Joined: Sun Jan 29, 2017 11:37 am

Re: Likelihood of Success

Post by midagelawyer » Sun Sep 16, 2018 10:57 am

Thank you all for your clarifying questions! I revised my original post to be more clear. Below is the additional clarification:

To clarify what I mean by "plan" I mean a comprehensive, monetary plan for the years between now and Financial Independence (or "retirement" if that's different). The plan includes expectations for expenses (down-payment in year x, car purchase in year y, kids, etc.) and income (raises, windfalls, etc.). "success" means probability of running out of money before death. If anyone is familiar with personalcapital, I used their retirement planner.

The question is, how much lower? Is there a good way to determine this, based on certain assumptions (e.g., high/low savings rates, # of children, variance in predicted salaries, etc.)? Curious to hear this board's thoughts. The reason one would expect a lower success rate is because of reaching for higher "returns," except returns are experienced in real life terms, such as retiring one year earlier, or returning with higher expected withdrawals out of the portfolio.

Wm_o_o_o
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Joined: Sat Feb 10, 2018 9:07 pm

Re: Likelihood of Success

Post by Wm_o_o_o » Sun Sep 16, 2018 11:51 am

Start with ordinary stuff, the more you save earlier on the greater your return on those savings is likely to be all things being equal..

I think you are asking questions no person can answer because (and you should hear this often on BH) not only can we not see *the* future, we specifically cannot see *your* future [1]

There isn't a general plan for everyone. I can say there are some fantastic people here and if you choose the personal bit of this forum you might get better guidance there.

[1] for example I have no idea how many children you and your partner or partners will produce, how you want to educate them, what sort of quality food you plan to feed them, where you plan for them to live, and so on ad infinitum.

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