Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

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HomerJ
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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by HomerJ » Tue Oct 16, 2018 1:13 pm

MnD wrote:
Sat Sep 29, 2018 6:34 pm
Working more years, saving more, spending less to overcompensate beyond the worst series in history is not anything resembling a win-win in my book. More like locking in a horribly bad sequence of returns retirement plan from Day 1 of retirement before you even experience one.
And this.
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HomerJ
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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by HomerJ » Tue Oct 16, 2018 1:24 pm

duplicate
Last edited by HomerJ on Tue Oct 16, 2018 7:52 pm, edited 1 time in total.
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hammockman
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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by hammockman » Tue Oct 16, 2018 2:18 pm

So I'm generally IT/Application savvy however after I input the data points I don't have or see a "calculate" "enter" etc button? It mentions a camera icon bottom right which creates the graph I assume but I don't see that either? What am I missing....seems pretty straightforward otherwise.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by yousha » Tue Oct 16, 2018 3:04 pm

delamer wrote:
Tue Oct 16, 2018 1:04 pm
yousha wrote:
Tue Oct 16, 2018 12:49 pm
I am not quite sure. I believe I am content with my lifestyle and with my current spending.. Perhaps, it is psychological?
The habits of savings and frugality become well ingrained over the course of a lifetime.

An example — we have been staying at Hampton Inns when we travel for years. There is absolutely no financial reason that we could not stay at Four Seasons instead. The difference in cost is trivial as a percentage of our income or net worth.

But we stick with the Hampton Inns.

Same thing with high end restaurants. My husband loves steaks, but we’ve always gone to Outback and we haven’t upgraded to Ruth’s Chris.

If I had to give a specific reason, I say it is because the perceived improvement in quality isn’t worth the higher price.

But mostly, it is habit.
I agree!

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by Cloudy » Tue Oct 16, 2018 4:05 pm

hammockman wrote:
Tue Oct 16, 2018 2:18 pm
So I'm generally IT/Application savvy however after I input the data points I don't have or see a "calculate" "enter" etc button? It mentions a camera icon bottom right which creates the graph I assume but I don't see that either? What am I missing....seems pretty straightforward otherwise.
It just updates automatically when you change the values. Maybe try a different browser?

Thanks for sharing the link, EnjoyIt. I did indeed Enjoy It :D I also liked their retirement date fire calculator https://engaging-data.com/fire-calculator/

remomnyc
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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by remomnyc » Tue Oct 16, 2018 7:21 pm

I used the tool and was surprised by a strip of red broke. I played with the variables and realized it was taxes. I entered my taxes as 24% and that produced the strip of red. When I reduced my taxes to 15%, the strip disappeared. Given that my expenses include taxes, the rate should have no impact. Does this mean that we should be entering expenses as a net amount, before taxes?

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by EnjoyIt » Wed Oct 17, 2018 4:15 pm

JackoC wrote:
Tue Oct 16, 2018 12:09 pm
EnjoyIt wrote:
Tue Oct 16, 2018 11:49 am
JackoC wrote:
Tue Oct 16, 2018 10:51 am
delamer wrote:
Tue Oct 16, 2018 10:34 am
JackoC wrote:
Tue Oct 16, 2018 9:55 am

Not projecting this onto you personally but this argument from 'The Millionaire Next Door' (never read it, don't intend to, I rely on your characterization) gives a whiff to me of rationalizing not giving away money.
Many of the millionaires held out as good examples in The Millionaire Next Door are very supportive of their kids’ higher education and success in high prestige occupations (doctor, attorney, college professor). They were happy that their kids were able to do something socially useful and are happy to have paid for that education. The millionaires themselves are high net worth but low prestige. One man that I remember had a very successful business rebuilding diesel engines, for the example. (I think it stuck with me because it so outside my knowledge of career paths.)

The “teach a man to fish” outlook was lauded. It was the “give kids money to support a lifestyle that will implode if the gifts stop” philosophy that was frowned upon. Not to mention the corrosive effects, in the worst cases, of having to kowtow to your father-in-law in order to pay your mortgage. (There is an example of this in the book that still makes me cringe when I think about it.)
Thanks for further insight into the book, but my feeling remains that the argument "against give kids money to support a lifestyle that will implode if the gifts stop" is easy to use as a rationalization, by readers or people in general, for "it's better if I keep my money for myself".
JackoC, I think you are misreading/misunderstanding the thinking or choosing to rationalize your own decisions.
We disagree as to who is rationalizing, and would not reach agreement contesting it further.
Indeed, no need to convince the other of anything. If you have any interest in the potential harm's of outpatient economic care feel free to read about Stanley's research in the book Millionaire Next Door. It is a very interesting book which I am positive 9 out of 10 bogleheads who have read it would recommend it.

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HomerJ
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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by HomerJ » Wed Oct 17, 2018 4:19 pm

Does this tool work with two people?
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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by JackoC » Fri Oct 19, 2018 9:33 am

EnjoyIt wrote:
Wed Oct 17, 2018 4:15 pm
JackoC wrote:
Tue Oct 16, 2018 12:09 pm
EnjoyIt wrote:
Tue Oct 16, 2018 11:49 am
JackoC wrote:
Tue Oct 16, 2018 10:51 am
delamer wrote:
Tue Oct 16, 2018 10:34 am


Many of the millionaires held out as good examples in The Millionaire Next Door are very supportive of their kids’ higher education and success in high prestige occupations (doctor, attorney, college professor).
Thanks for further insight into the book, but my feeling remains that the argument "against give kids money to support a lifestyle that will implode if the gifts stop" is easy to use as a rationalization, by readers or people in general, for "it's better if I keep my money for myself".
JackoC, I think you are misreading/misunderstanding the thinking or choosing to rationalize your own decisions.
We disagree as to who is rationalizing, and would not reach agreement contesting it further.
Indeed, no need to convince the other of anything. If you have any interest in the potential harm's of outpatient economic care feel free to read about Stanley's research in the book Millionaire Next Door. It is a very interesting book which I am positive 9 out of 10 bogleheads who have read it would recommend it.
No need, but you're not leaving it at that, but again circling around to 'studies' which we already covered. :D Nobody with any common sense denies that getting money from parents *can* be a negative in some hypothetical situation. The question is how often that possibility is used as a rationalization for either
a) I'd rather just keep my money and spend it on myself.
or
b) I won't have any significant money to give to my kids, but that's OK, because it would have been a negative for them anyway.

I think it's a common rationalization. You apparently don't. Simple difference of opinion. It's not a matter of whether I've read a particular book. :D

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by EnjoyIt » Fri Oct 19, 2018 11:27 pm

JackoC wrote:
Fri Oct 19, 2018 9:33 am
EnjoyIt wrote:
Wed Oct 17, 2018 4:15 pm
JackoC wrote:
Tue Oct 16, 2018 12:09 pm
EnjoyIt wrote:
Tue Oct 16, 2018 11:49 am
JackoC wrote:
Tue Oct 16, 2018 10:51 am

Thanks for further insight into the book, but my feeling remains that the argument "against give kids money to support a lifestyle that will implode if the gifts stop" is easy to use as a rationalization, by readers or people in general, for "it's better if I keep my money for myself".
JackoC, I think you are misreading/misunderstanding the thinking or choosing to rationalize your own decisions.
We disagree as to who is rationalizing, and would not reach agreement contesting it further.
Indeed, no need to convince the other of anything. If you have any interest in the potential harm's of outpatient economic care feel free to read about Stanley's research in the book Millionaire Next Door. It is a very interesting book which I am positive 9 out of 10 bogleheads who have read it would recommend it.
No need, but you're not leaving it at that, but again circling around to 'studies' which we already covered. :D Nobody with any common sense denies that getting money from parents *can* be a negative in some hypothetical situation. The question is how often that possibility is used as a rationalization for either
a) I'd rather just keep my money and spend it on myself.
or
b) I won't have any significant money to give to my kids, but that's OK, because it would have been a negative for them anyway.

I think it's a common rationalization. You apparently don't. Simple difference of opinion. It's not a matter of whether I've read a particular book. :D
I see where you are getting at. I guess we both assumed something about each other and both of us were wrong. Cheers.

You do bring up a decent question. How often do people rationalize not helping their kids for the two reasons you described and is it a common rationalization? I honestly don't know the answer to that because I have not seen any research or poll done on the subject. My anecdotal evidence does show that most people believe that throwing more and more money at the kids will somehow make them better, smarter, and happier individuals. The amount of cash that a child can consume is infinite because there are always better private schools, more extra curricular activities, foreign class trips, nice cars, expensive private colleges, mortgages in safe neighborhoods, etc. It can go on and on and on. I have seen people buy massive homes because no child could possibly have a happy life in a home under 5000sqft. I honestly believe people rationalize wasteful expenditures for their kids as some acceptable excuse vs the opposite of not wanting to spend on their kids so that they can spend on themselves. After all, nothing is too good for the kids. Does that kind of expenditure make those kids happier or better?

I have a friend who bought a $3 million dollar home because she thought the kids would have a better life there. Although my friend can afford it with her current income, how sustainable is it working that hard for the next 20-25 years to maintain that lifestyle while putting in 6 days a week and not spending that much time with the kids that she is doing all this for? Are the kids actually happier with all the fancy stuff or would life be better just having mom around more? I guess it depends.

I have another friend who grew up with his parents spending lots of money on him and his siblings. Leased car every 3 years in high school, college and grad school, and later helped with a downpayment on his home. Sure he was happy getting all those things but he never learned how to budget and function on his own and not until his mid 40s did he realize that living paycheck to paycheck has been adding a lot more unnecessary stress in his life. He was one bad event from bankruptcy and had to make drastic changes to get out of the deep hole he and his parents helped him dig. Luckily he had a big income shovel to dig himself out and doing great now.

Another high school friend of mine grew up in a very rich home. His father made a killing in their family business. He had a live in nanny/baby sitter/maid )not sure her exact title) right up until he left high school. He ended up going into the family business obviously making an excellent income unfortunately his parents enriched in him with a very poor relationship with money and he simply could not spend his way into happiness. No matter what he bought he was always depressed. No new Jaguar, Mercedes or boat would keep him happy. He ended up hitting the bottle and today is a very rich functioning alcoholic.

Just to turn it around, I have another friend whose parents left him a nice trust fund. This fund gives him a reasonable income every month. It is just enough to live a decent middle class lifestyle which is exactly what he does. He supplements it with his own part time business. This guy couldn't be happier. As I stated, he works part time maybe 1-2 weekends a month and just enjoys life. He travels, reads, takes classes, dates, and maybe has found himself an awesome women to spend the rest of his life with. Although money has kept him from being a highly productive member of society, he is living a very happy and enjoyable life.

Last one, I promise. Another friend whose parent passed away and left behind a very sizable 401k and life insurance policy. Because all his life he educated my friend about having a healthy relationship with money, my friend is using this cash to help pay for higher education and invested the rest to help kick start his retirement savings. Just a good example of cash crating a benefit for someone.

Personally I see more stories of money creating more harm than good. I truly believe there is such a thing as too much money.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by BanquetBeer » Sat Oct 20, 2018 7:08 am

I didn’t read the millionaire next Door as a prescriptive tale. When I read it it was more of ‘in these situations, this tended to occur - for better or worse’.

There is the variability on the individual - some may be good with money and some may get ruined by it. Your friend with a trust likely could have sold his annuity to JG Wetworth for CASH NOW!!

I plan on living frugally (relative to our earnings/assets) and giving support to my kids... but only later in life. Since a lot of this effort is going to their long term benefit I’m not sure how one could make the argument that I am ‘using that book to selfishly keep more money for myself until I’m sure things have worked out’ - I would just work a year or 2 longer if that was the concern.

At this point the kids cost as much as us adults (including child care) so we spend plenty on them but I do not agree with giving the kids whatever they want - they have to earn it (or a token amount) to teach them value. That’s what the discussion was about. Kids learning value.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by visualguy » Sat Oct 20, 2018 2:07 pm

It's extremely valuable to pass some wealth from generation to generation early enough to prevent the next generation from having to go into debt. People should be working to enrich the family, not the banks. If I help my kids to avoid or reduce debt, they can then afford to help their kids to avoid debt, and so on. This keeps the fruits of labor within the family rather than siphoning them off to the banks.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by willthrill81 » Sun Oct 21, 2018 12:48 am

visualguy wrote:
Sat Oct 20, 2018 2:07 pm
It's extremely valuable to pass some wealth from generation to generation early enough to prevent the next generation from having to go into debt. People should be working to enrich the family, not the banks. If I help my kids to avoid or reduce debt, they can then afford to help their kids to avoid debt, and so on. This keeps the fruits of labor within the family rather than siphoning them off to the banks.
That's why Jim Dahle, the White Coat Investor, advocates for a 'twenties fund'. He says that it's in your twenties when you most often need money the most.

OTOH, I've seen at least one person who received a significant inheritance at age 18 and blew it quickly.

This is an issue that is of long-term concern to me. We'll likely leave millions behind for our daughter, but she'll probably be at least in her 50s, probably in her 60s, by the time that that happens. My hope is that she'll be in good enough shape to not need the money for herself but can do something very worthwhile and positive with it.
“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: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by visualguy » Sun Oct 21, 2018 2:37 pm

willthrill81 wrote:
Sun Oct 21, 2018 12:48 am
That's why Jim Dahle, the White Coat Investor, advocates for a 'twenties fund'. He says that it's in your twenties when you most often need money the most.
Absolutely. That's when money makes the most difference - making it possible to get the right education, settle down, start a family, avoid debt. Typically, people don't have the money when they need it most (early in their adult lives) which can lead to unfortunate compromises and lives not lived to their full potential. That's when financial help from the family can have the most positive impact.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by EnjoyIt » Mon Oct 22, 2018 1:11 am

visualguy wrote:
Sun Oct 21, 2018 2:37 pm
willthrill81 wrote:
Sun Oct 21, 2018 12:48 am
That's why Jim Dahle, the White Coat Investor, advocates for a 'twenties fund'. He says that it's in your twenties when you most often need money the most.
Absolutely. That's when money makes the most difference - making it possible to get the right education, settle down, start a family, avoid debt. Typically, people don't have the money when they need it most (early in their adult lives) which can lead to unfortunate compromises and lives not lived to their full potential. That's when financial help from the family can have the most positive impact.
Seams like a great idea to help cover education and make sure they start the world debt free, but what about a mortgage? Do we pay for that as well if we could? A mortgage is debt after all. In addition do we help them get a mortgage in an areas that they couldn’t afford on their own? Is that helpful or actually harmful. I think there is a line somewhere that giving more money early is harmful though I don’t quite know where that line is. Right now I believe it is to help them get their higher education debt free. But only if it comes with studying and good grades. I’m not interested in paying for 4 years of drugs, alcohol and partying like some of my past classmates had received and now low productive members of society.

Where is your line?

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by willthrill81 » Mon Oct 22, 2018 9:12 am

EnjoyIt wrote:
Mon Oct 22, 2018 1:11 am
visualguy wrote:
Sun Oct 21, 2018 2:37 pm
willthrill81 wrote:
Sun Oct 21, 2018 12:48 am
That's why Jim Dahle, the White Coat Investor, advocates for a 'twenties fund'. He says that it's in your twenties when you most often need money the most.
Absolutely. That's when money makes the most difference - making it possible to get the right education, settle down, start a family, avoid debt. Typically, people don't have the money when they need it most (early in their adult lives) which can lead to unfortunate compromises and lives not lived to their full potential. That's when financial help from the family can have the most positive impact.
Seams like a great idea to help cover education and make sure they start the world debt free, but what about a mortgage? Do we pay for that as well if we could? A mortgage is debt after all. In addition do we help them get a mortgage in an areas that they couldn’t afford on their own? Is that helpful or actually harmful. I think there is a line somewhere that giving more money early is harmful though I don’t quite know where that line is. Right now I believe it is to help them get their higher education debt free. But only if it comes with studying and good grades. I’m not interested in paying for 4 years of drugs, alcohol and partying like some of my past classmates had received and now low productive members of society.

Where is your line?
Your point is well taken, and this issue gives me pause, even though our daughter is only three. My DW and I want to put her on sound financial footing, but at the same time we both understand well that eliminating too much hardship nearly always inhibits character development. We are very confident right now that we will want her to contribute significantly to what we believe are 'exorbitant' purchases. For instance, if she wants designer clothing, she'll need to pay for the difference in price over something we would buy by saving up birthday money, an allowance (which she'll have to earn by doing jobs), or getting a 'little' job. We also expect her to pay for a significant chunk of things like her first vehicle, college, etc.

Regarding the mortgage, I'm leaning at this point toward no financial assistance unless the situation is truly aberrant. First, a home is not a necessary purchase; renting is perfectly fine. As such, if she wants one, it will be up to her to build her credit and save up for a down payment. Second, buying a home on your own seems to make you more likely to buy a modest home than if you're getting financial help to buy it.
“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: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by smitcat » Mon Oct 22, 2018 9:58 am

EnjoyIt wrote:
Mon Oct 22, 2018 1:11 am
visualguy wrote:
Sun Oct 21, 2018 2:37 pm
willthrill81 wrote:
Sun Oct 21, 2018 12:48 am
That's why Jim Dahle, the White Coat Investor, advocates for a 'twenties fund'. He says that it's in your twenties when you most often need money the most.
Absolutely. That's when money makes the most difference - making it possible to get the right education, settle down, start a family, avoid debt. Typically, people don't have the money when they need it most (early in their adult lives) which can lead to unfortunate compromises and lives not lived to their full potential. That's when financial help from the family can have the most positive impact.
Seams like a great idea to help cover education and make sure they start the world debt free, but what about a mortgage? Do we pay for that as well if we could? A mortgage is debt after all. In addition do we help them get a mortgage in an areas that they couldn’t afford on their own? Is that helpful or actually harmful. I think there is a line somewhere that giving more money early is harmful though I don’t quite know where that line is. Right now I believe it is to help them get their higher education debt free. But only if it comes with studying and good grades. I’m not interested in paying for 4 years of drugs, alcohol and partying like some of my past classmates had received and now low productive members of society.

Where is your line?
I believe our daughter has learned a great deal by her numerous jobs both before and during college. While I am sure she knows we will likely help her out now that she is almost done with college (for a time) the values and skills she has learned by securing and performing these various jobs has been above and beyond any college courses. And she 'feels' much better knowing that she both helps out with some costs as well as knowing a bit about budgeting and already saving for the future.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by willthrill81 » Mon Oct 22, 2018 10:16 am

smitcat wrote:
Mon Oct 22, 2018 9:58 am
EnjoyIt wrote:
Mon Oct 22, 2018 1:11 am
visualguy wrote:
Sun Oct 21, 2018 2:37 pm
willthrill81 wrote:
Sun Oct 21, 2018 12:48 am
That's why Jim Dahle, the White Coat Investor, advocates for a 'twenties fund'. He says that it's in your twenties when you most often need money the most.
Absolutely. That's when money makes the most difference - making it possible to get the right education, settle down, start a family, avoid debt. Typically, people don't have the money when they need it most (early in their adult lives) which can lead to unfortunate compromises and lives not lived to their full potential. That's when financial help from the family can have the most positive impact.
Seams like a great idea to help cover education and make sure they start the world debt free, but what about a mortgage? Do we pay for that as well if we could? A mortgage is debt after all. In addition do we help them get a mortgage in an areas that they couldn’t afford on their own? Is that helpful or actually harmful. I think there is a line somewhere that giving more money early is harmful though I don’t quite know where that line is. Right now I believe it is to help them get their higher education debt free. But only if it comes with studying and good grades. I’m not interested in paying for 4 years of drugs, alcohol and partying like some of my past classmates had received and now low productive members of society.

Where is your line?
I believe our daughter has learned a great deal by her numerous jobs both before and during college. While I am sure she knows we will likely help her out now that she is almost done with college (for a time) the values and skills she has learned by securing and performing these various jobs has been above and beyond any college courses. And she 'feels' much better knowing that she both helps out with some costs as well as knowing a bit about budgeting and already saving for the future.
:thumbsup

The sense of accomplishment that comes from enduring hard things and succeeding is extremely valuable, especially to young people, and cannot be replicated by other means.
“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: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by visualguy » Mon Oct 22, 2018 2:42 pm

EnjoyIt wrote:
Mon Oct 22, 2018 1:11 am
Seams like a great idea to help cover education and make sure they start the world debt free, but what about a mortgage? Do we pay for that as well if we could? A mortgage is debt after all. In addition do we help them get a mortgage in an areas that they couldn’t afford on their own? Is that helpful or actually harmful. I think there is a line somewhere that giving more money early is harmful though I don’t quite know where that line is. Right now I believe it is to help them get their higher education debt free. But only if it comes with studying and good grades. I’m not interested in paying for 4 years of drugs, alcohol and partying like some of my past classmates had received and now low productive members of society.

Where is your line?
The help is for specific things that enable them to focus their attention on the important things - their families and careers. Education - yes. Housing - yes. Health-related - yes. Luxury cars - no. Travel - no.

Also, helped with buying a home only once they started a good career in the area.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by spreadsheetguy » Tue Oct 23, 2018 12:58 am

visualguy wrote:
Mon Oct 22, 2018 2:42 pm
EnjoyIt wrote:
Mon Oct 22, 2018 1:11 am
Seams like a great idea to help cover education and make sure they start the world debt free, but what about a mortgage? Do we pay for that as well if we could? A mortgage is debt after all. In addition do we help them get a mortgage in an areas that they couldn’t afford on their own? Is that helpful or actually harmful. I think there is a line somewhere that giving more money early is harmful though I don’t quite know where that line is. Right now I believe it is to help them get their higher education debt free. But only if it comes with studying and good grades. I’m not interested in paying for 4 years of drugs, alcohol and partying like some of my past classmates had received and now low productive members of society.

Where is your line?
The help is for specific things that enable them to focus their attention on the important things - their families and careers. Education - yes. Housing - yes. Health-related - yes. Luxury cars - no. Travel - no.

Also, helped with buying a home only once they started a good career in the area.
I like this set of criteria. I'll have to remember it when my kids are older.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by Dandy » Tue Oct 23, 2018 7:10 am

I look at retirement funding as a journey through the desert that might take say 20 or 30 days or even slightly more. Temperatures might range from 100 to 30 degrees. Experts say you need a quart of water a day 95% of the time. I'm not bringing 20 or 30 quarts - I'm bringing 50 quarts. It's okay with me if I end the trip with extra water I just don't want to run out. Nor do I want to get to day 25 and have real concerns about do I have enough.

No analogy is perfect but as long as you can have a nice retirement with a modest withdrawal strategy I see no compelling reason to try to maximize early withdrawals. To continue the analogy, just because I have 50 quarts on the above journey doesn't mean on day 2 I'm starting to consume 2 quarts a day because I like the cooling feel when I pour a quart over my head at the end of each day. I still have up to 30 days to go and don't know what the actual weather will be. At some point during the journey I might consume more than a quart - but not at the very start. I will likely end up with lots of unused water. As long as I wasn't thirsty during the trip I will have no regrets.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by nick evets » Tue Oct 23, 2018 7:28 am

Dandy wrote:
Tue Oct 23, 2018 7:10 am
I look at retirement funding as a journey through the desert that might take say 20 or 30 days or even slightly more....
Wouldn't your analogy be more accurate to extend it so that at the start of the trip you'd want to spend a lot of time exploring the desert, thus needing more water, and towards the end, you'll maximize your time in the shade, or travel at night, and bring down your consumption?

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by Dandy » Tue Oct 23, 2018 8:23 am

Wouldn't your analogy be more accurate to extend it so that at the start of the trip you'd want to spend a lot of time exploring the desert, thus needing more water, and towards the end, you'll maximize your time in the shade, or travel at night, and bring down your consumption?
As I said no analogy is perfect. Actually, I didn't pick my retirement date my employer did :happy The point is the actual retirement journey is mostly unknown despite a lot of prior research. The pot you've got at retirement is usually all you've got. How you manage it through your journey of unknown length and risks is the challenge. The fact that 95% or 100% of the people got through their journey with a certain withdrawal scheme doesn't mean you will. The fact that no one ran out of water doesn't mean you won't. There are no do overs. There may have be some shade on the path but maybe lightening struck that tree and burned it to the ground before you got there.

I'm not full of fear and I personally feel I am lucky to have enough but retirement can be such a long journey with large financial risks e.g. health/medical, markets, inflation, etc. that I'll have a nice standard of living at the beginning and risk dying with money left unspent. My spending plan is to gradually increase our standard of living from good to better than good. I don't want it to be great, good and then barely acceptable.

Saving and living below your means is a Boglehead philosophy. Then you get to retirement of 30 years or more and often the conversation is what is the maximum "safe" that I can withdraw? Not what is a decent "safe" initial withdrawal rate and how/when do I modify it? And I mean modify it up or down.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by spreadsheetguy » Thu Oct 25, 2018 1:40 pm

Dandy wrote:
Tue Oct 23, 2018 8:23 am
Wouldn't your analogy be more accurate to extend it so that at the start of the trip you'd want to spend a lot of time exploring the desert, thus needing more water, and towards the end, you'll maximize your time in the shade, or travel at night, and bring down your consumption?
As I said no analogy is perfect. Actually, I didn't pick my retirement date my employer did :happy The point is the actual retirement journey is mostly unknown despite a lot of prior research. The pot you've got at retirement is usually all you've got. How you manage it through your journey of unknown length and risks is the challenge. The fact that 95% or 100% of the people got through their journey with a certain withdrawal scheme doesn't mean you will. The fact that no one ran out of water doesn't mean you won't. There are no do overs. There may have be some shade on the path but maybe lightening struck that tree and burned it to the ground before you got there.

I'm not full of fear and I personally feel I am lucky to have enough but retirement can be such a long journey with large financial risks e.g. health/medical, markets, inflation, etc. that I'll have a nice standard of living at the beginning and risk dying with money left unspent. My spending plan is to gradually increase our standard of living from good to better than good. I don't want it to be great, good and then barely acceptable.

Saving and living below your means is a Boglehead philosophy. Then you get to retirement of 30 years or more and often the conversation is what is the maximum "safe" that I can withdraw? Not what is a decent "safe" initial withdrawal rate and how/when do I modify it? And I mean modify it up or down.
Here's my analogy that focuses much more on the tradeoff between the work you put in before retirement and less on the potential for being unprepared.

Retirement planning is like studying for your last final exam in college potentially ever. You think that maybe you didn't study enough during the semester so you have a couple of weeks to really prep for the test.

Here's the tradeoff (Preparing vs Enjoying Limited Retirement Time):
The more time you put in now, the higher the chances are that you'll do well enough to really ace your exam. There's a fairly small, but still real chance that you'll fail the exam and have to retake the class instead of graduating. However, the more time you spend really studying, the less time you have to spend hanging out and enjoying your (hopefully) last few weeks of college.

You think you understood the material so should get an okay grade. However, you've heard rumors that this professor can give pretty hard exams so there's definitely a chance of failure. Maybe you should re-read the textbook one more time and do all the problem sets again to make sure you "get" it. You could even look at other textbooks from the library just to see if having a different explanation of the concepts will help you out. And you could do the problems from that book too. The point is that the more studying (preparing) you do means that you'll enjoy your last few weeks in college less, but will increase your already decent chances of passing the test.

The analogy breaks down with the consequences of "failure". In my example, you'd have to go to summer school, but in a retirement scenario, you may have to cut back on spending a little bit, or go back to work (part-time), or move to a LCOL area or whatever. The severity of the "failure" is somewhat variable, it could be bad or it could be barely an inconvenience.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by nick evets » Thu Oct 25, 2018 2:27 pm

Dandy wrote:
Tue Oct 23, 2018 8:23 am

My spending plan is to gradually increase our standard of living from good to better than good. I don't want it to be great, good and then barely acceptable.

Saving and living below your means is a Boglehead philosophy. Then you get to retirement of 30 years or more and often the conversation is what is the maximum "safe" that I can withdraw? Not what is a decent "safe" initial withdrawal rate and how/when do I modify it? And I mean modify it up or down.
The problem I have, is I want a model that reflects health and quality of living, so it's front-loaded and not geared to a conservative start, and then more funds later. I mean, hell, in a male adult's late 70's, you have almost a 50/50 chance of being dead!

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by spreadsheetguy » Thu Oct 25, 2018 2:42 pm

nick evets wrote:
Thu Oct 25, 2018 2:27 pm
Dandy wrote:
Tue Oct 23, 2018 8:23 am

My spending plan is to gradually increase our standard of living from good to better than good. I don't want it to be great, good and then barely acceptable.

Saving and living below your means is a Boglehead philosophy. Then you get to retirement of 30 years or more and often the conversation is what is the maximum "safe" that I can withdraw? Not what is a decent "safe" initial withdrawal rate and how/when do I modify it? And I mean modify it up or down.
The problem I have, is I want a model that reflects health and quality of living, so it's front-loaded and not geared to a conservative start, and then more funds later. I mean, hell, in a male adult's late 70's, you have almost a 50/50 chance of being dead!
That model won't ever exist unless you can predict the stock market and your own mortality. The only way to make your model be more accurate is to retire in your 70s (so that returns don't matter as much and the mortality picture is much clearer).

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by Dandy » Thu Oct 25, 2018 2:50 pm

nick evets wrote:
Thu Oct 25, 2018 2:27 pm
Dandy wrote:
Tue Oct 23, 2018 8:23 am

My spending plan is to gradually increase our standard of living from good to better than good. I don't want it to be great, good and then barely acceptable.

Saving and living below your means is a Boglehead philosophy. Then you get to retirement of 30 years or more and often the conversation is what is the maximum "safe" that I can withdraw? Not what is a decent "safe" initial withdrawal rate and how/when do I modify it? And I mean modify it up or down.
The problem I have, is I want a model that reflects health and quality of living, so it's front-loaded and not geared to a conservative start, and then more funds later. I mean, hell, in a male adult's late 70's, you have almost a 50/50 chance of being dead!
Gee I hope it isn't 50/50 I'll be 71 soon :oops: There is no one right answer.

I started retirement with a decent standard of living and have gradually expanded it. So if I die tomorrow I won't feel I have been deprived and my widow and children sure won't. I don't have expensive tastes or bucket list items. But, I recently came back from a rather expensive tour of the Grand Canyon and other Canyons out west. It was great. I wouldn't have done that earlier in retirement. I am also looking at some options other than home ownership for a few years down the road. The continuous care models might be an answer and they are expensive to get in and when in. But, lots of conveniences on site and may be better suited to us as we age. I would hate to feel that that would be an ideal solution and where we could be close to our children only to find out we can't afford it.

I think I have always seen the benefits of a bit of delayed gratification. e.g Waited the max to take each pension and my SS.
But I can see the other side of younger retirees wanting to travel more and live it up while they are in their healthier and more energetic stage. They are hopefully willing to risk a bit of a rough landing later in retirement. I like things a bit smoother.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by visualguy » Thu Oct 25, 2018 3:29 pm

nick evets wrote:
Thu Oct 25, 2018 2:27 pm
The problem I have, is I want a model that reflects health and quality of living, so it's front-loaded and not geared to a conservative start, and then more funds later. I mean, hell, in a male adult's late 70's, you have almost a 50/50 chance of being dead!
I foresee needing a lot of money early (to pay for fun stuff) and a lot of money late (to pay for care). So, a lot of money for the 60s and hopefully early 70s, then not as much money, and then ramping up significantly around the late 70s. Thinking about retirement around 60 to have enough time to have some fun... Retiring earlier would prevent me from having those resources, and I don't really need THAT many years of retirement.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by willthrill81 » Thu Oct 25, 2018 3:34 pm

nick evets wrote:
Thu Oct 25, 2018 2:27 pm
Dandy wrote:
Tue Oct 23, 2018 8:23 am

My spending plan is to gradually increase our standard of living from good to better than good. I don't want it to be great, good and then barely acceptable.

Saving and living below your means is a Boglehead philosophy. Then you get to retirement of 30 years or more and often the conversation is what is the maximum "safe" that I can withdraw? Not what is a decent "safe" initial withdrawal rate and how/when do I modify it? And I mean modify it up or down.
The problem I have, is I want a model that reflects health and quality of living, so it's front-loaded and not geared to a conservative start, and then more funds later. I mean, hell, in a male adult's late 70's, you have almost a 50/50 chance of being dead!
I didn't provide such a model, but I did outline a withdrawal strategy earlier this year that was intended to reflect the fact that most retirees' spend more in their younger years than they do in their later years. Most withdrawal strategies are geared in opposition to this (i.e. smaller withdrawals at first then larger withdrawals later) as a means of addressing sequence of returns risk and/or longevity risk. The strategy I outlined hit on all of it, including higher spending when younger.
“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: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by spreadsheetguy » Mon Nov 05, 2018 11:12 am

I feel like 4% or 3.5% is a perfectly fine level. Flexibility is the key - 90+% of the time you will not need to be flexible and reduce spending. But in a few rare circumstances you’ll have to reduce spending and rely on social security. The more buffet you have in your spending (ie not spending 25k/yr) the better off you’ll be.

Anyway the point of the calculator is that we’ll take the typical failure rate that’s calculated by this and other calculators and reduce that by the probability of dying before running out of money. Alot has to go right (and wrong) for you to actually run out of money (esp if you have SS and have spending flexibility).

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by Kompass » Thu Nov 08, 2018 12:05 pm

Day9 wrote:
Sat Sep 29, 2018 1:48 pm
Could we estimate lower expected future returns by simply increasing the "Investment Fees" field by the amount that expected returns will be lower going forward?

Plugged in OP's numbers:
Image

Again but with 2% investment fees, adjusting for 2 percentage point decrease in expected return going forward:
Image
The charts shown in this post show "Extra Income" and then fields for start and end dates. When I use it on Safari it only shows fields for extra income with no start or end fields. This is very relevant to my situation and I would love to use it. Any ideas on what to do to have access to these other tools?
The large print giveth and the fine print taketh away.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by PaulF » Thu Nov 08, 2018 2:36 pm

Kompass wrote:
Thu Nov 08, 2018 12:05 pm
The charts shown in this post show "Extra Income" and then fields for start and end dates. When I use it on Safari it only shows fields for extra income with no start or end fields. This is very relevant to my situation and I would love to use it. Any ideas on what to do to have access to these other tools?
On my Safari (and Firefox), the fields appear to be "wrapped." That is, the fields fo extra income and expense are on the right-hand side of the window, and then the corresponding start/end fields are on the next line, on the left-hand side. So, they don't appear to be related to the income fields, but they work.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by Kompass » Thu Nov 08, 2018 3:39 pm

Many thanks!

I knew I was looking at something wrong. I was using those fields inappropriately and had everything skewed, now I feel much better and can live about ten years longer.

:sharebeer
The large print giveth and the fine print taketh away.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by Will do good » Thu Nov 08, 2018 6:36 pm

MnD wrote:
Sat Sep 29, 2018 12:42 pm
Ron Scott wrote:
Sat Sep 29, 2018 8:05 am
Watty wrote:
Sat Sep 29, 2018 5:50 am
Ron Scott wrote:
Fri Sep 28, 2018 11:04 pm
I have yet to hear a logical argument for the validity of using historical data, much of it from 20th century America, to predict a specific 30-year retirement period in the future.

People like me believe “the 4% rule” might actually work out well...or it might not.
The biggest problem with the “the 4% rule” is that it really doesn't exist.

What there is are some academic studies that have shown what would have worked in the past which a very specific set of assumptions that are not meant to model how people in retirement actually spend their money.

No one has constant expenses and everyone will alter their spending based on how their investments are doing.

When looking at the various models the results are often stated in the odds of success, failure or even broke like this model. For most people "failure" would mean something like having to reduce their spending by 20% when they are in their 70 which might not be fun but would usually be a long way from being broke, homeless and hungry.

I would suspect that a lot of people that do end up broke in retirement were either clearly not financially prepared for it under almost any assumptions, or they had an unfortunate situation with extremely high expenses.
The financial experience of retirees can be dynamic and complex.

I think it’s safe to say the majority of Americans retiring today are not financially prepared for it because they did not or could not save enough. I feel for these people.

There are others who have the means and the desire to adequately prepare and are looking for guidance on how much to save before retiring. Many are willing to delay retirement and continue working to improve their chances of success. To this group I say, do not trust the simplistic output of online retirement planning tools like the one the OP points to, Firecalc, and the various Monte Carlo sims that all crunch the same old US historical datasets. These tools require an unwarranted leap of faith that the past can predict the future and logic does not back that assumption.

The safe thing for these people to do is to admit uncertainty and overcompensate before retirement by planning to save more and spend less. If the future turns out to be like the past they will have worked a bit more and have more money than they need. If the future is not as rosy as the past they will have a cushion. It’s as close to a win-win you will get.

We do not get a lot of do-overs in retirement, so better safe than sorry...
The past includes things like the Great Depression, world wars, polio, urban riots, global flu pandemics, 40-year runs of interest rate increases, stagflation, multiple ~50% market declines, presidential assassinations and resignations - you get the picture. This idea that the past just too rosy so we need some ultra-low SWR beyond what history suggests that might add a decade or more of work to achieve, or mean no retirement given that people die in their 50's, 60's and 70's all the time, just doesn't hold water. While the large majority of US households are woefully underfunded for retirement, many Bogleheads will derive only a small portion of the potential utility of their retirement savings. For many the game seems to be money collecting or hoarding versus a plan to save and invest to provide a comfortable retirement income early enough in life that one can still enjoy it.
+1, but some people worries and rather work until it's 100% safe or die working.

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by spreadsheetguy » Fri Nov 09, 2018 11:43 am

Kompass wrote:
Thu Nov 08, 2018 3:39 pm
Many thanks!

I knew I was looking at something wrong. I was using those fields inappropriately and had everything skewed, now I feel much better and can live about ten years longer.

:sharebeer
That confused me too. Thanks PaulF!

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Re: Rich, Broke or Dead: Visualizing probabilities of outcomes in early retirement

Post by inbox788 » Fri Nov 09, 2018 6:25 pm

Sandtrap wrote:
Fri Sep 28, 2018 5:48 pm
Very interesting.
Thanks for posting.
According to the chart and projection, the odds are 100% that I'm going to be dead before running out of money :oops:
Yes, interesting visual. I'd rather not worry about death, since that's a certainty. I care more about being broke before I'm dead.

You can UNCHECK the DEATH BUTTON!

According to this model, at age 92.5 years, I have a 50/50 chance of being broke if I'm not dead.

https://engaging-data.com/will-money-la ... 1&show5x=1

If you're not going broke by age [insert target age here], you're not spending enough each year, or blowing a large chunk your savings all at once.

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