What are you talking about? If he has $2MM now at 58 and decides to retire, how will he still have $2MM to draw $100k off of 22 years later at age 80 without a plan for his money to grow beyond annual cost of living increases?
Can I retire?
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Last: 2 yr ago by insulator_king
"For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%."BDJ_AG said:
https://firecalc.com/
you can plug in your own numbers and assumptions...
Currently packing my stuff up at the office. Just told the boss to FO
Retire and get a part time gig as a Walmart greeter. Or Lowe's.
I was addressing your he can't get a job at 80 comment specifically, but you knew that. That's why my post suggesting getting a financial and tax advisor to get a plan.Bizarro Jerry said:Telling him he needs a retirement income plan before he retires is not fear mongering at all and I'm not sure how anyone could view it as such.AgLA06 said:He's 58. Stop fear mongering.Bizarro Jerry said:Sorry, but you aren't finding a part time job as an 80 year old man even if you're able to work. That's the absolute last thing you'd want to do anyways.AgLA06 said:
I look at these threads and can't help realize how my opinion has changed over the years.
I've watched too many people work too hard or determined to hit some theoretical number only to never have a chance to retire and live before we covered them in dirt.
Stop over thinking this. You cashed out and are in a great spot. Get with a financial / tax planner and retire today and enjoy life.
Find a part time job and volunteer if you can't sleep at night, but stop letting fear of the unknown factor in. The only certainty is we die. You can always consult or get a part time job down the road if you need it. Or God forbid buy a used car instead of new.
Sounds like OP really needs a retirement income plan that he can count on for the rest of his life, even if he lives to 90. It all depends on how much he wants to spend on an annual basis, whether he has LTC insurance or not, and whether he has estate or legacy goals beyond a comfortable retirement.
I can also promise one thing, OP will not have enough money for a two person 30 year retirement by keeping it all in cash or fixed income. He needs a comprehensive plan to follow religiously each and every year.
He should know long before 22 years from now (if he's still alive) if needs to consider what to do with his principal that isn't being used.
The 4% that's been discussed specifically in detail throughout this plan assumes you're drawing on interest and not principal. I'm not sure how you would think otherwise with the numbers used.
See my other post.Bizarro Jerry said:
What are you talking about? If he has $2MM now at 58 and decides to retire, how will he still have $2MM to draw $100k off of 22 years later at age 80 without a plan for his money to grow beyond annual cost of living increases?
I believe this is incorrect. The Monte Carlo simulations that I've seen always refer to depleting available funds, which includes principal. The purpose is to see if your money will last for your lifetime, not to ensure some sort of residual value.AgLA06 said:
I was addressing your he can't get a job at 80 comment specifically, but you knew that. That's why my post suggesting getting a financial and tax advisor to get a plan.
The 4% that's been discussed specifically in detail throughout this plan assumes you're drawing on interest and not principal. I'm not sure how you would think otherwise with the numbers used.
BenTheGoodAg said:The 4% rule is supposed to account for inflation, especially from a macro-view. If you're taking out 4% and the market makes 8%, then your account grows 4%, allowing for inflation. Next year you can take out $100k, then $104k the next, and so on. In 20 years, you could take $210k.up-n-aTm said:
I question whether the 4% rule is safe for age 58 retirement. I'm mostly concerned with inflation. We could make $96k per year work currently, but that may not apply in 20 years.
Average annual inflation 1960-2022: 3.8% per year
Average S&P 500 return, 1960-2022: 10.02% per year
Based on these numbers, you could have lived off of 6.22% per year, so 4% is supposed to be conservative. There's plenty of details you can pick at, but that's the theory anyway. A little skepticism isn't a bad thing for a decision like this.
Everything I've read in regards to the 4% rule is along the lines of what I bleed maroon is saying. You're depleting funds, which is why they use it as a rule to retire at 65. The percentage should be lower if retiring earlier.
The 4% rule is a rule of thumb. A long-term 10% average is historically accurate, but it rarely is ever 10% exactly. Sequence of returns are EXCEEDINGLY important for retired clients living off assets, even more so for early retirees. This is an easier conversation because of what we saw last year. Portfolios fell across the board. For our retired clients, that did not change the fact that they still needed to keep the lights on, food on the table, etc. They still needed their "4%" but their portfolios saw a decline. The 4% rule is great for giving you an idea of income based on assets quickly, but I would be wary about using that as a strategy for living on your assets for about as long as you've been saving them.
If the average return is (1993-2022) 7.52% over the last 30 years, that wouldn't appear to be the case.htxag09 said:
Everything I've read in regards to the 4% rule is along the lines of what I bleed maroon is saying. You're depleting funds, which is why they use it as a rule to retire at 65. The percentage should be lower if retiring earlier.
Unless I'm missing something, that's the point of using 4% to be "conservative". The conservative is in reference to the rate of return.
In the link above that runs the scenarios, plug in a number and show 4% as the take out number each year. The vast majority of the results on the chart are the same amount as the principal or above. The reason it's not 100% success probabilities is because in the last 100 years there's been 30 year periods that haven't made a 4% return. So those years factored show a loss.
It's also not considering other assets such as property or Social Security which will probably be almost half as much again each year.
AgLA06 said:
If the average return is (1993-2022) 7.52% over the last 30 years, that wouldn't appear to be the case.
FWIW, assuming that's S&P 500, that value over that period doesn't account for dividends. If you reinvest the dividends out over that period, the rate is closer to 9.7%.
Also FWIW, The annualized rate of return with reinvested dividends adjusted for inflation over that period is about 7%.
Link
Nope - you are missing something - the point of a monte carlo simulation is to use thousands of scenarios based on real data (called back-testing) to determine how often a given set of assumptions fails to achieve a defined objective. It has nothing to do with either being conservative, or comparing a historical rate of return to a withdrawal rate.Quote:
If the average return is (1993-2022) 7.52% over the last 30 years, that wouldn't appear to be the case.
Unless I'm missing something, that's the point of using 4% to be "conservative". The conservative is in reference to the rate of return.
As I recall, the stated objective for the classic 4% analysis is "DON'T RUN OUT OF MONEY". They could easily add in your PRESERVE PRINCIPAL objective as well, if they wanted, but that is NOT what they solved for. The rates of return used are ACTUAL historical data points, and they run as many scenarios as they can to provide the "failure percentages". You can think of the failure rates as roughly equivalent to a confidence interval, and choose a higher withdrawal rate, if you choose to accept a greater risk of "failure". It makes no value judgment - just provides facts.
The main flaw with it, as I see it, is that they're using only historical returns, and as we all know, the past doesn't necessarily predict the future. We could have a severe negative market event that creates a new worst case scenario, which of course invalidates the whole exercise.
I'm trying to be helpful, here, as I had studied this stuff many years ago.
I'd argue anything over 85% success in Monte Carlo is pretty solid. When you run thousands of simulations, by definition you will will end up many simulations that are extremely unprecedented in the history of the country... imagine the great depression, followed by 9/11, then the housing collapse and then the dot com collapse all over a 5 year period.
If we really end up in a sequence like that once you start retirement are you going to stick your head in the sand and tell yourself "well I made a plan 5 years ago that said I shouldn't run out of money so I'll just keep spending like the world isn't on fire and make no adjustments"?
On the flip side are going to work until you are 70 just so you are safe in case we have a sequence of events like that?
If we really end up in a sequence like that once you start retirement are you going to stick your head in the sand and tell yourself "well I made a plan 5 years ago that said I shouldn't run out of money so I'll just keep spending like the world isn't on fire and make no adjustments"?
On the flip side are going to work until you are 70 just so you are safe in case we have a sequence of events like that?
Like most things, I'd say the truth is in the middle....hypeiv said:
I'd argue anything over 85% success in Monte Carlo is pretty solid. When you run thousands of simulations, by definition you will will end up many simulations that are extremely unprecedented in the history of the country... imagine the great depression, followed by 9/11, then the housing collapse and then the dot com collapse all over a 5 year period.
If we really end up in a sequence like that once you start retirement are you going to stick your head in the sand and tell yourself "well I made a plan 5 years that said I shouldn't run out of money so I'll just keep spending like the world isn't on fire and make no adjustments"?
On the flip side are going to work until you are 70 just so you are safe in case we have a sequence of events like that?
If you truly know your costs, including insurance, and have an 85% success rate, I 100% agree with you. But if you just take your current costs, assume it'll be the same or less, and have an 85% success rate, then you may be in for an unpleasant surprise....
Obviously everyone is different. And I'll likely change my mindset in 20 years, but generally if I'm not working I'm spending money. Travelling, visiting family, spoiling grandkids, increased time on expensive hobbies, etc. are all things I anticipate in retirement.
Good points above. I think the reason people have tended toward the higher end of the success rates is that both re-entering the workplace and markedly reducing expenses are a lot tougher, if not impossible, once you reach advanced years.
Personally, I'd probably choose something like 80% success rate, knowing I can adjust expenses downward from my objectively higher-than-average run rate if absolutely needed, and I could probably be a Wal Mart greeter or a call center phone rep up if I had to until I'm on my deathbed. And if I am truly incapacitated with dementia or something, I honestly don't think I would mind being on whatever the welfare state offers me.
Personally, I'd probably choose something like 80% success rate, knowing I can adjust expenses downward from my objectively higher-than-average run rate if absolutely needed, and I could probably be a Wal Mart greeter or a call center phone rep up if I had to until I'm on my deathbed. And if I am truly incapacitated with dementia or something, I honestly don't think I would mind being on whatever the welfare state offers me.
One of the best things folks can do is work out a very thorough, all-in budget for your spending so you know exactly what your needs will be. Make sure you factor in major one-time expenses that happen periodically. Identifying your needs there with some certainty will then help you develop much more realistic depletion scenarios from it, identify just how much you can "belt tighten", and identify just how impactful some sort of part time retiree job/consulting could be.
With 2.4 million at 58 plus 7K/ month coming in 9 years if he can't make that work I got no shot at retirement.
OP,
Im going to the best advice nobody has given you.
Get off TexAgs and go see a fee only CFP.
You're welcome.
Im going to the best advice nobody has given you.
Get off TexAgs and go see a fee only CFP.
You're welcome.
There should be a straightforward answer if you tell us what your all inclusive expenses are
ToddyHill said:Quote:
What's your plan for health insurance between now and age 65?
This is a BIG issue.
I'm about to retire (I'm 66). Fortunately, I have Medicare. My wife is 3.5 years from Medicare so we're looking on the open market for insurance. Best we can find right now is a high deductible policy for about $1000 per month.
The thing about Obamacare...if you make decent money there are no subsidies available.
Good luck.
Toddy,
I have access to a health policy that might be a good fit for your wife at half the cost. Email me at keith@centexins.com if you'd like to discuss.
what difference does it make if you are living off gains only?htxag09 said:
But the 4% rule was also mainly designed around a more traditional retirement age near 65.
You could do it at age 25 theoretically, or any age. The idea is you aren't touching your principal.
I said the same thing. I was told I was wrong, but nothing has been shown as to why.62strat said:what difference does it make if you are living off gains only?htxag09 said:
But the 4% rule was also mainly designed around a more traditional retirement age near 65.
You could do it at age 25 theoretically, or any age. The idea is you aren't touching your principal.
Let me explain. It's not right or wrong, it's how the original concept was designed. You can obviously construct a model with whatever assumptions you want.62strat said:what difference does it make if you are living off gains only?htxag09 said:
But the 4% rule was also mainly designed around a more traditional retirement age near 65.
You could do it at age 25 theoretically, or any age. The idea is you aren't touching your principal.
1. It is not living off gains only - it's ensuring you don't deplete your money before you die.
2. The study specifically is for retirees at 65 years old, using standard mortality data, therefore is not useful for any other age. You can, of course, do a study for a 25 year old, but that's not what this is.
3. As in item #1, you absolutely are including your principal.
Seen several anecdotes here about people saving money and waiting to retire only to retire and die shortly after.
Would be interested to hear stories of people that saved regularly and retired around normal retirement age but ran out of money or outlived it? I'm not talking about people that didn't save and had trouble but regular savers. All these calculations are for not running out of money so is that happening all the time?
Would be interested to hear stories of people that saved regularly and retired around normal retirement age but ran out of money or outlived it? I'm not talking about people that didn't save and had trouble but regular savers. All these calculations are for not running out of money so is that happening all the time?
Images are worth a 1000 words. I edited multiple times going back and forth from my phone to computer to get a coherent thought and graphics.
Here's the model for the OP's scenario (starting draw of $94K [4%} on $2.4MM).
Of the 152 models done (every starting point to get returns since 1871) only 4 would mean he ran out of money WITHOUT changing anything. The 4 worst snap shots in return history of the stock exchange. There's just as many models that show his investment would instead be worth more than $11MM.
Approximately 12 (one or two cover each other up) require dipping into the principal WITHOUT changing anything. More models show he would instead have more than $8MM instead.
136 of the 152 models show him being able to draw 4% AND increase the draw for inflation every year and his principal amount growing over 30 years.
As Hypeiv pointed out well on page 1, if you change anything in regarding the 10% chance there is a dip in your principal, it adjusted the model. Could be expenses or drawing less.
This also doesn't account for his additional SS draw which would mean he could replace 85% of his 4% draw for a couple years with the SS money and not draw less annually.
I can't see any justification for not retiring and just casually monitoring and adjusting accordingly unless he just doesn't want to or you KNOW the market will crass the second he retires. It's 90% likely he'll be drawing $180k+ a year once SS kicks in and still having his invested principal or more.
I tried to mark it up on my phone. Black line is holding principal amount. Red line is $0 dollars.
Here's the model for the OP's scenario (starting draw of $94K [4%} on $2.4MM).
Of the 152 models done (every starting point to get returns since 1871) only 4 would mean he ran out of money WITHOUT changing anything. The 4 worst snap shots in return history of the stock exchange. There's just as many models that show his investment would instead be worth more than $11MM.
Approximately 12 (one or two cover each other up) require dipping into the principal WITHOUT changing anything. More models show he would instead have more than $8MM instead.
136 of the 152 models show him being able to draw 4% AND increase the draw for inflation every year and his principal amount growing over 30 years.
As Hypeiv pointed out well on page 1, if you change anything in regarding the 10% chance there is a dip in your principal, it adjusted the model. Could be expenses or drawing less.
This also doesn't account for his additional SS draw which would mean he could replace 85% of his 4% draw for a couple years with the SS money and not draw less annually.
I can't see any justification for not retiring and just casually monitoring and adjusting accordingly unless he just doesn't want to or you KNOW the market will crass the second he retires. It's 90% likely he'll be drawing $180k+ a year once SS kicks in and still having his invested principal or more.
I tried to mark it up on my phone. Black line is holding principal amount. Red line is $0 dollars.
What you are talking about is withdrawing 4% of your nest egg every year, so it lasts exactly 25 years (65+25 = 90). But this assumes you have your nest egg as pile of cash under your mattress, which is what absolutely NO ONE does.I bleed maroon said:Let me explain. It's not right or wrong, it's how the original concept was designed. You can obviously construct a model with whatever assumptions you want.62strat said:what difference does it make if you are living off gains only?htxag09 said:
But the 4% rule was also mainly designed around a more traditional retirement age near 65.
You could do it at age 25 theoretically, or any age. The idea is you aren't touching your principal.
1. It is not living off gains only - it's ensuring you don't deplete your money before you die.
2. The study specifically is for retirees at 65 years old, using standard mortality data, therefore is not useful for any other age. You can, of course, do a study for a 25 year old, but that's not what this is.
3. As in item #1, you absolutely are including your principal.
Realistically, your nest egg is invested. So if your spend rate is $80k a year, and you have $2m in liquid assets/cash, you could hypothetically have it invested, neither too aggressively nor too conservatively, and make 4% return, which is $80k a year, and so you are never touching your principal/$2m. You are living off gains only. You get $80k a year, for your entire life, no matter your age.
It's the rule of 25X (inverse of 4%)
I have a few sets of aunts/uncles and parents who retired in the 2010s.. all who did well and saved a lot. UP until maybe the last year or so, none of them were spending their money fast enough to outpace the growth. They had more money in Jan 2020 then when they retired 5,6,7,8 years before then.Quote:
Would be interested to hear stories of people that saved regularly and retired around normal retirement age but ran out of money or outlived it
This is obviously dependent on the market when you retire. If you could time one thing, retire at the beginning of a nice long bull run.
AgLA06 said:
Images are worth a 1000 words. I edited multiple times going back and forth from my phone to computer to get a coherent thought and graphics.
Here's the model for the OP's scenario (starting draw of $94K [4%} on $2.4MM).
Of the 152 models done (every starting point to get returns since 1871) only 4 would mean he ran out of money WITHOUT changing anything. The 4 worst snap shots in return history of the stock exchange. There's just as many models that show his investment would instead be worth more than $11MM.
Approximately 12 (one or two cover each other up) require dipping into the principal WITHOUT changing anything. More models show he would instead have more than $8MM instead.
136 of the 152 models show him being able to draw 4% AND increase the draw for inflation every year and his principal amount growing over 30 years.
As Hypeiv pointed out well on page 1, if you change anything in regarding the 10% chance there is a dip in your principal, it adjusted the model. Could be expenses or drawing less.
This also doesn't account for his additional SS draw which would mean he could replace 85% of his 4% draw for a couple years with the SS money and not draw less annually.
I can't see any justification for not retiring and just casually monitoring and adjusting accordingly unless he just doesn't want to or you KNOW the market will crass the second he retires. It's 90% likely he'll be drawing $180k+ a year once SS kicks in and still having his invested principal or more.
I tried to mark it up on my phone. Black line is holding principal amount. Red line is $0 dollars.
OP, sounds like you should meet with a financial advisor and get your investments in order, and then retire. If you want to do consulting work for a few then by all means. Best wishes!
Why do you keep doubling down on this? And trying to put words in my mouth? That's not at all what I'm talking about. I am talking about the classic "4% Rule", also known as Bergen's Law, the Trinity Study, or the Ibbotson analysis. Read about it yourself if you'd like to learn more. They all assume about 50% stocks/50% bonds, and their stated purpose is to define a conservative approach where a retiree doesn't run out of money before they die. END OF STORY.62strat said:What you are talking about is withdrawing 4% of your nest egg every year, so it lasts exactly 25 years (65+25 = 90). But this assumes you have your nest egg as pile of cash under your mattress, which is what absolutely NO ONE does.I bleed maroon said:Let me explain. It's not right or wrong, it's how the original concept was designed. You can obviously construct a model with whatever assumptions you want.62strat said:what difference does it make if you are living off gains only?htxag09 said:
But the 4% rule was also mainly designed around a more traditional retirement age near 65.
You could do it at age 25 theoretically, or any age. The idea is you aren't touching your principal.
1. It is not living off gains only - it's ensuring you don't deplete your money before you die.
2. The study specifically is for retirees at 65 years old, using standard mortality data, therefore is not useful for any other age. You can, of course, do a study for a 25 year old, but that's not what this is.
3. As in item #1, you absolutely are including your principal.
Realistically, your nest egg is invested. So if your spend rate is $80k a year, and you have $2m in liquid assets/cash, you could hypothetically have it invested, neither too aggressively nor too conservatively, and make 4% return, which is $80k a year, and so you are never touching your principal/$2m. You are living off gains only. You get $80k a year, for your entire life, no matter your age.
It's the rule of 25X (inverse of 4%)
Is is perfect? Far from it. But, the fact is, that's what it is. You can have an opinion, but what you can't argue is that this is factually what their (admittedly imperfect) study's parameters involve. It's not a one-size-fits-all retirement plan, and was never intended to be. Feel free to provide your opinions of how it could be better, but quit stating it's something it isn't, until you educate yourself.
This might be helpful - the updated Trinity Study for those who wish to read it instead of arguing past each other.
Updated Trinity Study
Updated Trinity Study
you can if you live a normal life and don't do anything dumb with your money.up-n-aTm said:
Here's my situation:
58 year old couple, just sold our business. Have $1.3 million in cash and $1.1 million in a 2030 target fund. Only debt is a $130,000 home equity loan at 2.3% interest. SS at age 67 will be about $7k per month, if it's still available. Kids are thru school so the only future major expenses are unplanned at this time.
Can I retire? What should I do to maximize income off of the existing assets? Really don't want to work any longer but worried about out living our money.
Thanks!
This thread has been quite informative. I want to express my gratitude to all who have contributed. Seems to be a situation with realistic numbers that many can relate to.
I do not have an actual number for annual expenses yet as I am just settling in from the sell. I plan to put those numbers together and meet with wealth management professionals at the bank that is handling these funds.
I'll update as I get some specifics. Again- thanks everyone!
I do not have an actual number for annual expenses yet as I am just settling in from the sell. I plan to put those numbers together and meet with wealth management professionals at the bank that is handling these funds.
I'll update as I get some specifics. Again- thanks everyone!
EXACTLY THISAgOutsideAustin said:
With 2.4 million at 58 plus 7K/ month coming in 9 years if he can't make that work I got no shot at retirement.
I watch a ton of Youtube retirement planning shows (I'm 52) and the average American has very little in savings even into their 50s and 60s.
to already be a multi-millionaire puts you in the top 4-6% of the entire world population.
if you can't retire on that- I don't know what to tell you.
Of those with retirement savings, here are the average savings statistics:
A huge percentage of Americans HAVE NO RETIREMENT SAVINGS AT ALL
The average household has $65,000 saved for retirement.
The average 30 year old has $45,000 saved.
The average 40 year old has $63,000 saved.
The average 50 year old has $117,000 saved.
The average 60 year old has $172,000 saved.
(Source: https://www.creditdonkey.com/average-savings-by-age.html)
I look at these numbers and they don't seem real. How will people make it? That's my earlier point for those that have saved regularly and have a decent amount saved ( more than all these averages) are they really running out of or outliving their money ? I saw something yesterday that said only 10% of people retire with at least one million and we are " what if" and "yeah but" the OP's 2.4 million saved at 58 ?
Eh, I'd wager a lot is perspective and different situations.
Some families/cultures take care of their elders. Some have zero plans of fully retiring, won't cut back until SS.
And being able to or not being able to retire on $2.4mm will differ for every single individual. If the OP has $2.4mm that he's been able to save while living off a $100k/year salary they'd have a quite different retirement outlook than if they've only been able to save $2.4mm w/ a $500k salary because they have an extremely extravagant lifestyle....
Some families/cultures take care of their elders. Some have zero plans of fully retiring, won't cut back until SS.
And being able to or not being able to retire on $2.4mm will differ for every single individual. If the OP has $2.4mm that he's been able to save while living off a $100k/year salary they'd have a quite different retirement outlook than if they've only been able to save $2.4mm w/ a $500k salary because they have an extremely extravagant lifestyle....
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