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Old 04-17-2016, 10:07 PM
 
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Here is a different point of view:

AAII: The American Association of Individual Investors
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Old 04-18-2016, 02:23 AM
 
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Quote:
Originally Posted by ReachTheBeach View Post
My FA told me that some of the tools that his firm (Janney) and others use are often restricted to clients only not because they are trying to use them as bait or an advertisment but because they do scare people. They aren't trying to convince you to invest more by pretending what you have isn't enough, just telling you what the odds are that it is or isn't enough based on historical data. And a good FA will encourage you to think about prioritizing planned expenses if you need to lower your draw to increase the odds of success, not just pound you to invest more if you tell him that isn't likely to happen.
key word is they are marketing tools not actual retirement calculators . there is a difference .

there are loads of marketing tool toys that will pull numbers out of their butt based on pretty much nothing other then to get you to save but that is not an actual retirement calculator.

you see these toys every where . throw in your guess at an average return per year , a guess at inflation and a spending amount and it acts like a reverse amortization calculator . it never ever spends down in a negative year and every year has the same lovely average return .

as moshe milevsky showed us that average return can skew results so badly when there is no sequence risk that your money can either run out up to 15 years earlier or last 15 years longer in reality

Last edited by mathjak107; 04-18-2016 at 03:23 AM..
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Old 04-18-2016, 02:31 AM
 
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Originally Posted by jlawrence01 View Post
moshe milevsky , who just happens to be the one interviewed in your link is a brilliant researcher . his paper retirement ruin and the sequencing of returns is what modern retirement planning is based on .

it his work that demonstrated just why those toy calculators like the market watch one are useless and why average returns do not work when spending town .

every retirement calculator that is a true calculator is based on moshe's work in sequence risk .

that is why i say there are marketing tools and then their are actual calculators that you can't fudge because a safe withdrawal rate is very specific about the criteria that is used .

just think of it like credit scores , there are very specific fico scores and then there are ones created using different criteria which can be anything .

if i was a credit repair firm i would create my own where no matter what, my scoring would give you a lower score so i could help you repair it .

yeah it is a credit score but it isn't a fico score .

a calculator that determines safe withdrawal rates has to be based on worst case scenario's and they are the same scenario's no matter how you slice it . there is specific math and data that it has to follow so to claim i t has something to do with fudging the amount that is nonesense because it does not give you an amount you need , only a success rate of at least 90% using what you have..

the problem is not the calculators , it is people .

the public has very little knowledge about financial things and even less knowledge when it comes to retirement planning and most do not want to take the time to get even a basic understanding of things .

they make it easy to get taken or pushed to believe myths and marketing gimmicks .

if a tool is being used , shouldn't you at least understand what it is showing you ? if you were buying a refrigerator or car you surely would know all about it and do your homework .

the internet is a great source when you don't know .

you can just google best retirement calculators and see the reviews on them and what they are based on .

always at the top and easy to use is firecalc .

remember a retirement safe withdrawal rate calculator never tells you that you need x-amount in dollars to retire . it only works with what you have and your own allocations.

all you get is a success rate based on your money , your draw rate and how many times you would have run out of money already in the past . if you didn't survive at least 90% of the already existing conditions then the plan you have is considered dicey and the rate of failure already to high .

you can cut spending and draw make that plan passable the only question is how much can you cut .

a true retirement calculator tells you what you need to reduce spending to . it does not tell you how much more you need to invest with their firm .

Last edited by mathjak107; 04-18-2016 at 03:38 AM..
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Old 04-18-2016, 07:02 AM
 
Location: NC Piedmont
3,911 posts, read 2,875,565 times
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The little bit of spin that my FA (or the tool he used) put in was that we got the overall assessment and a graph showing all the scenarios but they were color coded based on where they think things are headed so I had an assessment with all scenarios equal and one they thought was more likely which was slightly rosier (but only very slightly). This was a couple of years ago. It was all one big overview from that point forward, so it was an estimate of my overall net worth at retirement as well as a retirement income stream analysis. I will get it done again at least a couple of times before retirement. It is a more involved process than just the income stream calculator; we go over everything and it will get adjusted based on employment changes, spending we do for kids' college, etc.
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Old 04-18-2016, 07:05 AM
 
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rosier is never the picture you want to pay attention to . rosier should always be the upside surprise and not the plan . that is why worst case scenario's are used as a starting point in prudent planning .

you can change the default on the fidelity rip planner from worst to average , but your failure rate goes up to 50%. the numbers look great if you are average , but will you be average ?

spending cuts are usually far more life changing then greater gains turn out to be .
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Old 04-18-2016, 07:20 AM
 
Location: NC Piedmont
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Originally Posted by mathjak107 View Post
rosier is never the picture you want to pay attention to . rosier should always be the upside surprise and not the plan . that is why worst case scenario's are used as a starting point in prudent planning
It wasn't much different. I think raw numbers said 79% and theirs was 85% for an income stream that is well above what I think I need. That does remind me that I guess there was a little push at that meeting to consider whether I can really cut spending that much when I retire. I think it is likely I will have to before retirement, depending on when my current contract ends. In an odd way, it would probably be good to have to live a year or two on less before I retire and maybe retire at 64 instead of 63.5.
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Old 04-18-2016, 07:25 AM
 
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you can always adjust later on if things are going better . that is why i don't think anyone actually has a fixed rate of withdrawal .

we tend to mentally want to cut back in down years and spend more when markets are doing well , it is just human nature . which is why i use a variable draw rate based on each year . but my opening amount was based on firecalc and fidelity's rip . those set my goal posts for opening day . .

Last edited by mathjak107; 04-18-2016 at 07:42 AM..
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Old 04-18-2016, 08:34 AM
 
Location: NC Piedmont
3,911 posts, read 2,875,565 times
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I just saw yet another "are you saving enough?" article with a chart that uses your current income as basis. Of course it says I am not but if I look at what I will likely make if this contract ends I am fine. It's from NBC. Note that I think it is dramatically oversimplifying and I am not using it for anything but an example of how those articles really make me scratch my head. Why is the multiplier greater if you make more money?

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Old 04-18-2016, 10:35 AM
 
Location: Haiku
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Good retirement planning starts with a good retirement budget. Unlike market returns, your budget is under your control.

We logged every expenditure for over a year and then divided that into discretionary and non-discretionary spending. Obviously the non-discretionary part is our bottom-line budget. The difference is pretty big.

Non-discretionary budget = 2.3% of our assets
Total (including discretionary spending) budget = 3.4% of assets.

Both are below the so-called 4% SWR (which I don't trust), but the non-discretionary is way below it. This gives us a lot of wiggle room.
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Old 04-18-2016, 10:48 AM
 
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Another useful thing for a RIP is to model different withdrawal methods. Most RIP tools assume a constant withdrawal (adjusted for inflation) but there are more sophisticated schemes that give better results, like variable percentage and glide path. I ended up writing my own RIP tool just so I could test different withdrawal schemes. It is interesting stuff. (We follow Guyton-Klinger withdrawal method)


What is "RIP"? Internet does not return anything useful for this abbreviation...
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