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i like rip and firecalc. but remember they are only guides for getting to the gate . they reflect noooooo personal spending patterns at all.
any human inter action was removed from those scenario's. they also do not reflect such low interest rates and high stock valuations together in historical data.
as humans we may or may not need to adjust for inflation yearly and that can have a big impact on results.
the more discretionary spending you have in the budget the less inflation may effect you as you age since what you stop buying and doing may cover the inflation in the things you do buy.
that has a big impact on amounts needed as well as withdrawal rates. the big wild card today is health care costs and the way they have been rising inflation adjusting may still be needed even as you age and cut back on other spending.
but these calculators are all we really have to guess by so we have to take the good with the bad.
Last edited by mathjak107; 05-25-2015 at 02:48 AM..
I like the Fidelity calculator and have an electronic print out that is my guide to spending. I like the Fidelity calculator because it seems to consider all of the important variables, but mainly because I liked the format of the output. When it comes to actual SWA determinations, I think the 4% rule is as good as any.
The 4% rule and all of the calculators are just guesses based on past history. None of them will tell you what you need to spend, what will happen with inflation and what will happen that could alter the size of your portfolio and the returns. The first few years of retirement are by far the most important in shaping your future ability to spend. I have been fortunate that my first 4 years in retirement have been good. Even so I have been conservative in spending and although I am well ahead of my Fidelity income tables, I plan to remain conservative and spend less than 4%. Personally I think conditions are also good for someone starting retirement now. We have an economy that is in midcycle and recovering. Corporate profits and stock prices are very likely to continue to grow. Inflation is low and looks like it will remain that way for a number of years. It is pretty easy to out earn inflation by a couple of percent which is all that is required to maintain the 4% rule.
A good friend of mine, who is 6-7 years older, recently asked me how much we are living on in retirement. He is wanting to retire and wanted to compare his pension/SS and what we are living on to determine if he could retire too. I guess he felt that our lifestyle is similar to what he hopes for in retirement. I thought that was so odd because his situation is entirely different, although his income would be similar to ours. We have completely different personal styles and his wife is not what I would call a "help" in keeping their expenses down.
We have had so many of these "Do we have enough to retire" threads. Every case is so different it's impossible to use the example of others to determine your own needs. I think of an example that one person said their entire monthly food budget was less than $300. Other people spend that in a week, what with dining out, take out, etc. A neighbor of ours says his electric bill is $300-400/month. We live in a larger home, same neighborhood, and ours is about $65/month, except in extreme weather months. I would be willing to bet that most people COULD live on much less than they think, they just don't want to. We know that we spend more than others on some things, and far less than others on other things. I do know this: ONE'S EXPENSES WILL ALWAYS EXPAND TO CONSUME THE AVAILABLE BUDGET!
A good friend of mine, who is 6-7 years older, recently asked me how much we are living on in retirement. He is wanting to retire and wanted to compare his pension/SS and what we are living on to determine if he could retire too. I guess he felt that our lifestyle is similar to what he hopes for in retirement. I thought that was so odd because his situation is entirely different, although his income would be similar to ours. We have completely different personal styles and his wife is not what I would call a "help" in keeping their expenses down.
We have had so many of these "Do we have enough to retire" threads. Every case is so different it's impossible to use the example of others to determine your own needs. I think of an example that one person said their entire monthly food budget was less than $300. Other people spend that in a week, what with dining out, take out, etc. A neighbor of ours says his electric bill is $300-400/month. We live in a larger home, same neighborhood, and ours is about $65/month, except in extreme weather months. I would be willing to bet that most people COULD live on much less than they think, they just don't want to. We know that we spend more than others on some things, and far less than others on other things. I do know this: ONE'S EXPENSES WILL ALWAYS EXPAND TO CONSUME THE AVAILABLE BUDGET!
Excellent analysis, Shadow. I agree with everything you wrote except a single word - the word "always" in your final sentence. If the available income is not too tight, there are some of us who continue to spend less than the income while still enjoying life and doing things. In my case I dislike waste. For example, when I take road trips in my car - and I have made some epic ones through the USA and Canada, I prefer to stay at Motel 6 and similar, if available. It would be easy to spend twice as much on motels/hotels (and I have done that when no cheaper alternatives were available) but it just seems like such a waste to me that I prefer not to.
Therefore, I cannot claim any iron self-discipline; it's just that my psychological comfort level automatically enforces reasonable (as defined by me) expenditures. An occasional $4 bottle of beer with a meal is splurging, not routine, even though that's a fairly normal price for a beer when eating out.
Call me a cheapskate if you wish, but I don't think I can be the only exception to the "always".
A good friend of mine, who is 6-7 years older, recently asked me how much we are living on in retirement. He is wanting to retire and wanted to compare his pension/SS and what we are living on to determine if he could retire too. I guess he felt that our lifestyle is similar to what he hopes for in retirement. I thought that was so odd because his situation is entirely different, although his income would be similar to ours. We have completely different personal styles and his wife is not what I would call a "help" in keeping their expenses down.
We have had so many of these "Do we have enough to retire" threads. Every case is so different it's impossible to use the example of others to determine your own needs. I think of an example that one person said their entire monthly food budget was less than $300. Other people spend that in a week, what with dining out, take out, etc. A neighbor of ours says his electric bill is $300-400/month. We live in a larger home, same neighborhood, and ours is about $65/month, except in extreme weather months. I would be willing to bet that most people COULD live on much less than they think, they just don't want to. We know that we spend more than others on some things, and far less than others on other things. I do know this: ONE'S EXPENSES WILL ALWAYS EXPAND TO CONSUME THE AVAILABLE BUDGET!
as they say "there is always to much month at the end of the money"
I like the Fidelity calculator and have an electronic print out that is my guide to spending. I like the Fidelity calculator because it seems to consider all of the important variables, but mainly because I liked the format of the output. When it comes to actual SWA determinations, I think the 4% rule is as good as any.
The 4% rule and all of the calculators are just guesses based on past history. None of them will tell you what you need to spend, what will happen with inflation and what will happen that could alter the size of your portfolio and the returns. The first few years of retirement are by far the most important in shaping your future ability to spend. I have been fortunate that my first 4 years in retirement have been good. Even so I have been conservative in spending and although I am well ahead of my Fidelity income tables, I plan to remain conservative and spend less than 4%. Personally I think conditions are also good for someone starting retirement now. We have an economy that is in midcycle and recovering. Corporate profits and stock prices are very likely to continue to grow. Inflation is low and looks like it will remain that way for a number of years. It is pretty easy to out earn inflation by a couple of percent which is all that is required to maintain the 4% rule.
while no calculator can guess the future they can tell you what failed in the past and that is where their strength lies.
it isn't in the events that happened or the returns of the markets as they unfolded. it is in identifying the math behind the failures.
it is simply mathematics. it does not matter if 6+4=10 or 8+2=10 or any of the other combinations that can get to the same number. all tht matters is we are at 10.
the math is such that by identifying the worst scenarios with the calculators , researchers were able to identify the the common denominators to those failed time frames and translate them to useful numbers.
the 4% safe withdrawal rate can mathematically survive if you have at least a 2% average real return over the first 15 years of a 30 year retirement with no spending cuts . .
what those real returns are made up of doesn't matter all that matters is the ending total.
that is an important guide . if you are ten or 15 years in to your retirement and are running below a 2% real return average you better make some spending cuts.
the y2k retiree has still not gotten 2% as an average real return with a 50/50 mix or higher.
so the numbers say 4% as a safe withdrawal rate wil likely fail so while there is still time you better adjust spending down.
there is no need for predicting the future because we now know 4% inflation adjusted can't survive unless we see that 2% real return our first 15 years ..
Last edited by mathjak107; 05-25-2015 at 11:54 AM..
Call me a cheapskate if you wish, but I don't think I can be the only exception to the "always".
Consider it amended to "usually". I will grant that there are definitely cheapskates who may still have some money left at the end of the month...I married one! Heck I think I might be one, but I consider that a choice we make, not a necessity. I just know that if I had 50% less income than I had now, we'd survive just fine, but our entertainment expenses and home projects "usually" balloon up and consume all the leftover cash.
I like the Fidelity calculator and have an electronic print out that is my guide....... The first few years of retirement are by far the most important in shaping your future ability to spend. I have been fortunate that my first 4 years in retirement have been good. Even so I have been conservative in spending and although I am well ahead of my Fidelity income tables, I plan to remain conservative and spend less than 4%..
This would make an EXCELLENT thread! Who has used a Retirement calculator and where are they in reality after retirement vs what the calculator predicted!!! I would LOVE to hear some more real examples. Congrats jrkliny!! Awesome.
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