Announcement

Collapse
No announcement yet.

Your Retirement May Last Longer Than You Expect?

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

  • Your Retirement May Last Longer Than You Expect?

    According to the Actuaries Longevity Illustrator there is a better than 50% chance that I live to 85 and a 5% chance that I live to 100:

    https://www.longevityillustrator.org/Profile/ReportResults

    Sounds reasonable, though a 5% chance to make 100 seems a bit optimistic.

    According to this calculator (below), which accounts for a number of additional variables (education, income, DM, BMI, sleep and ETOH habits, etc.), I should expect to live to 101, and be "healthy" until almost 99!

    https://apps.goldensoncenter.uconn.edu/HLEC/

    If the second calculator is closer to the truth, then I'm inclined to work quite a bit longer than previously planned.

    Have you estimated your life expectancy based on such calculators? Any surprises? Does it (or did it) change your planning?

  • #2
    Why not create a life you don't want to retire from? Retirement is the back-up plan in case you can't do or can't find work you love.
    Helping those who wear the white coat get a fair shake on Wall Street since 2011

    Comment


    • #3
      Image result for trinity study chart

      You can quibble with the details but if you have a withdrawal rate under 4% (which should be pretty manageable if you are getting close to max SS benefit after age 70 until you die) and a reasonable stock:bond allocation you can can plan to live to 120 and come out fine, at least from a financial perspective.

      Comment


      • #4




        Why not create a life you don’t want to retire from? Retirement is the back-up plan in case you can’t do or can’t find work you love.
        Click to expand...


        I was on my way to NYC to audition for the American Ballet Theatre, but then I remembered that I can't leap over my old copy of Braunwald's Heart Disease anymore. Guess it will have to be the back-up plan for me.

        Comment


        • #5
          I messed around with that calculator. I need to get more sleep to break 100, apparently. The subjective answering of how one eats and perceived health is probably skews results. I would say that my diet is good, but would one upgrade it to very good if viewed objectively?

          I decided to put in the stats of an average person around here and apparently it drops life expectancy in half (to around 68 years old).

          Comment


          • #6


            You can quibble with the details
            Click to expand...


            The historical figures would be reassuring if current stock and bond valuations were approximately equal to the historical averages. Unfortunately, the historical record contains very few, if any, data points that are relevant to our current circumstance.

            If we had 100 data points with current valuations, it is extremely likely that failure rates for any given withdrawal rate would be much higher, and the SWR would be much lower.

            Physicians should understand this right away, once they understand that prospective returns are inversely proportional to valuations (and sequence of return risk is higher as well).

            Comment


            • #7




              I need to get more sleep to break 100, apparently.
              Click to expand...


              Breaking 100 depends on your age. My wife (younger than me) is not expected to break 100 either, but she is expected to have more remaining years of life.

              Comment


              • #8
                I have several 100+ year olds in my practice, and after seeing them on a regular basis I have absolutely no wish to live to 100.

                Comment


                • #9


                  You can quibble with the details
                  Click to expand...


                  Wade Pfau performed a Monte Carlo simulation* of the 4% rule in retirement using today's starting interest rates and the historical equity risk premium.

                  https://retirementresearcher.com/4-rule-work-todays-markets/

                  The 4% rule worked 69% of the time instead of 94% of the time (for a 30-year retirement).

                  I think Pfau's simulation over-estimates equity returns by assuming the historical equity risk premium. That premium is now only about 2.8% (to LT TIPS) or 3.4% (to bills).

                   

                  *Monte Carlo simulations provide unrealistic tail scenarios because they don't account for reversion to the mean (for valuations and thus returns), but the percentage of outcomes above and below zero should be far closer to the mark with a Monte Carlo simulation than with the historical record.

                  Comment


                  • #10







                    You can quibble with the details
                    Click to expand…


                    Wade Pfau performed a Monte Carlo simulation* of the 4% rule in retirement using today’s starting interest rates and the historical equity risk premium.

                    https://retirementresearcher.com/4-rule-work-todays-markets/

                    The 4% rule worked 69% of the time instead of 94% of the time (for a 30-year retirement).

                    I think Pfau’s simulation over-estimates equity returns by assuming the historical equity risk premium. That premium is now only about 2.8% (to LT TIPS) or 3.4% (to bills).

                     

                    *Monte Carlo simulations provide unrealistic tail scenarios because they don’t account for reversion to the mean (for valuations and thus returns), but the percentage of outcomes above and below zero should be far closer to the mark with a Monte Carlo simulation than with the historical record.
                    Click to expand...


                    Ok, so how much are you going to save before you retire?  30x? 33x? 40x? 50x?

                    You can always think of what if scenarios to explain why a plan won't succeed, as there are few major risk-free decisions in life.  We'll have another lost decade in stocks, SS will be slashed or means tested, nuclear holocaust will ensue, LTC will cost seven figures, etc. etc.  At some point the risks and personal costs of continuing to work eclipse the risks of leaving the workforce.

                    Comment


                    • #11
                      So the calculator says I'll live 16 mo longer if I drink less, sorry, pour me another.

                      Comment


                      • #12
                        I've budgeted to roughly 175. I'm really in trouble if I make it to 200.

                        Comment


                        • #13


                          At some point the risks and personal costs of continuing to work eclipse the risks of leaving the workforce.
                          Click to expand...


                          That's true for you and me and a few others who lack the imagination to "create a life they don’t want to retire from." Retirement is only the back-up plan for everyone else.


                          so how much are you going to save before you retire?  30x? 33x? 40x? 50x?
                          Click to expand...


                          It will depend on several factors. My job was killing me 20 years ago so I quit. I'd retire now if my job was onerous, but I have enough time and energy to exercise and sleep; I can continue at this pace for quite a while.

                          I can continue, but I wouldn't if I had so much money that the extra income wasn't meaningful (not there yet), or if there was something else that I had a burning desire to do.

                          There were a lot of things I wanted to do when I was young and full of testosterone; my career just got in the way of my life. Now I enjoy working, as long as the pace and the hours are tolerable.

                           

                          When I "retired" 20 years ago I had enough to cover our current spending with a 3.25% withdrawal rate (numbers adjusted for inflation). I didn't know anything about Bengen or the Trinity Study, that's just the way it worked out. That should have been enough, right?

                          I can tell you that it didn't feel like enough, i.e., didn't feel comfortable. I worried about money for the first time in my life. I worried a lot more when the portfolio value declined. That was true despite the fact that I believed I could still get back in the workforce at any time. I expect I'd worry much more at 80 yo.

                          Also, although we only spend $X while working, I know that we could spend $5X and still save plenty of money, so I don't worry about any expense that might come up. If we were limited to $X, that would be much less comfortable, a less enjoyable life even if actual expenses didn't vary much from expected expenses.

                          So, as long as my job is not too demanding and as long as I don't find something else that I just have to do, then I'd like to have enough to spend substantially more than our current expenses with a high likelihood that we'd still have at least half the real value of the portfolio remaining when I die (to assure that my wife remains secure and comfortable in her old age).

                           

                          Comment


                          • #14


                            You can always think of what if scenarios to explain why a plan won’t succeed
                            Click to expand...


                            Correct, but if you plan your portfolio withdrawal rate based on the historical record then you're making a fundamental mistake.

                            It's analogous to the mistake you'd make if you had metastatic lung cancer, but you relied on the projections in the longevity calculators above.

                            Those calculators don't account for the adverse circumstance of metastatic lung cancer, and our historical record doesn't account for the adverse circumstance of current valuations.

                            Comment


                            • #15
                              It really boils down to a Pascal's wager for me. Even a very small chance of failure = unacceptable, therefore be conservative.

                              I want to enjoy my some things outside of medicine while I still have good health etc. but I need to make sure I don't risk running out of money.

                              I think logically a 2-3% withdrawl rate is a good place for me. Some days I love my job, others I want to quit but I think quitting now is premature (at least for me). I will try to stop at age 50 which is still really early.

                              Any time I think I will quit immediately I reread Nassim Nicholas Taleb (fooled by randomness and the black swan). Those books and the current valuations of the stock market keep me conservative. We are flawed over-confident pattern seeking primates and anything could happen.

                              There is a very good chance that I will die with piles of cash but what if some really rare event occurs? Obviously I would try to adjust and go back to work for a while (to avoid sequence of returns risk) but I think it would be much more advantageous just to be careful.

                              I would like to pursue a "glider path" to retirement = part time etc. but that is not always super easy. For example, I would love to travel to see family and friends and spend time with folks who I deeply care about but who do not live nearby and also to explore this wonderful planet, but employers (understandably)  don't exactly like the idea of having me take tons of time off.

                              I guess I could do locums etc. but that contains its own set of headaches, and I like working at the same place where I know the system, have good benefits etc.

                              I am inclined to work another 1-4 years, increase the cash/bond allocation and decrease the mortgage, such that I can hit the eject button and not need to go back asking for work after pulling the trigger.

                              1-4 years is not long and will likely go by fast and I can reassess and remain nimble and agile. Who knows in 4 years I might want to work more or find a gig that provides lots of unpaid vacation etc.

                              Yes, ideally we should create a life where we do work that matters and where we find fulfillment etc. (and I have a side gig that provides some of that) but medicine (call, commuting, long hours, stress, malpractice risk, etc. ) has some downsides and the older I get the less I want to be up all night (which I think is frankly awful for you).

                              Is there some goldilocks type medical jobs etc.? Sure probably, but someone has to take call and even the youngsters need a break in most groups, so unless they get a ton of extra cash for taking extra call, they appreciate some help.

                              At some point you get enough money. At some point the headaches outweigh the fun parts. At some point you want to do some other stuff. Perhaps the "other stuff" is meaningful work that helps people and makes some money or perhaps it costs some money but provides fulfillment (caring for and spending time with your elderly parents)

                              Anyway, sorry to ramble, but yes. I think you have to expect to live a long time, and have expensive healthcare needs.

                               

                              Comment

                              Working...
                              X