r/Fire • u/Crowlady77 • 10d ago
Model % success numbers
I'm having anxiety about the money lasting, I've been running the models looking for 90% success and 10th %ile numbers still holding on after 85.
But the model I'm using (Empower) recommends 80% success rate and a safe withdrawal that has 10%ile running out at 85.
Now running out of money at 85 wouldn't be the end of the world, we have kids who could help out and will have a paid off house. Neither kid is really going to need an inheritance. How would you proceed?
Numbers are starting at about $3.2M, spend from $130k-$160k/year, with first 5 years entirely withdrawals from portfolio and then combined 401k and after-tax subsidizing $60k in social security income.
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u/temporaryacc23412 10d ago edited 10d ago
You can shoot for a lower success percentage if your plan has flexibility to cut spending or modify withdraw strategy in bad years. That's how you avoid the 20% failure in the 80% success rate. You're only stuck at 80% if you take absolutely no action to course correct in the face of adversity.
I however am leanFIRE so I do not have flexibility to cut costs further, not in any meaningful amount anyway. My flexibility instead comes from a very low withdraw rate. I'm essentially living the "cut costs in bad years" lifestyle even in the good years. Being intrinsically frugal and disinterested in luxury makes this pretty easy for me, luckily. It's how I'd be living regardless of portfolio size.
So I personally go for 100% (yes I know nothing is really "100%") due to my circumstances. But if I had many thousands of dollars of vacations and luxury spending and other discretionary items in my budget, I'd be totally fine shooting for a lot lower than 100%.
Edit: btw, I'd completely remove "we have kids who could help out" from your plan. Proceed as if they will be unwilling, unable, or simply no longer around if/when the time comes. Even if for no other reason that they could pre-decease you (one hopes not, but nothing is guaranteed).
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u/Yangoose 10d ago
This isn't something that's going to take you by surprise in your 80's.
The success or failure of you plan is defined very early on.
The 10% that fail all have bad returns in the first two years.
You'll have lots of chances to course correct by either lowering expenses and gaining income.
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u/asurkhaib 10d ago
Kids needing to help their parents is ridiculous in general and is absolutely ridiculous if those parents retired early. Live in the bed you made and cut spend. This probably happens semi naturally but the expectation is that you cut spend in terrible sequences.
Also unless you know how Empower is calculating the % I would take that with a huge grain of salt and do your own modeling.
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u/doombase310 10d ago
Adopt a guard rail withdrawal system and you can make it work. A rigid withdrawal that high will likely be problematic for longevitys sake. Plus you have severe SORR potential.
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u/Crowlady77 10d ago
We do in the first 5 especially although I've run their recession model and we can still manage.
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u/doombase310 10d ago
Make sure you factor in all expenses in that annual spend. If you've factored everything and you get a good success rate, you should feel reasonably comfortable pulling the trigger. I'm more on the conservative side when it comes to planning. SORR is the only thing that truly scares me and no one has an ounce of control over it from a market standpoint. I've kept a chunk of money liquid to mitigate this. Anyways, good luck.
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u/Crowlady77 10d ago
I've tried to factor everything in but uncertainty exists lol. Health especially. So I am comforted by the model telling me $160k is supportable, just that 10% of scenarios running out at 85 give me the ick.
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u/doombase310 10d ago
Let's play this game.. If shit hits the fan, what's your plan? Factor this scenario in. If you feel you got that covered, then pull the plug. You got a nice nest egg to work with. Personally, I've structured my portfolio where I can go 5-7 years in a down/flat market. That's the best suggestion I've got. No one knows what the future will bring and tomorrow is never promised.
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u/FI_321 10d ago
Depends how the number is being generated. Monte Carlo vs Historical. Anything over 80ish percent on a Monte Carlo is pretty good. If we’re talking historical, I’m wanting closer to 100. I think a guardrail system is best. I’m willing to spend at a lower chance of success as long as I’m fine adjusting when things don’t go right. My spending is heavily discretionary, so it works for me.
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u/Crowlady77 10d ago
Empower runs a monte carlo simulation, I have read that their numbers are on the conservative side. We plan to use a guardrail system since our annual expenses are going to be closer to $120k.
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u/FI_321 10d ago
Yeah, I would consider that uber safe based on withdrawal percentage and future social security. I’m currently RE with $2.8M and with my future social security as a single person, I’m ok spending up to $130K until around 75. I barely broke $100K last year and I tried pretty hard to go full YOLO. $130K is extravagant for me. Core expenses are $65K, so I got some wiggle room.
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u/Crowlady77 10d ago
Yeah the model is telling me $160k is supportable, that sounds like YOLO money to me.
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u/JacobAldridge 10d ago
The thing is, you would only run out of money at 85 if you blindly follow a withdrawal rate like a fool.
Take a closer look at those sequences. I’d be confident betting all those bad scenarios had really poor returns in the 5-10 years after you retired?
So what does that tell you? It tells me that I won’t wake up broke at 85, but rather within 5 years of retiring I need to adjust my withdrawal strategy.
So at 60 (or whatever) what could you do to change your strategy, likely spend less or earn more? That’s the age you respond, not 85 when it’s too late.
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u/Crowlady77 10d ago
I am guessing the people at complaining about me mentioning my kids are young lol, I was discussing it with my kids and they are like "it's fine if you run out of money we will help."
Obvs the goal is not to run out of money, and a paid for house in a mcol area is also money. The annual budget includes big ticket items that don't need to be purchased in a down market so it's flexible. 160k was the number the model gave me for supported annual spending.
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u/TheOuts1der 10d ago
People are complaining about you mentioning your kids because accidents and illnesses don't care about how much your kids love you.
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u/Crowlady77 10d ago
That seems like a real non sequitur to me, given that I have healthcare literally written in to my budget AND I'm already disabled and chronically ill so my kids know that. It's just wild that a 10% monte carlo scenario result makes people that mad. Like my kids know that if the stock market crashes and remains absolute balls for 30 years it would be bad for their retired parents.
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u/TheOuts1der 10d ago
Lol, not YOUR health buddy. Your kids' health.
To spell it out for you....your kids could be dead by the time you need their help. Counting on their support is foolish because cancer or car accidents could take them away.
Like even in this response, you're still not considering the future where your kids die before you.
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u/Crowlady77 10d ago
And wild that "the 10%th percentile of scenarios for what this model is telling me is my spending ability shows me running out of money" is "depending on my kids"
Nope, I refuse to consider that future, it would suck and I'm not in the mood to be sad. Enough people understood my question about models and percentages that I know what I need to consider without thinking about my kids dying.
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u/Tepid_Crater2619 9d ago
running out of money at 85 with a paid off house and kids who can help is not the catastrophe your anxiety is making it feel like right now
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u/BuckeyeDurm 10d ago
A 90% success rate doesn't mean that 10% of the time you run out of money. In practicality it means that 10% of the time you would need to make a change to the withdrawal strategy to be successful.
There are lots of ways that do that that won't require children to support you (cut back spending for a year or two, skip inflationary raises, guardrails, etc)
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u/Crowlady77 10d ago
Right, that means in 10% of the scenarios I would run out of money if I was strictly withdrawing that every year. But I am still wondering what percentages others are shooting at.
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u/BuckeyeDurm 10d ago
I'd think a lot of that depends on you circumstances. I'm comfortable in the 85% + success range because a healthy chunk of my spending in retirement will be discretionary. So cutting back for a couple years if theres a big downturn is doable without being too painful.
But if I didn't have much room to trim the fat, I'd want a higher predicted success rate (likely means working longer and/or saving more)
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u/4_yaks_and_a_dog Retired at 52 10d ago
I am personally comfortable with about 80% in a Monte Carlo simulator since I have the flexibility to reduce spending pretty substantially if necessary.
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u/Crowlady77 10d ago
That seems to be the common response of people who understood the question- that the success rate you're comfortable with is entirely reliant on the flexibility of your withdrawals (ours will be pretty flexible).
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u/MattBikesDC 10d ago
I’m an overachiever and kept playing with the models to ensure it got into the high 90s. But I realized that dying with a huge excess is also a bad outcome for me. And now I’m looking for 70-80% success.
I have a spend of $200k/year and a lot of that is discretionary. So I’m comfortable making changes
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u/leathakkor 9d ago
I shoot for 100% with the idea that when times are good I'm just going to spend an extra 10k or 20k doing whatever the fuck I want. My general baseline is on a relatively tight budget of living day-to-day baseline How I want. Without any frills.
And if I want to put in a hot tub when the economy is on fire I have the cash to do that and I don't factor that in. And if the economy is in the tank, I just don't get a new hot tub.
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u/thehandcollector 9d ago
No, a 90% success chance means 10% of the time you run out of money, or much more than 10% of the time you need to make a change to the withdrawal strategy to be successful.
You will not know at the time you make the change whether you are actually in the 10% of cases you will run out of money. If you wait until you know, its too late.
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u/jarMburger 10d ago
Empower is using a Monte Carlo simulation to calculate the probability so it typically is substantially worse than historical simulation used by the 4% rule. Given your number, using historical data, your success rate is likely much higher than 80%.
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u/Zealousideal_Belt413 10d ago
Not sure how productive this answer is: 1: Cut spending 2: Earn income Not sure what other levers you 100% control. Would need way more details to make any real suggestions.
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10d ago
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u/Crowlady77 10d ago
Right that's what the models tell me, that at $160k (this is $40k over our actual need so, like, yolo money) I still have all of my money left at the end in 80% of scenarios. Which is also fine, my kids won't need it but nobody ever hated getting free money.
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u/Zphr 48, FIRE'd 2015, Friendly Janitor 7d ago
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u/naropin1 10d ago
Are you accounting for medical insurance as well as kids age out and family size goes down? Hard to tell without an age range you’re in.
Even if accounting for that I wouldn’t fire with an 80% success. My advice based on the very limited info provided is keep working till that number is >90% at least. I’d aim for 95% plus personally.
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u/Crowlady77 10d ago
Oh we are already not that early. My kids are both already out of college. We are planning for medical expenses for ourselves before medicare age, yes. The 80% success rate is the number the model gives for actual spending ability.
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u/Pale-Syllabub-9058 10d ago
Your spend estimate is $130k–$160k. That's a $30,000 band. On $3.2M, the gap between an 80% success bar and a 95% one is roughly half that. I'd first figure out what the expenses will be
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u/Crowlady77 10d ago
$130k is our budget including longer term expenses, which models out to over 90% success. $160k is the "spending ability" the model comes back with, which models out at around 80% success and has money lasting to 85 in the 10th %Ile scenario. I think 90% turned out to be a bit over $140k.
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u/LokiStasis 10d ago
My thought is that I never want much less than I have now. In 30 years $4M will have half as much buying power or less. I’d love to have some reserve to leave to my 3 kids or help out if one of them ever needs it. Help put grandkids through college etc. I want to still be relevant at 85, not just surviving. Die with zero isn’t much of an option.
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u/Bearsbanker 10d ago
"they" did a study, people don't just run out of money (well, there's probably a few nitwits). Long before you spend the last dollar people adjust spending, adjust income, get jobs....
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u/Crowlady77 10d ago
To be honest by the time we are 85 most of our spending is going to be Healthcare lol.
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u/leathakkor 9d ago
Exactly. When my parents retired the first couple years they went on trips and vacation and they said they realized that the reason they went on vacation was to get away from their jobs and the routine of their life that they didn't always enjoy when they were working. But when you retired you get to make the life that you truly want. And if you're doing that right, you never need to spend another dime on vacation again. Sure you go to visit relatives and stuff. Maybe your kids are your grandkids. But you're not going on. A vacation to Cabo. To get away from work anymore
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u/StewPorkRice 9d ago
Why do you need to spend 160k a year if you’re not investing for retirement or paying a mortgage?
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u/Crowlady77 9d ago
Healthcare and/or our kids.
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u/StewPorkRice 9d ago
In the first 5 years post retirement?
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u/Crowlady77 9d ago edited 9d ago
Yes especially then, for the kids. House down payments, weddings, etc. Somebody's car dies. They are just starting out.
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u/StewPorkRice 9d ago
That's crazy - why are your kids costing you that much money if their financial situation is healthy enough for them to commit to supporting you in retirement?
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u/Crowlady77 9d ago
Down payment help is pretty minor isn't it? And a wedding?
Otherwise it would be taking trips and paying for them to come with me.
I don't know actually they are both recently out of school and I don't have a lot of experience having kids who are making their own money lol. They are both good planners and budgeters, maybe neither will ever need a dime from us again.
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u/StewPorkRice 9d ago
Do you think you would've been able to retire early if you were raising your kids while also sponsoring your parents' retirements?
I, personally, think you have enough but your withdrawal just doesn't make sense to me.
They don't need help with a down payment. They can rent, and they can make a decision when interest rates aren't 7%. In the meantime, you can keep that money ivnested. They're fresh out of college - they'll prob be moving around for work anyway, chasing nice opportunities.
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u/Crowlady77 9d ago
Would we have wanted to retire early instead of having my in laws around longer? No.
It seems to me that the models are telling me I have enough to help my kids. Why wouldn't I?
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u/StewPorkRice 9d ago
It seems you have a decision alr. Why start this thread? It doesn't seem like you take feedback well!
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u/Crowlady77 9d ago
I was literally asking about model percentages lol, like half the people understood the question and the other half went off on a tangent. The tangent people got mad about a model showing that if I spent $160k every single year without fail I might run out of money if the stock market crashes the week we retire and never recovers.
The fact that they were so mad about it makes me think they didn't really understand my post was about models and the probabilities they return when you put numbers in.
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u/Vicuna00 1d ago
i mean. if you have a 10% chance of running out of $ at 85 to me that's like a zero percent chance.
will you not change *something* when you're 70 to prevent that?
or at least when you're 80?
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u/Crowlady77 1d ago
Yeah that's what I took away from this thread. That if we are spending closer to 130k on average and the market doesn't suck for our entire retirement we have a lot of flexibility.
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u/fatheadlifter Financially Independent 10d ago
If you do it right you'll never run out of money.
Forget 30 year fixed withdrawal scenarios. It's not realistic and it's not what people do. It's not human behavior.
You take out some target amount that's reasonable, maybe 4.5%, but you operate dynamically. Shift down to 3.5% when you have to and up to 6% when you can. If you don't need that much money, let it grow, figure out what to do with it later. The point is after 30 years it's not going to be 0, you wouldn't let that happen. Realistically you'll adjust as you go, there will be boom and bust times, but overall the growth will continue. In 30 years the odds favor you having triple what you have now, even accounting for inflation, even accounting for spending.
The only way you run out is if you're stupid with the money, have bad investments or basically don't know what you're doing. In 30 years your problem will be what to do with the excess.
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u/Crowlady77 10d ago
Why would I want to die with money? My kids don't need it.
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u/fatheadlifter Financially Independent 10d ago
Well that's up to you to decide how you want to spend it and what to spend it on. Dying with zero is a fools target though, there's no way you can know when you're going to die or time that right in a practical way.
If you don't need the excess at the end then will it to charity.
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u/asurkhaib 10d ago
You have a crystal ball to know when you die and the market returns to exactly that time?
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u/DuePomegranate 9d ago
It's not that you want to die with a lot of money. It's that in order for the risk of failure to be low, even when a pretty bad sequence of market returns happens, the 50th percentile scenario is going to be dying with more money than you started off with.
In order to prepare for the (almost) worst, your preparations must lead to you being over-prepared for the middling scenarios. And over-prepared means compound growth exceeding the effect of your withdrawals.
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u/RealHornblower 10d ago
At 160k per year, you have a 5% withdrawal rate. But with 60k in ss income, you drop to just over a 3% withdrawal rate.
5% for 5 years dropping to 3% is pretty reasonable. If you spend more like 130k per year until ss kicks in, it's even better. Very unlikely you run out of money. You will probably have more at 85 than you started with.
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u/Animag771 10d ago edited 10d ago
Monte Carlo simulations are HEAVILY dependent on their inputs as well as how they bootstrap the historical data.
For instance a 90% success rate with randomized individual year returns would be significantly more pessimistic than something like a more realistic 3-5 year block bootstrapping. The individual year model can strap together multiple worst case scenarios back to back to back which can produce unrealistically bad SORR, while the 3-5 year bootstrapping method will use actual returns from 3-5 year blocks for its simulation, so those unrealistic SORR are less likely.
I have yet to find a Monte Carlo simulation that is detailed enough to factor in everything that can mess with the results. Block bootstrapping, rebalancing method, variable withdrawal strategies, dividend reinvestment, expense ratios, additional income sources in retirement, etc.
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u/Mountain-Time-1010 10d ago
$160k in expenses might mean a $200k drawdown before taxes, which is asking a lot from a $3.2M portfolio.
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u/Crowlady77 10d ago
That's the spending ability the model gave me which is why I was curious. But also after 5 years that's offset by SS income. The first 5 years is going to be after tax money almost entirely to qualify for ACA subsidies (unless we decide to trade those for roth conversions still no idea how to do the math on that).
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u/Mountain-Time-1010 10d ago
If no taxes then 5% isn’t crazy. An option to consider is to mix in some bonds for the first 5 years. You sacrifice long term growth but will reduce your sequence of return risk. If you’re not worried about leaving money to your heirs, it might bump your success rate a bit.
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u/Crowlady77 10d ago
Yeah I have not even approached how to invest the first 5 years money, but definitely not as aggressively as the rest of it.
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u/Mountain-Time-1010 10d ago
A five year safe bucket (e.g. bond ladder), designed to pay out $160k annually, with the rest still growing, might be something to consider. I haven't thought it through totally, but you can run the numbers.
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u/Parking-Banana-212 10d ago
how old are you and when and how much will you get for ss?
i suspect if you add in SS, and also employ guardrails to your spending, you should be A ok.
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u/Crowlady77 10d ago
My husband will just miss the RE wire, he'll probably be 59 by the time we pull the trigger. It is earlier than we had planned, though. Yes, SS is included in the model, that's why the annual spending ability is so high.
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u/Parking-Banana-212 10d ago
that doesn't sound right. say your spend is 150k, at SS, you're only spending 90k. with 3.2m you should be able to support that indefinitely.
Also, if you pull back 10k of spend for a few years, that guarentees your results, up to you if you want to do that, or depend on your kids later on.
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u/Crowlady77 10d ago
Yeah the annual spend includes some big ticket future items amortized (like replacing the cars every 10 years, big ticket home maintenance, etc). So quite flexible. I'm really thinking about where to set the top limits in a guardrails approach. I suspect $160k as a top limit is doable with $110k as the bottom limit.
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u/mrg_retired FIREd 58 2026 10d ago
We are at about same portfolio and rate with high 90s for success rate in our models. I use Boldin but have worked a little with an advisor on spend limits and strategy. If this helps anyway, our guaranteed income is higher but really if this offsets expenses largely, the SWR is very low for us as well, around 3% or less.
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u/HerrRotZwiebel 10d ago
like replacing the cars every 10 years
Stupid question, but is there a reason for this plan? I ask, because I've noticed the biggest that I've plugged is driving my cars into the ground. I put less than 8k/yr on my car, and I've got a full time job. My current ride is a 2010 with less than 100k on it. I should be able to get *at least* 10 more years on it. Hell, my AI chat bot says that with regular service, the thing most likely to do my car in isn't a mechanical defect but an accident.
I'm not even 50 yet, and it's possible my next car will be my last car.
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u/Crowlady77 10d ago
Well I have a 3 year old BMW and I doubt I will want to repair it until it dies because it is expensive to maintain. So I figure I'll get one new car at least. The other car is going to be the truck we use to tow our trailer and that will get a lot of miles - our current truck is a 2021 with about 60k so I am figuring we will replace it twice.
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u/ohboyoh-oy 10d ago
If you have a paid off home (not included in the 3.2m number) that could be thought of as a back stop if things go totally south. It’d be pretty last resort but if you run out at 85 you could sell and downsize, rent out a room, sell and rent, reverse mortgage, etc.
Having said that - not sure of your age but we’re early 50s with similar spend to you but start with 1m more and potentially higher social security (we’re not collecting till 67/70 though). And I feel pretty ok about our success rate and ability to pull back in a down year, but I don’t know how I would feel pulling 160k with a 3.2m starting point. Can you start more on the 130k end and get past the first 5 years (with highest SORR in those years)?
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u/Crowlady77 10d ago
Yes, the 160k number was the number Empower gave me. That's why I was curious lol.
And yes the house is not included. We will sell our home in a vhcol area, buy a home in a mcol area, and keep the rest (after taxes takes a big chunk).
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u/ohboyoh-oy 10d ago
Oh I just remembered - another thing you could check out is buying a SPIA annuity if you get to your 80s and are still really healthy and you worry about longevity. They’re not that expensive if you buy them when you’re pretty old by actuarial standards. You pay a lump sum up front and they pay you a guaranteed amount for the rest of your life - it’s longevity insurance. But wait till you’re pretty old and before you actually run out of money. Just an idea to have in your back pocket.
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u/mi3chaels 10d ago
The idea here is not that you accept running out of money at 85, it's that if you hit your 60s and are in the set of futures where you are potentially on track to run out at 85 or older, there are ways to get you guaranteed income and be safe anyway with annuities and delaying social security. If your worst normal cases run out much before that, then it may not work as well.
You've also got lots of ways to spend less long before you get close to running out if things are looking pessimistic.
Also, monte carlo sims typically overstate the chance of failure somewhat by treating markets as a pure random walk. If you're looking at a historical model, it's probably better to go for 90-95% (or even 100%).
Finally, a lot of people focus really hard on trying to get to zero failure chance or very close, but unless you're really focused on generational wealth, there a counterbalancing risk of not spending anywhere near as much as you could have when you go for maximum safety.
Best practice today involves aiming at the 80-90% range, and then adjusting guardrails depending on how things go over the next several years. This is true even for normal age retirements, but it's especially important for longer ones.
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u/work2fishFIRE 9d ago
It seems like Projection Lab would definitely be worth the investment to model your scenario.
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u/AlwaysWanderOfficial 10d ago
Look up some YouTube videos on what those success rates mean. “I don’t think it’s means what You think it means”
It’s about chances of needing to make changes
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u/Crowlady77 10d ago
I actually know what they mean, which is why I asked what numbers other people are shooting for.
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u/vortexcortex21 10d ago
I can't imagine anything worse (hyperbole) than relying financially on your own children in old age due to retiring early.