Back to work probability

Post questions about how to use the planner, user inputs, how the planner works, and comments and suggestions.
Post Reply
cargalmn
Posts: 2
Joined: Fri Aug 25, 2017 9:39 am

Back to work probability

Post by cargalmn »

Hi -

I have a few questions...my probability of success is 90%, provided I/we don't mind returning to work for 5 years. It says the probability of me returning to work is 30%.

1 - how does it know what salary I'd make? Does it just assume I'd make enough to cover my expenses?
2 - If I don't return to work, my probability of success is 84%, with an average spending shortfall of 34% (but my median ending portfolio is $5.6M). I would think my original 90% / 30% results would influence my success probability more than 6%...or that the 30% chance of returning to work would more closely align with the chance of success (so if I'm "doomed" to fail 1 times in 10, wouldn't the chance of returning to work be something more like 10 - 15% vs 30%?). I'm hoping someone can explain this to me.

Thank you for an awesome calculator. We have a few years that will have higher planned expenses, and I've been able to account for that. I've even been able to configure my Roth conversion ladder by withdrawing from my tax-deferred account X$/year and contributing to my tax-free account by the same amount. VERY few calculators have this amount of flexibility. Thank you!

jimr
Posts: 670
Joined: Thu Feb 28, 2008 6:48 pm

Re: Back to work probability

Post by jimr »

Hello,

You are correct that the "back to work" logic assumes that working provides just enough to cover expenses. Basically, portfolio withdrawals are suspended in the years when the back-to-work logic is active.

Understanding or predicting the impact of the back-to-work logic on your success rate is tricky because there are so many moving parts. You might try experimenting with back-to-work parameters such as max age and number of years to work to get a better sense of how they might impact the result.

It's very possible to have simulation paths where the back-to-work logic gets activated, but the plan still ends up failing because back-to-work only suspends withdrawals for 5 years max by default, and even less if it gets invoked after age 65 and the max age to work is set to age 70.

cargalmn
Posts: 2
Joined: Fri Aug 25, 2017 9:39 am

Re: Back to work probability

Post by cargalmn »

Thank you - I really appreciate the response and explanation. :)

Brainer
Posts: 1
Joined: Sat Dec 02, 2017 5:56 am

Re: Back to work probability

Post by Brainer »

Hi Jim, is there a way to set the max limit above the age of 70?

jimr
Posts: 670
Joined: Thu Feb 28, 2008 6:48 pm

Re: Back to work probability

Post by jimr »

In settings, once you enable the back-to-work option, you should be able to edit the max age to work parameter.

Post Reply

Who is online

Users browsing this forum: No registered users and 1 guest