I read through a good online discussion of retirement spending/investment probabilities this weekend. Someone was asking early retirees in a forum if they felt a 90% probability of out-living your retirement nest egg was enough, based on a online calculator like FIREcalc.
I’ve written about FIREcalc probabilities before and using Monte Carlo analysis to help pressure test your FIRE plan. It is a great tool. For our own planning, we aimed for a 100% probability against our ‘base’ FIRE plan and 85% of our ‘high spend’ plan.
Related: Calculating FIRE
I expected that most Early-Retirement.org respondents would advise against a 90% probability. Readers of that forum tend to be a pretty conservative bunch and indeed, some were fixated on getting to >100%. Since no one can tell the future, they argue, it is better to be safe than sorry.
Still, when I rallied up the responses on the forum, the great majority of people recommended to “go for it” and retire at 90% probability. Like us, most felt they were underspending their FIRE plan or had gotten better investment returns than they had conservatively planned for. Here’s the way the responses broke:
⁃ 64% – Retire Now @ 90% probability
⁃ 21% – Not Sure / Need More Info
⁃ 18% – Save More / Need Higher Probability %
Since past performance is no predictor of future performance, I would say you have to use FIREcalc-type calculators as a blunt instrument. I’m not sure there is any real difference between 85%-90%-95% results. Being willing to pick up an occasional side gig or trim a little discretionary spending can easily make up 5%-10% if you need to.
Like many respondents to the question, I would say that early retirement is about so much more than the money and the chance to accelerate your FIRE escape by a year or two by accepting a 90% probability would be well worth it in my eyes.