FIRECalc Results

How does one account for the fact that if you do a FIRECalc model using $1M in January or do it in September, the result will be the same? I would think that if money had 9 months longer to be invested, the results would be different at year end. What am I missing?

Hi, Chince. I'm not a FireCalc expert. Nevertheless . . . I think that FireCalc uses historical results for the performance of the various markets. These results were collected for predetermined periods -- for example, Jan 1 thru Dec 31 of each year. So, the results you get are accurate, strictly speaking, only for the same periods, and, in this example, would not be accurate for Sept 1 thru Aug 31. However, this probably doesn't make much differnce in a practical sense. I would add my own little caution -- if the difference is make-or-break to you, you might be cutting things too close.

[dory36]

Originally Posted by bogart

Hi, Chince.* I'm not a FireCalc expert.* Nevertheless . . . I think that FireCalc uses historical results for the performance of the various markets.* These results were collected for predetermined periods -- for example, Jan 1 thru Dec 31 of each year.* So, the results you get are accurate, strictly speaking, only for the same periods, and, in this example, would not be accurate for Sept 1 thru Aug 31.* However, this probably doesn't make much differnce in a practical sense.* I would add my own little caution -- if the difference is make-or-break to you, you might be cutting things too close.*

Bogart is correct. On the "How it works" page at the Firecalc site, it explains that Firecalc "simply takes a given portfolio on an assumed retirement on 12/31/1871, and adjusts it for actual market conditions with the given (inflation adjusted) withdrawal each year for as many years as you expect to continue making your withdrawals. Then, the web page starts over, assuming retirement was 12/31/1872. Then 1873, and so forth ..."

In FIRECalc, when is the end of year 1? Is it Decamber 31 of the year in which one retires or is it December 31 of the year after one retires?

[dory36]

Originally Posted by Chince

In FIRECalc, when is the end of year 1? Is it Decamber 31 of the year in which one retires or is it December 31 of the year after one retires?

The first withdrawal is assumed to be Jan 1 the year after you retire, and is based on the 12/31 of the year you retire.

The default assumption is that you retire sometime during the year, and hold out enough from the portfolio you report to Firecalc to live on until the first withdrawal. Take a look at the bottom of the Firecalc screen, and you'll see the option:

"First year withdrawal: Withdrawals are calculated as of the end of each year, so interest, dividends, and growth continue to be applied until then. This means the first "normal" withdrawal will not take place until up to a year after you begin retirement, if you retire early in the year.

[ ] Check this box if your first year living expenses will have to come out of the amount you entered for the initial portfolio value, above. If checked, your first year's withdrawal will include one withdrawal immediately, prior to any growth or inflation, and a second withdrawal, at the end of the year. Do not check the box if you prefer to handle first-year expenses ouside this model, as recommended by the author. "