Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 05-17-2014, 09:31 AM   #21
Thinks s/he gets paid by the post
 
Join Date: Oct 2006
Posts: 3,820
Quote:
Originally Posted by Travelwanted View Post
I already use this calculator to run Montecarlo simulations:

Crowdsourced Financial Independence and Early Retirement Simulator/Calculator
(Has multiple options for calculating for different variables.)

.
Thanks for the link. I wasn't aware that this existed, though I found this thread about it when I searched A replacement for FIREcalc?

One issue with FIRECalc has been that it did not adjust bond returns for market gains/losses when interest rates change. It appears that the crowdsourced version has some modification for this.
__________________

__________________
Independent is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-17-2014, 03:44 PM   #22
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
I periodically do the exercise using the Quicken Retirement Planner, ORP, FireCalc, and Fidelity RIP and get similar results from them all. Had a CFP who was trolling for business offer to do a free one a couple of years ago, and his results were very pessimistic. Well, he left out about $400k of assets, and assumed SS benefits of 0. Waste of time. Did one with my CFP last year and he got results similar to mine.

I think we oversaved, so rather than a success rate, we are usually looking for a spending level that will break the plan, and just plan to stay somewhere below that.

Might get a review later as we are spending well over $100K above our annual budget on extraordinary non-recurring items this year.
__________________

__________________
Rustward is offline   Reply With Quote
Old 05-17-2014, 04:13 PM   #23
Recycles dryer sheets
 
Join Date: Mar 2014
Location: Islands
Posts: 330
Because I am younger...42, I do not included SS in my planning. Who knows if it will be around and if so will I be even eligible? I have paid a ton in so I certainly hope so but don't count on it.
__________________
Travelwanted is offline   Reply With Quote
Old 05-17-2014, 04:19 PM   #24
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
At 42 I'd plan for a reduction, increased taxes, or a combination. We are 58 & 61 and are pretty confident it will be there, but our plan works even without SS.
__________________
Rustward is offline   Reply With Quote
Old 05-18-2014, 09:46 AM   #25
Thinks s/he gets paid by the post
 
Join Date: Jan 2014
Posts: 1,318
Quote:
Originally Posted by Travelwanted View Post
I already use this calculator to run Montecarlo simulations:

Crowdsourced Financial Independence and Early Retirement Simulator/Calculator
(Has multiple options for calculating for different variables.)
and get a 93-97% success rate.
Thank you for this link. As I said when I registered for this site, I'm not sure I'm ready to retire, I enjoy what I'm doing. I'm here to learn and I've learned a lot. Many of you say do it yourself as far as financial planning but for some of us it's not that easy. I have to say that the link above was one of the easiest calculators to use. I even understood the explanation/tutorial without reading it more than once. I appreciate all the information that is given on this site.
__________________
splitwdw is offline   Reply With Quote
Old 05-18-2014, 09:54 AM   #26
Thinks s/he gets paid by the post
David1961's Avatar
 
Join Date: Jul 2007
Posts: 1,074
Quote:
Originally Posted by Midpack View Post

That said, planning for 50-60 years out is a tall order. The range of possible outcomes is even wider than most 25-35 year retirees. Best of luck...
+1 I think this is a key point. Most retirement calculators assume 30 years out, 40 is about the max.

If your investments take a big hit during the first few years of retirement, you may have to move your spending toward the lower end.
__________________
David1961 is offline   Reply With Quote
Old 05-18-2014, 12:05 PM   #27
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by robnplunder View Post
Fire your FA. Either he is lying or don't have a clue. Either way, he is (up to) no good.
I agree with "fire the FA", but I disagree with both of your sentiments. He likely isn't lying, and he also has a perfectly good idea of what's going on.

The issue is that he's using the projections based on his wrap fees and the subpar, higher expense-ratio mutual funds he has the OP in. In all likelihood, the OP will run out of money at age 80, given the projections of the expense ratios and all other fees.
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 05-18-2014, 01:15 PM   #28
Dryer sheet wannabe
 
Join Date: May 2014
Posts: 13
Quote:
Originally Posted by REWahoo View Post
Have you looked at how FIRECalc works?
Yes. FIRECalc uses historical values as its input. It is not clear from the description if it fully randomizes the years or sequences the returns in the same order. I believe randomization is better since we have no idea if the pattern of returns will look the same in the future as the past.

However, FIRECalc does not account for taxes or inflation. And it only accounts for "life events" (like selling your house in 2020) as a reduction in spending, not as an addition to your investment pool.

Another RIP tool to try is the one on Fidelity.
__________________
TwoByFour is offline   Reply With Quote
Old 05-18-2014, 03:58 PM   #29
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,971
Quote:
Originally Posted by TwoByFour View Post
Yes. FIRECalc uses historical values as its input. It is not clear from the description if it fully randomizes the years or sequences the returns in the same order. I believe randomization is better since we have no idea if the pattern of returns will look the same in the future as the past.

However, FIRECalc does not account for taxes or inflation. And it only accounts for "life events" (like selling your house in 2020) as a reduction in spending, not as an addition to your investment pool.

Another RIP tool to try is the one on Fidelity.
I may be mistaken, but I don't think FIRECALC randomizes historical data at all.

I am curious why you believe Monte Carlo/randomization would be better given those tools rely on getting returns and variation of returns correct. Both are valuable but different tools, both have well known shortcomings, neither can predict the future any better than the other that I know of. It's up to the user to decide how/what safety factors/contingencies to build in compared to past history (FIRECALC) and/or Monte Carlo results show.

FIRECALC does account for inflation, and it does allow you to add the proceeds of selling a home or any other lump sum to your portfolio.

FIRECALC doesn't attempt to predict taxes, and it seems wise to keep that separate since tax rates can change in an almost infinite number of ways in the years/decades ahead.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-18-2014, 07:40 PM   #30
Dryer sheet wannabe
 
Join Date: May 2014
Posts: 13
I think the main difference between the two is whether there is a correlation between the return values or whether they are independent events. A randomized Monte Carlo assumes zero correlation - the return in 2016 is completely independent of what the return was in 2015, but does choose return values based on the frequency of occurrence historically. A calculation that uses historical sequences is assuming there is in effect a correlation between the return one year and those in subsequent years.

It is an interesting question as to whether a correlation exists. Given that we have Bear and Bull market periods, there appears to be some correlation. But it really needs to be calculated.

If there is a non-zero correlation, that correlation function can be used as an input to MC to choose its values. I have no idea what other tools (such as the one on Fidelity) do in this regard.

My bad on inflation - their web site is a little vague on the topic and I interpreted it to be no inflation. I am curious if FC uses historical inflation sequences or a probability function for inflation.

I love to geek about this stuff, in case you haven't noticed.
__________________
TwoByFour is offline   Reply With Quote
Old 05-18-2014, 08:04 PM   #31
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,572
"A portfolio with random performance, with a mean total portfolio return of [x]% and variability (standard deviation) of [y]%. Assume an inflation rate of [z]%."

It's a selection on the "Your Portfolio" tab.
__________________
Rustward is offline   Reply With Quote
Old 05-18-2014, 08:12 PM   #32
Full time employment: Posting here.
urn2bfree's Avatar
 
Join Date: Feb 2011
Posts: 711
Any FA charging you based on a percent of your Assets Under Management is going to encourage you to have more and more assets so he gets more and more- inherent conflict of interest. There are excellent lower cost options for advice. When I fired my advisor I saved over $10,000 a year which is that much less savings we needed as well... The drag on your portfolio plus his inherent bias are keeping you captive. Fire him for sure and get a fee based advisor or do it yourself- immediately.
__________________
urn2bfree is offline   Reply With Quote
Old 05-18-2014, 09:13 PM   #33
gone traveling
 
Join Date: May 2014
Posts: 153
I have a FA, primarily because he alerts me to financial products that could make me more $$ or preserve what we got. He admits that he has no idea where the markets will be. So why do I keep him? Because he keeps me from doing something stupid-which is the same reason I know and work with a lawyer, and a CPA (non-tax, whom I get an unlimited supply of cherries).
__________________
LongPrime is offline   Reply With Quote
Old 05-18-2014, 09:21 PM   #34
gone traveling
 
Join Date: May 2014
Posts: 153
You know my older bro, the one who works at big bank, corp level-He needed and needs a FA.
__________________
LongPrime is offline   Reply With Quote
advisor calculations vs my calculations
Old 05-18-2014, 09:25 PM   #35
Full time employment: Posting here.
urn2bfree's Avatar
 
Join Date: Feb 2011
Posts: 711
advisor calculations vs my calculations

I am not saying don't have an advisor. i am saying don't pay more than you have to. There are many low cost food options that are not charging ever higher amounts for no more work like many of the AUM based thieves do.
__________________
urn2bfree is offline   Reply With Quote
Old 05-19-2014, 10:52 AM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Brat's Avatar
 
Join Date: Feb 2004
Location: Portland, Oregon
Posts: 5,913
My DD and her husband use a FEE BASED FA for planning purposes. Both are CPAs, she is a CFO. Their holdings are complicated with venture level stock. Not the normal situation.
__________________
Duck bjorn.
Brat is offline   Reply With Quote
Old 05-19-2014, 02:03 PM   #37
Recycles dryer sheets
 
Join Date: Jun 2002
Posts: 367
Quote:
Originally Posted by MooreBonds View Post
The issue is that he's using the projections based on his wrap fees and the subpar, higher expense-ratio mutual funds he has the OP in. In all likelihood, the OP will run out of money at age 80, given the projections of the expense ratios and all other fees.
I believe this is the case. If you have a 2.5% WR, then the Advisor takes even 0.5% and the funds (assuming he's using funds) have about a 1% ER, you are at a 4% draw. Even if you are in stocks and ETFs with low ERs and the advisor takes 0.5% or so, you are still at a 3% WR.
__________________
When you walk in the shadow of insanity, the presence of another mind that thinks and acts as yours does is something close to a blessed event. -Robert Pirsig, Zen and the Art of Motorcycle Maintenance
panhead is offline   Reply With Quote
Old 05-19-2014, 02:38 PM   #38
Moderator
MBAustin's Avatar
 
Join Date: Jul 2010
Posts: 4,152
We use an FA for a small part of our portfolio - big enough to generate enough fees for him to consider us worth keeping but small enough that feel like I get what I pay for in terms of perspectives on the markets, etc. Most importantly, if something were to happen to me, the FA would give much more help to DH in managing everything else on a fee-only basis (at least until DS gets enough financial experience to take that on, probably 5-10 years out).
__________________
"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute." William Feather
----------------------------------
ER'd Oct. 2010 at 53. Life is good.
MBAustin is offline   Reply With Quote
Old 05-19-2014, 02:48 PM   #39
Confused about dryer sheets
 
Join Date: Nov 2005
Posts: 7
Quote:
Originally Posted by MooreBonds View Post
I agree with "fire the FA", but I disagree with both of your sentiments. He likely isn't lying, and he also has a perfectly good idea of what's going on.

The issue is that he's using the projections based on his wrap fees and the subpar, higher expense-ratio mutual funds he has the OP in. In all likelihood, the OP will run out of money at age 80, given the projections of the expense ratios and all other fees.
...and, perhaps the FA knows something more fundamental about their client that we don't.

ISTM this topic is about a fairly young couple who could experience more than one catastrophic medical or other family event (e.g. divorce) over the course of the long period of their ER.

I hate ever agreeing with a FA, but in this instance ISTM erring on the side of caution may be the wiser course.
__________________
SilentSwirl is offline   Reply With Quote
Old 05-19-2014, 05:05 PM   #40
Thinks s/he gets paid by the post
robnplunder's Avatar
 
Join Date: Nov 2013
Location: Bay Area
Posts: 2,124
Quote:
Originally Posted by SilentSwirl View Post

I hate ever agreeing with a FA, but in this instance ISTM erring on the side of caution may be the wiser course.
The OP's $5M in post tax investment and < $10k expense/mo (and he is not even counting SS income) can go a long way for RE. If he can't retire with $5M today, who among us can RE?
__________________

__________________
Pura Vida
robnplunder is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
advisor or no advisor frank FIRE and Money 10 04-29-2014 07:58 AM
Spreadsheet to ease SWR calculations using Guytons Decision Rules walkinwood FIRE and Money 7 08-25-2007 10:28 AM
SS calculations/FIRECalc question Sheryl FIRE and Money 13 12-28-2005 12:45 PM

 

 
All times are GMT -6. The time now is 09:16 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.