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Another Great Depression?
Old 10-02-2013, 10:44 AM   #1
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Another Great Depression?

I have been leveraging FIRECalc as my primary tool for calculating my FIRE date. When I use all years available on the "Your Portfolio" tab, my current plan (FIRE Jan 2015) comes out at over 95%. When I change the years on the "Your Portfolio" tab to exclude the great depression (only use 1940 and after), I end up with 100%. If I then move my FIRE date to today, I am still at 100%. The way I am reading this, I could retire today unless another great depression hits. Does that sound right?

What years have the rest of you included on your FireCalc settings for portfolio returns?
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Old 10-02-2013, 12:35 PM   #2
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I use all years, especially now when the U.S. markets are hitting new highs. I think it's only fair to exclude the Great Depression if you are currently in one. For example, in 2009 in the middle of the market dip, you put your portfolio value into FIRECalc. It then proceeds to assume that the Great Depression occurs in the next few years as one of its scenarios. Hopefully that is pretty much impossible. But today, with a big debt screw-up, I wouldn't say it's impossible.
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Old 10-02-2013, 03:11 PM   #3
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Since there is no certainty in anything going foreward, I suspect that the planning differences between FireCalc 100/95 percent are marginal to you.

What if you plan carefully and then you or the spouse have a drawn-out expensive illness. How does that play into your modeling ? Similarly what if your kid gets divorced and then moves in with you ?

What if hyperinflation/currency devaluation/increased taxation/Social Securit and Medicare stops/nuclear war/astroid impacts/ plague/ pestulance/ Earthquake/flood/ Solar Supernova etc hit. What good then is your Firecalc modeling ?

I suggest you look at broad trends in your retirement modeling and then make some informed decisions based on that. If things change then all you can do is react and change the plan. A few percent better reslt in Firecalc doesn't imply safety.
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Old 10-02-2013, 04:51 PM   #4
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Thanks MasterBlaster, In my 42 year plan, I have about 250k dedicated to unpredictable expenses. This was based on a 5 year history of actual unexpected expenses. If I were to plan for all of the possibilities that you mention, I would just work til I am dead. It's clear there is no magic formula and it is up to each of us to live with the risks we choose to. I guess my thinking around the Great Depression question is that if it were to happen between now and the time I am 65, I would find a job somewhere to supplement. Once I am 65, I could live on SS if I had to. Of course there is the chance at over 60 years old I could not find a job, but there is also a chance that I could die in a car wreck on the way home tonight.
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Old 10-02-2013, 05:16 PM   #5
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Quote:
Originally Posted by cinman2000 View Post
I have been leveraging FIRECalc as my primary tool for calculating my FIRE date. When I use all years available on the "Your Portfolio" tab, my current plan (FIRE Jan 2015) comes out at over 95%. When I change the years on the "Your Portfolio" tab to exclude the great depression (only use 1940 and after), I end up with 100%. If I then move my FIRE date to today, I am still at 100%. The way I am reading this, I could retire today unless another great depression hits. Does that sound right?

What years have the rest of you included on your FireCalc settings for portfolio returns?
i use all the years in FIRECALC and hedge further from there! But that doesn't make my approach right, just right for DW and I.

There are all sorts of possibilities beyond another "Great Depression." And using only 1940 and after is really cherry picking as it includes returns that were unprecedented for the USA not to mention the rest of the developed world.

The SWR in some pretty advanced economies is markedly less...will the USA continue to be exceptional?

An International Perspective on Safe Withdrawal Rates: The Demise of the 4 Percent Rule?
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