Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Re: FIREcalc rewrite - suggestions?
Old 02-03-2003, 06:30 AM   #21
Recycles dryer sheets
 
Join Date: Nov 2002
Posts: 398
Re: FIREcalc rewrite - suggestions?

Here's a suggestion that I suspect would be easy to implement: *allow a different "expense ratio" to be entered for each category of asset.

For many investors, the expenses of the "stock" portion of their portfolio are substantially higher than for the "fixed income" part. *Crediting these higher expenses to stocks will tend to shift their "preferred" asset mix towards the fixed income part.

I have another reason for wanting this feature that is a little "devious." *(I love to try to outwit computer programs!) *

I expect that, in the future, average returns on stocks will be less than they have been in the past -- I would guess by about 1.5% per year. *It is possible to incorporate this pessimistic guess into FIRECalc by "inflating" the expense ratio by that amount. *In other words, I expect my actual stock management expenses to be 0.3%, so I would actually enter 1.8%.
__________________

__________________
Ted 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!

Re: FIREcalc rewrite - suggestions?
Old 02-03-2003, 12:45 PM   #22
Recycles dryer sheets
 
Join Date: Dec 2002
Posts: 290
Re: FIREcalc rewrite - suggestions?

I like Ted's suggestion (2-3-03). More flexibility on expenses is a great idea.

Have fun.

John R.
__________________

__________________
JWR1945 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-02-2003, 02:55 AM   #23
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: FIREcalc rewrite - suggestions?

In a different thread, a suggestion that I'll look at implementing next time I look at the code...
Quote:
...For discussion, if we just use the default input values ($30,000 Withdrawal, 30 Years, 650,000 dollars, etc.) and looking at the spreadsheet created, the last totally complete period starts at 1971 (so it ends at 2001). For the row starting in 1972, the last year (2002) is empty. For the row starting in 1973, the last two years are empty, etc. etc. continuing up to the present.

So starting out in a bad year like 1973, for example, is missed, although 1973 is included as an intermediate or ending year of rows starting 30 or less years previous. But we know that starting out in a bad year should have a much more negative effect than having a bad year in the middle or the end.

When I put in 40 or 45 years, the effect grows.

Are there any suggestions of what I could do with the data of incomplete rows into the present? I can't really create future yearly data to complete them. But it seems I am just losing a lot of start and early years for data. For a 45 year period, the latest start row that completes is 1956.

Is there anything I can mine out of the incomplete rows?

I did have a horrible idea... If there was, say, five years incomplete on the end of a row, take the last useful cell's data from that row, then successively feed it into 1871 for 5 years on, then into 1872 for 5 years on, etc. etc. In effect, re-using existing data successively for the missing data. And on and on for all of the rows that did not complete. My gut feel is that the size of the thing would become monstrous :P

I'm interested in any and all comments!
Dory36
__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-02-2003, 07:26 AM   #24
Recycles dryer sheets
 
Join Date: Nov 2002
Posts: 398
Re: FIREcalc rewrite - suggestions?

Don't do it ! You will cause the program to double-count the data from the earliest years. Aside from the fact that this is completely unacceptable from a statistical standpoint, it would also be giving extra "weight" to the period of time which is presumably the least representative of "modern" economic conditions.

It is not so bad that the FIRECalc data will not consider a hypothetical period of greater than 29 years starting in 1973/74, because the FIRECalc data set does include some other periods that were probably even worse, such as the 1920s/1930s into the 1960s/1970s.

Another thing to consider about FIRECalc, in being aware of its limited ability to predict future financial outcomes, is this. Imagine that a person ran FIRECalc in the year 2000, assuming a relatively high allocation to stocks of, say, 70%, with the data set that then extended through 1999. It would have suggested that a relatively high wiothdrawal rate could have been sustained.

Now, imagine that the same data is input to FIRECalc today. FIRECalc's data set now extends through 2002, and as the result will indicate that, with a 70% stock allocation, a somewhat lower withdrawal rate will be sustainable. This is because the data set is now influenced by the large drop in the stock market that occurred in the years 2000 through 2002.

But (barring a future meltdown of the financial system) it is reasonable to believe that a person retiring today could actually sustain a higher withdrawal rate with a 70% stock allocation than they could have if their retirement had started in 2000. In other words, FIRECalc would have been excessively "optimistic" in the year 2000. It may still be too optimistic, but probably not to as great a degree as it was then.

As I have often noted, FIRECalc is potentially a very useful tool, but to use it wisely a person needs to understand the limitations that are inherent in using historical data to estimate future outcomes .
__________________
Ted is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-02-2003, 09:25 AM   #25
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: FIREcalc rewrite - suggestions?

Excellent point, Ted -- the best bet is to allow people to make their own inferences from the available data.

OK, it's off the plate!

Dory36
__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-02-2003, 09:40 AM   #26
Recycles dryer sheets
 
Join Date: Dec 2002
Posts: 290
Re: FIREcalc rewrite - suggestions?

Sorry Ted but I like Telly's idea. Let me suggest the following refinements:

1) Put a special button called Sensitivity Studies on the main page. Make no changes to the basic FIRECalc entries.
2) In the sensitivity study section list two sets of entries corresponding to the calendar years that are covered by data. One set of entries would cover 1871 through 2002 and that would refer to the data that already exists in FIRECalc. The other section would be next to it and it would be the what if entries. It would start with default values equal to the current data set. If someone wanted to replace years 1940-1945 with data from 1960-1965 he would replace the 1940 default value with 1960. He would replace the 1941 default value with 1961 and so forth.
3) To satisfy Telly's wishes, include a set of entries through 2042 (or some other future date) with additional, dummy default values such as the 1871-1911 that Telly mentioned. But be sure that the user could also change these projections aka guesses.
4) From a programming standpoint, you would simply be replacing the table that has your historical data with data selected from different dates.
5) Limit changes to replacing data for one year with existing data from another year. This makes the programming task manageable.
6) Be sure that any calculations remain in the special section. Keep it as idiot proof as possible. (Understanding, of course, that nature is always able to supply a superior idiot.)

Have fun.

John R.
__________________
JWR1945 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-02-2003, 10:18 AM   #27
Recycles dryer sheets
 
Join Date: Nov 2002
Posts: 398
Re: FIREcalc rewrite - suggestions?

I'm so argumentative that I have to disagree somewhat with my own analysis that I posted earlier today, although I stick by my prior recommendation to leave the data set in FIRECalc as it is.

I said that "tacking on" the returns from the start of the data period to the returns at the end of the data period would cause the early returns to be "double-counted." While this is true, it is also true that the returns from years in the middle of the data set are counted numerous times. For example, if the period of analysis were 20 years, then 1870 would be counted once, 1871 would be counted twice, and the years from 1890 to 1982 would each be counted 20 times. So FIRECalc inherently provides the heaviest "weighting" to the returns from the "middle" years.

To the extent that this causes a distortion in the results, one would expect it to be greatest for the longest periods of analysis. I don't think there is any way around that problem, but I also don't think that it is a major problem from a practical standpoint, because the "middle years" certainly include a number of years that had horrible market returns.

From a practical standpoint, the major uncertainties faced by any person in planning retirement financing are (1) not knowing how long they will live and (2) not knowing what the actual future returns on various alternate investments will be (especially after taxes and inflation). While a professional statistician might be able to slightly improve the theoretical validity of FIRECalc, a practitioner of real world economics like myself would say that the benefit of doing so to any individual planning their retirement financing would be nil.

I have enough confidence in my own intelligence to admit that JWR1945's suggestions for changes to FIRECalc are over my head . They may be brilliant, but they are definitely not simple and "idiot-proof!"
__________________
Ted is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-02-2003, 12:07 PM   #28
Recycles dryer sheets
 
Join Date: Dec 2002
Posts: 290
Re: FIREcalc rewrite - suggestions?

Thank you, Ted.

My term idiot proof refers to making sure that anyone who goes into the special section for a sensitivity study knows that he is there and not in the normal FIRECalc section.

Without special precautions, someone could be sent back to the original section to continue making his inputs. If he forgot that he had changed things in the special section, he could come up with all sorts of nonsense.

Who might forget? Forget what? (humor)

I imagine that you yourself might enjoy such a section. Captain Bill aka Dory36 does a marvelous job making user interfaces. I think that he could make it much easier for you to use than for me to explain.

You might want to know what could happen if went through something like the sixties and seventies over the next two decades. Looking at the year by year results might help you figure out what to look out for and when to feel comfortable with your portfolio.

Have fun.

John R.
__________________
JWR1945 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-05-2003, 07:05 AM   #29
Recycles dryer sheets
 
Join Date: Nov 2002
Posts: 398
Re: FIREcalc rewrite - suggestions?

I feel a little guilty recommending things that would make the software for FIRECalc more complicated, since I'm not the one who would have to do the work. But here's another idea that I don't think would be too difficult to implement.

FIRECalc assumes rebalancing a portfolio at the end of every year to a specified percentage of stocks (with the remainder of the portfolio going into the specified fixed income asset). One recommendation (by JWR1945) was to permit the frequency of rebalancing to be changed; however, I think that that would be difficult mathematically and would not really provide any useful guidance as to what frequency of rebalancing is likely to produce the best results in the future. As far as anyone can tell, doing it once a year should be adequate.

The conceptual problem is that, as has been recognized in various posts, the "optimal" safe percentage allocation to stocks declines as a person ages and their "planning period" declines. But FIRECalc doesn't provide a means of accounting for this (except by some manipulations involving sequential runs that I won't try to explain.) For example, if a person inputs a 40 year planning period, with a 50% allocation to stocks, FIRECalc rebalances the portfolio to 50% stocks at the end of each year. In practice, however, as the person aged, they would want to periodically reduce their allocation to stocks, such that when they were, say, 90 years old and their planning period was down to 10 years, they would optimally have only 15% or so in stocks (and the rest would best be in TIPs).

I think that FIRECalc could be modified fairly easily to permit the allocation to stocks to be changed about three times, to a specified revised percentage after a specified number of years.

Many thanks to Dory36 for his efforts. It's a valuable service.
__________________
Ted is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-05-2003, 01:50 PM   #30
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: FIREcalc rewrite - suggestions?

Ted -- thanks for the suggestion, and don't feel guilty -- I am perfectly capable of ignoring suggestions that I don't feel like implementing!

I'll look at the feasibility of letting people change allocation a few times when I get around to a rewrite.

(For those who haven't picked up on this, I'm cruising full time on a boat. I generally travel for a day, stop a few days, travel a day, etc. These stops don't lend themselves to programming. But every 6-8 weeks, we'll stop for a month or so, and that's when I pay attention to updating FIRECalc or other stuff that requires brain cells.)

Dory36. currently in Islamorada FL, at 85 degrees
__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-08-2003, 12:39 PM   #31
Recycles dryer sheets
 
Join Date: Dec 2002
Posts: 290
Re: FIREcalc rewrite - suggestions?

My preference so far is Ted's suggestion in reply #20:

Here's a suggestion that I suspect would be easy to implement: allow a different "expense ratio" to be entered for each category of asset.

Therefore, while Dory36 makes it clear with good humor related to a later suggestion that:

Ted -- thanks for the suggestion, and don't feel guilty -- I am perfectly capable of ignoring suggestions that I don't feel like implementing!

I want him to give this particular suggestion of Ted's a priority. (BTW, he did not reject Ted's later suggestion...at least for now.)

While we are at it, is there any reason that FIRECalc is not available directly at this location?

Have fun.

John R.
__________________
JWR1945 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 03-08-2003, 01:52 PM   #32
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: FIREcalc rewrite - suggestions?

I'll be looking at the changing expense ratios and the changing allocations sometime down the road, err, waterway.

Meanwhile, there is a link to FIRECalc at the top level of the forum. Look at "News" and you'll eventually see: "Do you have enough to retire? Visit FireCalc" --

the word FireCalc is a link.

Not sure where else I can easily put it.

Dory36
__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-18-2003, 01:32 PM   #33
Recycles dryer sheets
 
Join Date: Dec 2002
Posts: 290
Re: FIREcalc rewrite - suggestions?

I recommend that you implement switching into at least one version of the FIRECalc.

By switching, I mean that you can vary portfolio allocations according to P/E10 (as defined by Professor Shiller). I have recently investigated switching using the Retire Early Safe Withdrawal [Rate] Calculator, version 1.61, November 7, 2002 (as-is, without any modifications of my own).
http://rehphome.tripod.com/re60.html

Earlier reports are in error. Switching produces a big payoff.

Although the calculator has provisions for two thresholds (and three allocations), it implements only one. Data inputs at F19, B20 and I20 work. Inputs for I19 and F20 do not. That is, the Low PE to Mid PE threshold works and the stock allocations for the Low PE Years and the High PE Years work.

I discovered this when I modified a version to include switching between stocks and TIPS. The relevant code appears in the formula bar (at the top) when you highlight any cell in row 182 Stock Switch by P/E. Before then, I had assumed that all of the thresholds and allocations were active. So had others.

Using a threshold of 12.0 and stock allocations of 80% (below threshold) and 20% (above threshold), I was able to bring the reported 30-year 100% Safe withdrawal rate up to 4.8%, compared 4.12% without switching. The fixed income portion of the portfolio consisted of commercial paper. (Performance is even better with TIPS, but it requires modification of the calculator.)

I routinely report my research along these lines at the SWR Research Group board at www.nofeeboards.com.

Have fun.

John R.
__________________
JWR1945 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-21-2003, 08:19 AM   #34
Recycles dryer sheets
 
Join Date: Oct 2003
Posts: 452
Re: FIREcalc rewrite - suggestions?

For what it's worth, I used Firecalc in this way: put in a dollar amt. as a starting point, 100% in stocks, for a 10 year period. I did this just to see what I would earn just from stocks over every 10 year period from 1871 to 1991. Years 1992 thru 2000 show as incomplete 10 year periods. While the S&P500 has 'earned' about 11 percent from 1926 thru 2000, Firecalc shows from 1871. I can see that the market goes in cycles that sometimes are bad, real bad. These periods are from 1873-1876, 1880-1890, 1901-1914, 1922-1937, and 1964-1973. Of course, the period from 2000 thru 2002 was also terrible, but firecalc doesn't show it. The financial gurus like to talk about the 1920's thru today, omitting pre 1920 market results.

So,,,, is the period 1871 thru 1920 irrelevant ? Should Firecalc not take into consideration the 19th Century
__________________
renferme is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-21-2003, 08:21 AM   #35
Recycles dryer sheets
 
Join Date: Oct 2003
Posts: 452
Re: FIREcalc rewrite - suggestions?

For what it's worth, I used Firecalc in this way: put in a dollar amt. as a starting point, 100% in stocks, for a 10 year period. I did this just to see what I would earn just from stocks over every 10 year period from 1871 to 1991. Years 1992 thru 2000 show as incomplete 10 year periods. While the S&P500 has 'earned' about 11 percent from 1926 thru 2000, Firecalc shows from 1871. I can see that the market goes in cycles that sometimes are bad, real bad. These periods are from 1873-1876, 1880-1890, 1901-1914, 1922-1937, and 1964-1973. Of course, the period from 2000 thru 2002 was also terrible, but firecalc doesn't show it. The financial gurus like to talk about the 1920's thru today, omitting pre 1920 market results.

So,,,, is the period 1871 thru 1920 irrelevant ? Should Firecalc not take into consideration the 19th Century
__________________
renferme is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-22-2003, 07:14 AM   #36
 
Posts: n/a
Re: FIREcalc rewrite - suggestions?

I seem to recall that gummi evaluated switching (market timing) based on PE ratio in his web pages and showed that it didn't work very well.

gummi, are you there? Can you help here?

The only problem I have with gummi's otherwise wonderful site is that I have trouble finding things again. There is so much good stuff there.

Ed
__________________
  Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-23-2003, 01:44 AM   #37
Recycles dryer sheets
 
Join Date: Dec 2002
Posts: 290
Re: FIREcalc rewrite - suggestions?

Understand that I am reporting new findings. *The Retire Early Home Page article that I referenced claimed that neither P/E nor P/E10 could improve performance. *I have now shown that P/E10 produces a substantial improvement using the identical calculator.

FIRECalc was originally based on an early version of the Retire Early Safe Withdrawal [Rate] Calculator. *Dory36 added a fabulous user interface, but the underlying calculations were the same. *Since then the two calculators have diverged somewhat. *Undoubtedly, the kind of results that I have just reported would show up on FIRECalc if it had a stock allocation switching capability.

I brought up the details of my discovery within this thread: 3% SWR for 56 Years dated Monday, Oct 13, 2003 at 7:19 pm CDT.
http://nofeeboards.com/boards/viewtopic.php?t=1541

Start here, read this post and the two that follow:
http://nofeeboards.com/boards/viewto...?p=12651#12651

I was able to reconstruct what was reported at the Retire Early Home Page. *I showed that switching stock allocations according to (Yale Professor Shiller s) P/E10 can increase the Safe Withdrawal Rate to 4.85%. *[I used the specialized term Historical Database Rate instead of Safe Withdrawal Rate in those posts. *This term draws attention to the fact that the calculation itself is not a prediction. *Only when you assume that the future is no worse than the past (and when you explain exactly what those words mean!) does it become a Safe Withdrawal Rate.]

The safety of retirement portfolios is strongly correlated to P/E10, which uses the average of ten years trailing earnings instead of just one year. *The correlation with P/E is weak. *I have recently shown that improving (declining) P/E as an early buy signal when P/E10 is high is a very bad idea.

Gummy hosts a board of his own at www.nofeeboards.com .

Have fun.

John R.
__________________
JWR1945 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-29-2003, 07:17 AM   #38
Recycles dryer sheets
 
Join Date: Nov 2002
Posts: 373
Re: FIREcalc rewrite - suggestions?

Hi Dory -

I would suggest two items - one has been mentioned above by others, and by me in the past - and that is that the modelling of alternative income streams needs to be more intuitive. I suggest seperate boxes for alternative income streams (called out-year revenue in some posts) and changes in withdrawals due to lifestyle changes. I know that they are computationally equivilent, but knowing that should not be required of users. The fixed pension modelling especially should be more obvious.

The second is really just because of my need to look at the details to make myself comfortable - but I think there are quite a few others like me. That is to allow me to select a specific year, and see the detailed calculations for that year.

Let me know if you would like any help on FireCalc. I have been retired over a year now, and have recovered from being totally burnt out on computer work and have been playing around with programming again.

Wayne
__________________
wzd is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-30-2003, 01:13 AM   #39
Early-Retirement.org Founder
Developer of FIRECalc
dory36's Avatar
 
Join Date: Jun 2002
Posts: 1,826
Re: FIREcalc rewrite - suggestions?

wzd - thanks for the offer!

I'm debating how I will do the next rewrite.

One option is rewriting FireCalc using PHP instead of ASP/VB so I can move it to a server that has more capacity and less cost. How's your php?

I'm guessing I will get heads-down into the rewrite in about a month or so, after recovering from the move to land. :-/

Dory36
__________________
Often uninformed, seldom undecided.

Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover. Mark Twain
dory36 is offline   Reply With Quote
Re: FIREcalc rewrite - suggestions?
Old 10-30-2003, 03:15 AM   #40
Thinks s/he gets paid by the post
 
Join Date: Dec 2002
Posts: 3,875
Re: FIREcalc rewrite - suggestions?

Hey Dory, and how is the move to land coming. We are
interested.
__________________

__________________
MRGALT2U 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
Firecalc slays a strawman, deceives many hankjoy FIRE and Money 46 11-30-2010 04:14 PM
FIRECalc data dumps or saved runs for referencing during posts? Nords FIRECalc support 6 01-25-2007 07:09 AM
dory36: old vs. new firecalc results? halo FIRECalc support 31 05-29-2006 10:31 PM
Next round FIRECalc suggestions wzd FIRE and Money 1 11-25-2002 08:45 AM

 

 
All times are GMT -6. The time now is 04:53 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.