Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 07-25-2014, 12:05 PM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,959
Quote:
Originally Posted by retirementguy1 View Post
I think I remember William Bernstein or Bob Clyatt saying that anything over 80% on Firecalc (and probably any retirement calculator) is meaningless. Choose an AA that works for you and rebalance when necessary.
Many people continue to misquote him, unfortunately that's well outside the context of Dr B's statement from the Retirement Calculator From Hell series. He pointed out that based on the long arc of history, a larger geopolitical or some other unpredictable event may override any market circumstances we've seen (which already includes some substantial geopolitical events) - particularly in the USA.

Barring some historical catastrophe, a probability of 160% (ie, 2% WR) is still statistically twice as safe as 80% (ie,4% WR). A comet might hit your house, throwing any probability of success out the window - but planning for the comet to miss has some merit...

http://www.efficientfrontier.com/ef/901/hell3.htm
__________________

__________________
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
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 07-25-2014, 12:29 PM   #22
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by CaliforniaMan View Post
The primary flaw in FIRECalc, as I understand it, is that it does not update the value of bond holdings as interest rates change. Depending on the duration of your bond portfolio, the value will of course increase or decrease with decreasing or increasing interest rates and this change is not used (as I understand it) in the FIRECalc rebalancing or portfolio values and survival results.
I don't think this is correct. FireCalc uses total returns for each asset class, so it would implicitly take into account urnealized capital gains and lossses on bonds. What it doesn't do is break-out the income and price-change for each asset class.
__________________

__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 07-25-2014, 01:57 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
haha's Avatar
 
Join Date: Apr 2003
Location: Hooverville
Posts: 22,380
Quote:
Originally Posted by retirementguy1 View Post
I think I remember William Bernstein or Bob Clyatt saying that anything over 80% on Firecalc (and probably any retirement calculator) is meaningless. Choose an AA that works for you and rebalance when necessary.
But how do you determine what AA "works for you".

I thought that was what the calculators were for?

Ha
__________________
"As a general rule, the more dangerous or inappropriate a conversation, the more interesting it is."-Scott Adams
haha is offline   Reply With Quote
Old 07-26-2014, 03:07 PM   #24
Confused about dryer sheets
 
Join Date: Mar 2013
Posts: 3
Re- longer time horizons in Firecalc. If you want a really real worst case scenario, say for a 40 year horizon, put in a 20 year horizon -- then take the lowest from that and put it into another 20 year horizon. (Or use the average if you don't want to be super negative)

The idea is a shorter time horizon gives you more "runs" -- ie, if you put in a 60 year time horizon then you are culling out the randomized last 59 years from your data set.
__________________
Longview is offline   Reply With Quote
Old 07-26-2014, 03:25 PM   #25
Full time employment: Posting here.
gcgang's Avatar
 
Join Date: Sep 2012
Posts: 924
Quote:
Originally Posted by razztazz View Post
Bernstein was referring to using Monte Carlo systems. Using historical data of every kind and cause of societal collapse, he, apparently, concluded we all have only an 80% chance of living a normal lifespan.

As all retirement planner calculators are dealing with uncertainty of future returns, your TARGET success rate with the 2000+ simulations run on a good Monte Carlo simulation SHOULD be in the 75-90% range. Don't concern yourself with the top or bottom 10%, just re-run periodically to adjust your AA and spending to stay 75-90%.

If you are getting close to 100%, you are in effect leaving a much larger legacy than you intended in your inputs, and are taking more risk than you need.


Sent from my iPad using Early Retirement Forum
__________________
In theory, there's no difference between theory and practice. In practice, there is. YB
gcgang is offline   Reply With Quote
Old 07-27-2014, 01:43 AM   #26
Recycles dryer sheets
 
Join Date: Jun 2002
Posts: 374
Quote:
Originally Posted by FIRE'd@51 View Post
I don't think this is correct. FireCalc uses total returns for each asset class, so it would implicitly take into account urnealized capital gains and lossses on bonds. What it doesn't do is break-out the income and price-change for each asset class.
Have a look at this post and those that follow:

FIRECalc and the Hapless Y2K Retiree

I don't think this issue has been resolved.
__________________
Cb is offline   Reply With Quote
Old 07-27-2014, 09:52 AM   #27
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by Cb View Post
Have a look at this post and those that follow:

FIRECalc and the Hapless Y2K Retiree

I don't think this issue has been resolved.
I stand corrected. I hadn't read the linked thread carefully before. To do a quick check, I ran FireCalc with zero spending and fees and a 100% 30-yr US Treasury portfolio beginning in 1983 and looked at the year-by-year results in a spreadsheet. The nominal value of the portfolio column never decreased, even though there were several years of negative total return, and the real (inflation adjusted) value only decreased once (2009). My apologies to California Man.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 07-28-2014, 04:05 PM   #28
Thinks s/he gets paid by the post
Live And Learn's Avatar
 
Join Date: Feb 2012
Location: Tampa Bay Area
Posts: 1,688
Quote:
Originally Posted by Longview View Post
Re- longer time horizons in Firecalc. If you want a really real worst case scenario, say for a 40 year horizon, put in a 20 year horizon -- then take the lowest from that and put it into another 20 year horizon. (Or use the average if you don't want to be super negative)

The idea is a shorter time horizon gives you more "runs" -- ie, if you put in a 60 year time horizon then you are culling out the randomized last 59 years from your data set.
I agree that the longer horizons give overly rosy results. But two back to back 20 year FIRECalc runs assumes twp back to back worst case scenarios, which I find overly gloomy and hopefully unrealistic.

To combat this I use one 30 year run, look at the lowest remaining value and decide if it will be enough to get me through the next 10 years assuming that all I do is keep up with inflation (ie: I take the lowest value and divide by 10).
__________________

__________________
"For the time being no discipline brings joy, but seems grievous and painful; but afterwards it yields a peaceable fruit of righteousness to those who have been trained by it." ~
Hebrews 12:11

ER'd in June 2015 at age 52. Initial WR 3%. 50/40/10 (Equity/Bond/Short Term) AA.
Live And Learn 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
Will US Equity Weakness of Last Few Days Continue? haha FIRE and Money 4 11-10-2010 01:21 PM
NY Times article on AIG - New Weakness walkinwood FIRE and Money 1 07-31-2009 05:26 PM
What is your one material weakness ? Moemg Other topics 86 07-17-2007 12:05 PM
Material Weakness Poll TromboneAl Other topics 18 07-13-2007 07:47 PM
FIREcalc rewrite - suggestions? dory36 FIRE and Money 74 02-13-2005 09:20 AM

 

 
All times are GMT -6. The time now is 04:01 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.