Has Firecalc ever been wrong for you? Do you trust it 90%?

[pb4uski]

+1 sounded way too corporate for my liking.

 

[sansha]

Sort of like jumping out of an airplane with a parachute that no one has ever tried before. The concept is there, and the chute should open, but it may be a hard landing. Or get tangled in wires. Or a nice soft landing.

Or it may not open at all in a very small percentage of cases.

Sort of like life. But few stop living out of fear. Ditto for ER - though I think fear stops more here. But some still evaluate the odds as reasonable and jump.

 

[cyber888]

Hi Sansha, the $37,800 is my projected expenses or $3,150 per month. Some will be withdrawn from nest egg and some will be supported by social security and liquid savings in bonds. So, basically, expenses = withdrawal for income.

My wife is an organic nut and very anti-GMO, so we barely eat out now and just cheap home cook meal. We can spend $16 - $21 eating lunch total for both of us when we eat out at restaurants because our area is cheap, and we do that maybe 2x or 3x a month, so we'll never spend more than $80/month eating out. We never go out for dinner, as we stay home after 6:00 pm, and make our dinner. We're not night people. Our lifestyle is pretty frugal.


To the rest of the people, thanks for you feedback. Yes, I know firecalc is only a model. But I just wanted to know if those who retired 10 or more years ago, it's still a successful model for you when you run it a couple of years back.

BIG TICKET ITEMS:

As for big ticket items. I plan to earn from part-time work if I decide to really retire next year, and save for those too. I'm still looking for another job for next year. A job that I love to do, not one which I loath now. I'm still looking to have more than $1 mil liquid nest egg for me and my wife,and still hoping for a good job offer. But I'm just calculating a conservative estimate just in case I'm not that lucky on that job hunt next year.

As for maintenance, our house is solid brick, about 13 years old, and very well made. So far, we have repaired the water heater ($150), repaired the microwave for a blown part ($130), re-stained the deck twice ($350), and replaced clothes washer ($450). So, about $1000 in 13 years for major stuff. And yeah, I replaced the lawn mower last year - $400. It's low maintenance.

As for car, I just bought a brand new car 2.5 years ago with about 14,000 miles now. I barely drive more than 6,000 miles a year, because my work commute is 12 minutes, and we vacation in 2 or 3 spots a year about 3-3.5 hours from us every year. So, I project I will be driving much less in retirement, and my car will last another 15 years. 15 X 6000 = 90,000 miles in addition to my 14,000 = 104,000 mileage. By that time, I will downsize my 3,400 sq.ft. home. to a 1,500 sq.ft. house, or even sooner, so we can save some more.

when you say 37,800 a year income, do you mean spending/withdrawal, or income, like a pension, extra income?

 

[Meadbh]

Yes, I know firecalc is only a model. But I just wanted to know if those who retired 10 or more years ago, it's still a successful model for you.

Unfortunately, the answer to this question may be subject to survivor bias. I've been reading this site since 2006. I recall several people who ERd based on projections that included historical success on FireCalc, but no longer post. Some of them may have "failed" at ER.

 

[NW-Bound]

Unfortunately, the answer to this question may be subject to survivor bias. I've been reading this site since 2006. I recall several people who ERd based on projections that included historical success on FireCalc, but no longer post. Some of them may have "failed" at ER.

But then, they might have panicked and sold out at the bottom in 2008-2009 instead of buying stock or rebalancing as the FIRECalc model does. We will never really know.

In the case of the OP, his withdrawal rate is so low because his expenses are not much more than SS. If he can stick with the low posted expenses, he is golden.

It is only at higher WR rates approaching the 3.5-4% WR, or generally higher than the current average 2% dividend of stocks that one should be concerned.

 

[REWahoo]

But I just wanted to know if those who retired 10 or more years ago, it's still a successful model for you.

Retired for 10+ years, FIRECalc still tells me that my withdrawal rate would have survived 95%

of the time based on history, the same as

it told me prior to pulling the plug.

Draw your own conclusion about whether you think this

constitutes being a successful model

 

[hesperus]

Once again, FIRECalc doesn't predict anything, it only tells us how a specific set of inputs (portfolio size, asset allocation, annual withdrawal amount, etc.) would have fared historically.

Yes, I'll reiterate what I said. I would like to see how someone who used it a decade ago compares the result to where they are now. People use it to see the probability of success in the future based on past returns. How's that different than seeing how one 'fared' historically? The idea underlying firecalc is that you are using it as a probability predictor of success in the future.

From Firecalc webpage:

How it works - the philosophy:
FIRECalc makes a single fundamental assumption:
If your retirement strategy would have withstood the worst ravages of inflation, the Great Depression, and every other financial calamity the US has seen since 1871, then it is likely to withstand whatever might happen between now and the day you no longer have any need for your retirement funds.

Look closely at the phrase "then it is likely to withstand whatever might happen between now and the day you no longer have any need for your retirement funds." Still say they're not promoting it as a predictor??
If that doesn't promote the use of firecalc as a predictor, than what does? Get serious. The site is littered with references to using it as a predictor. Bottom line is people ARE using it as a predictor. Period.

You guys are too enamored with nitpicking semantics, that you miss the underlying point

 

[REWahoo]

Rather than follow up with nitpicking semantics, I'll bid you a good day.

 

[fosterscik]

That isn't much less than average expenditures for age 65+ households ($39,173, 2011 figures):

http://www.bls.gov/cex/2011/Standard/sage.pdf

That's great baseline info. and it's always nice to see what average expenditures are. However it's from 2011 and more recent data have been tabulated. The latest (2014) values can be found here:
http://www.bls.gov/cex/2014/combined/sage.pdf
Total average expenditures for this age group rose to $43,635 for 2014.

 

[hesperus]

FIRECALC gives you the success rate using the inputs/assumptions the user provides based on more than 100 years of actual past history - it does not predict anything. It's entirely up to the user to decide whether past history is of any use as a predictor for the future...

nonsense. Firecalc promotes the use of the tool as a predictor of future success all over the site. See my previous post. Why else would the majority of people use it?

 

[cyber888]

For an example assume you lived in germany in 1912 and ran the german equivalent of fire calc back then (if it had existed), you would have been spectacularly wrong it had been 100 years since a really destructive war had been fought in Germany. The Pre WW1 german firecalc would not have modeled WW1 or the great inflation after it. Or assume that Yellowstone had a catastrophic eruption in 10 years etc. Firecalc being historically based does not have a long enough time baseline to include the financial effects of these disasters.

I guess with this apocalyptic scenario, even with a $2 million nest egg might not be enough.
Here are other scenarios that can wipe you out, even without war:
1) Hackers hack wall st. and empty your retirement account. So, your $2 million = will become $0.00.
2) Terrorist will blow up Wall St. big database sites containing your financial data - wipe your retirement balance to zero.
3) A big Tsunami will wipe out New York and Wall St from the face of the earth, or California will be wipe out with the San Andreas fault breaking off.

 

[HFWR]

Sure, trust it... After all, the stock market will always go up 6%-8%. Just ask the Japanese investors.

Point taken, but Firecalc does not assume returns will be 6-8%/yr. In fact, it doesn't assume anything...

 

[NW-Bound]

nonsense. Firecalc promotes the use of the tool as a predictor of future success all over the site. See my previous post. Why else would the majority of people use it?

I use it as a guide.

Let's think in simpler terms. If you can manage to keep up with inflation, then for 30 years of retirement you can draw 3.33% each year. 30 years X 3.33% = 100%.

FIRECalc and other calculators say that by investing in stocks and bonds you can get a bit higher, perhaps 4% WR. It's because over long periods stocks and bonds give you some real returns. Not much magic there to go from 3.33% to 4%.

Sounds reasonable, doesn't it?

PS. Remember that success here means that your balance could be near 0 at the end of the 30 years. It does not mean that your stash stays intact.

 

[Options]

nonsense. Firecalc promotes the use of the tool as a predictor of future success all over the site. See my previous post. Why else would the majority of people use it?

If "people" (whoever they are) are using any tool as a "predictor", they are making a mistake. There are no guarantees. As noted above, all calculators are models, and all models are wrong. Some are useful.

I use Firecalc/***** as tools based on historical MC models, and use FIDO's calculator based on MC. It took me a while to get over FIDO'S referencing their calculator as for "educational" purposes only, until I saw it in this light.

Being risk adverse, I also use liability matching to a certain extent until 70, and use SS for pseudo liability matching thereafter. Part of my risk mitigation/disaster recovery methodology is the possibility of laddered or deferred annuities at a later date, if needed.

 

[Midpack]

nonsense. Firecalc promotes the use of the tool as a predictor of future success all over the site. See my previous post. Why else would the majority of people use it?

Because the past is the only quantifiable metric we have, and we don't have a better guide. But it is the past. Not sure how they promote the tool as a predictor, the website plainly states otherwise...

It's a starting point in the decision making process, after we all apply our own risk tolerances, safety factors, personal predictions/expectations, etc. - that's all. People here have concluded they need anywhere from 75% to 200% (2X the 100% nest egg) of the & FIRECALC results provided - there isn't anything remotely like a right answer.

The OP opened with "wrong" and "trust" - those terms don't apply.

How can I be sure these results will work in the future?
FIRECalc's standard model uses the overall US stock market performance. Most 401k and similar retirement plans offer investment choices ("index funds") that are closely tied to the overall market performance, and the others generally tell you how they compare.
If the next few decades are even worse for the stock market than the worst that has ever been seen, including the Great Depression, then all bets are off.
But as one early retiree pointed out, there isn't much anyone can do to prepare for a comet hitting us!

How can FIRECalc predict future returns from past performance?
It can't. And it doesn't try. In fact, it tries to predict what will not happen. This might sound confusing, but it's really simple.
Consider an analogy: Suppose you are building a house in Honolulu. How do you decide how much heating and air conditioning capacity you will need?
We know that the lowest it has ever been there was 52°, on a day in February 1902 and again on another day in January 1969, and the hottest it has ever been was 95°, in 1994. Buying a system suitable for an Anchorage-style winter and a Phoenix-style summer would be a major waste of money that could be better used elsewhere.
FIRECalc works the same way, using stock market history and your portfolio and spending plan instead of weather history and furnace capacity. No one could predict the temperature for any specific given future date during the decades that house will be used, and no one can predict the future returns of your investments. But by knowing the historical worst cases, you'll have the information to judge if your savings are sufficient to handle the winter.

 

[MuirWannabe]

I think what OP may be looking for is somewhat addressed in the attached post REW has made about his own personal situation. He shows where his actual line tracks against all the Firecalc lines. I always found this encouraging.


Muir


http://www.early-retirement.org/forums/f28/firecalc-vs-rew-64705.html

 

[daylatedollarshort]

+1.

You will now get the rebuttal from the risk averse crowd that future interest rates will be lower, global economies are different, liability matching strategy and cutting expenses are the only ways for portfolio survival.

I will stick with my balanced portfolio and spend in retirement without worrying about drastically cutting expenses until the market drops by 50%.

The idea behind liability matching is not to grow richer than you are in retirement, but to avoid pushing a shopping cart under the overpass, by using liability matching for essential expenses. Anything needed for nice to haves like the around the world cruise can be invested in riskier assets. Interest rates are at historic lows globally and have been trending downward for decades:

"Government bond rates are at or near record lows all around the world. So are corporate bond rates, including junk bonds. Even the cost of equity capital is at or near an all-time low for most businesses. Whether you’re a government, a big corporation or a tiny startup, it has never been cheaper to obtain capital.

Interest rates of all kinds have been in decline since the early 1980s. For a while, that looked like a simple regression to the mean. The early '80s saw central banks tighten a lot, driving up rates in an effort to rein in inflation. But the decline that we’ve seen during the past 15 years or so -- and especially since the financial crisis -- goes way beyond a simple normalization. Something unusual is happening. "

Get Used to It. Low Rates Are Here to Stay. - Bloomberg View

Both Shiller and Bogle are predicting low investing returns for at least the next decade. Firecalc is based on a time when interest rates were higher and only takes one country's stock market into account. A 16 country historical look at equities gets less optimistic results. You can bet your retirement on historical returns if you you choose. I am not trying to change anyone's mind who wishes to use the 4% rule / mutual fund / Firecalc approach. I am just letting the risk adverse among us know what I wish I would have heard about myself years ago - there are other methodologies with less risk for funding retirement that are not well advertised because they are not as profitable for the large investment companies.

 

[photoguy]

Yes, I'll reiterate what I said. I would like to see how someone who used it a decade ago compares the result to where they are now.

Do a google search for Y2K retiree. Also take a look at these threads:

http://www.early-retirement.org/forums/f28/firecalc-and-the-hapless-y2k-retiree-69942.html

Raddr's Early Retirement and Financial Strategy Board • View topic - Hypothetical Y2K retiree update

 

[pb4uski]

Unfortunately, the answer to this question may be subject to survivor bias. I've been reading this site since 2006. I recall several people who ERd based on projections that included historical success on FireCalc, but no longer post. Some of them may have "failed" at ER.

WADR, that is a humongous jump to a conclusion. In that situation I would think that the member would have posted something about it.

 

[Corporateburnout]

You can bet your retirement on historical returns if you you choose. I am not trying to change anyone's mind who wishes to use the 4% rule / mutual fund / Firecalc approach. I am just letting the risk adverse among us know what I wish I would have heard about myself years ago - there are other methodologies with less risk for funding retirement that are not well advertised because they are not as profitable for the large investment companies.

I am sure the risk averse group among us must have seen your posts that constantly preach the same themes as liability matching strategy, overhead reduction, low interest rates, Mutual funds industry profits etc..

Firecalc was not the only tool I've used before I pulled to plug. I've also used Fido RIP, I-Orp and Flexible retirement planner which use MC calculations as well. I like historical estimates like FIRECalc because so few assumptions are made and to give me an idea of how well my portfolio would have fared in the last 100 years with all the calamities that happened in that period and to quote Californiaman "to answer a simple question - are we anywhere near reasonable".

We both have very different approaches. I don't try to influence people to adopt my approach but you seem to constantly preach yours. I'm more of an optimist and don't believe in the gloom and doom of the US and global economies.

 

[ERD50]

Originally Posted by daylatedollarshort View Post
You can bet your retirement on historical returns if you you choose. I am not trying to change anyone's mind who wishes to use the 4% rule / mutual fund / Firecalc approach. I am just letting the risk adverse among us know what I wish I would have heard about myself years ago - there are other methodologies with less risk for funding retirement that are not well advertised because they are not as profitable for the large investment companies.

...
[/B]We both have very different approaches. I don't try to influence people to adopt my approach but you seem to constantly preach yours. I'm more of an optimist and don't believe in the gloom and doom of the US and global economies.

I actually appreciate DLDS's posts on the subject. It isn't talked about very much otherwise, and I think it is an interesting alternative viewpoint.

I'm not afraid of volatility myself, but I still think this approach is worth considering. Maybe only to 'test' our own approaches.

Historically though, the market hasn't returned sub-zero real returns over an early-retirement length period. I'm not sure that long term investments like that are really that risky. But, if one feels more comfortable with inflation adjusted investments, and keeping withdraws to (Plan Years)/X, then why not?

-ERD50

 

[HFWR]

Granted, many of the discussions around these parts involve equities and bonds, but many here are landlords, have pensions, have annuities, have no mortgage, have a mortgage, etc. Some here use dividends only, some use total return, some have cash buried in a Maxwell House can out back...

We have followers of Bogle, Pfau, Dent, Talib, Kotlikoff, Schiller, Cramer...

There are bigwigs, dot-com millionaires, military pensioners, working stiffs...

And we're all above average!

 

[Major Tom]

you forgot.... the sky is falling down too.

The other thing you forgot is that "this time, it's different"

 

[daylatedollarshort]

We both have very different approaches. I don't try to influence people to adopt my approach but you seem to constantly preach yours. I'm more of an optimist and don't believe in the gloom and doom of the US and global economies.

I am not sure what you want me to do - stop posting because I have a different opinion than you? Alternatively, we could continue have civil pro and con discussions of the different approaches in threads like this without negative labels like preaching, and people like ERD50, who may find my ideas of interest, can keep reading them and you can choose to ignore them.

 

[MichaelB]

Alternatively, we could continue have civil pro and con discussions of the different approaches

I vote for this