Has FIRECalc ever let you down?

[Rich_by_the_Bay]

I am a big FC fan and find it to be the best retirement calculator I have personally used. Of course, the data you enter can easily be wrong and then the results would be misleading or dangerous to your planning. Inflation is a good example -- just a 1% error can change your success rate considerably. Many of us run numerous scenarios under a wide range of assumptions to partially accommodate that margin of error (kind of a poor man's sensitivity analysis).

Has FC has ever misled you, been wrong in its logic, or revealed errors, deficiencies, or assumptions which might have led to serious planning errors, even though your input was acceptable to you? I'm especially interested in the experience of those already FIREd who relied on FC to guide the decision. Has it been as infallible as it seems to be?

For the record, I have not run into such deficiencies myself -- unexpected results were usually due to my input errors.

 

[W2R]

I am not yet retired, but just wanted to caution people not to base their retirement finances solely on ANY calculator. FIRECALC is the best one I have seen, but I only use it as a double-check. I think the kind of sensitivity analysis that you refer to is one of the best uses for FIRECALC, rather than using it to determine how much to spend.

Personally I worry that FIRECALC is too optimistic with my portfolio. It always seems to give me more money to spend than I think would be prudent.

 

[Bikerdude]

I use FC primarily to validate my retirement scenario assumptions. I use other calculators, including Monte Carlo and my own spreadsheets to compare results. I always use the historical inflation rates canned in FC so I have to trust they are representative of what will occur in the future. FC has not, to my knowledge, given me false results however I will probably never be able to verify it. This is because personally I do not have the stomach to follow the FC SWR during market turmoil like we have recently experienced. I also include a "cushion" on top of the FC amount that shows 100%+ success rate. I have, and will not hesitate, in the future to cut my SWR or defer unnecessary expenditures until market conditions improve.

FC is a tool, that when combined with others, gives you the confidence to take that step into retirement. That being said, I would caution anyone who believes their retirement will ultimately pan out precisely as it does on paper.

 

[REWahoo]

Has FC has ever misled you, been wrong in its logic, or revealed errors, deficiencies, or assumptions which might have led to serious planning errors, even though your input was acceptable to you? I'm especially interested in the experience of those already FIREd who relied on FC to guide the decision. Has it been as infallible as it seems to be?

I'll let you know in 20 years or so.

 

[Sarah in SC]

I'll let you know when we show up like dirty hippies in the Airstream on your doorstep, looking for a meal and a shower.

 

[REWahoo]

This sounds like a question asked by someone in the last 90 days leading up to pulling the plug...

 

[Notmuchlonger]

This sounds like a question asked by someone in the last 90 days leading up to pulling the plug...

Sure does! might need to change his sig to 95.7893% retired

 

[Rich_by_the_Bay]

This sounds like a question asked by someone in the last 90 days leading up to pulling the plug...

Well, a little more cushion never hurt anyone .

 

[bbbamI]

Well, a little more cushion never hurt anyone .

I like that attitude.....

 

[REWahoo]

Well, a little more cushion never hurt anyone .

That's the same line I used on DW when she asked "Does this dress make my butt look big?" Hope you do better with it than I did...

 

[Sarah in SC]

Whooooo, that REWahoo needs to change his name to RandyWahoo after some of these posts the last few days! Sassy! Has the young wife been putting something in your coffee?

 

[REWahoo]

Has the young wife been putting something in your coffee?

Yes, but if I detect even the slightest hint of arsenic I don't drink it.

 

[Moemg]

After the meltdown I reran firecalc with my new portfolio and it still gave me 100% safe so I hope it's correct or maybe it just did want to see a grown woman cry .

 

[Rustic23]

I am not sure how anyone would know if FC has let them down. The market is down, FC said it may go down some years, FC said it would recover soon enough and fast enough so ones retirement would be OK for a 25 or 30 year period. Now I don't know how long FC has been around but I doubt 25 years. So, I don't see how enough time has passed. Now if FC said you would be OK, and you are now broke, that may be a different story. So far, I have not heard any such stories here.

 

[W2R]

I am not sure how anyone would know if FC has let them down. The market is down, FC said it may go down some years, FC said it would recover soon enough and fast enough so ones retirement would be OK for a 25 or 30 year period. Now I don't know how long FC has been around but I doubt 25 years. So, I don't see how enough time has passed. Now if FC said you would be OK, and you are now broke, that may be a different story. So far, I have not heard any such stories here.

I may be completely out of line, because I am not familiar with Firecalc and have not seen the code. Still, if Firecalc gives you a 100% probability of success, I would suggest that the best interpretation of that is that given what the market has done historically, you would not have failed given your parameters in those market conditions.

Although this gives you a pretty good idea of where you stand, I would not interpret this output in a predictive sort of way since (as far as I know) the model is based on historical data, not on simulated data based on market predictions.

So, I still would not think that Firecalc had let me down, even if it gave me 100% probability of success and I was now broke (which thank heavens, is not my situation). OK, maybe I am quibbling over minutia.

 

[Bikerdude]

I may be completely out of line, because I am not familiar with Firecalc and have not seen the code. Still, if Firecalc gives you a 100% probability of success, I would suggest that the best interpretation of that is that given what the market has done historically, you would not have failed given your parameters in those market conditions.

Although this gives you a pretty good idea of where you stand, I would not interpret this output in a predictive sort of way since (as far as I know) the model is based on historical data, not on simulated data based on market predictions.

So, I still would not think that Firecalc had let me down, even if it gave me 100% probability of success and I was now broke (which thank heavens, is not my situation). OK, maybe I am quibbling over minutia.

I agree with W2R. You input your retirement $ amount, asset allocation and time period of your planned retirement and FC runs a rolling time analysis based on historical market performance back to 1871. So if you input 30 years, it compares success rates based on you retiring in every year since 1871 for a 30 year period. That's a lot of different 30 yr. retirements when many good and bad things happened.

 

[Nords]

(11% retired)

Did I miss an earlier announcement? Didn't that use to say "10%"?

 

[REWahoo]

Inflation.

 

[Rich_by_the_Bay]

Did I miss an earlier announcement? Didn't that use to say "10%"?

It changed months ago. I started making rounds 15 minutes later than before.

 

[Sarah in SC]

You rebel doc, you! lol

 

[Gone4Good]

Has FC has ever misled you, been wrong in its logic, or revealed errors, deficiencies, or assumptions which might have led to serious planning errors, even though your input was acceptable to you?

Well the other day I updated a "FIRECalc like" spreadsheet I put together using data from Japan instead of the US (Nikkei index, Japanese government bond yields and prices, Japanese CPI). It wasn't pretty. Assuming the retiree pulled the plug after the Nikkei had already lost 40% of its peak value (like now with the SPX) a 3% withdrawal rate and a 60/40 equity allocation was close to failing after 20 years. On the positive side, a 100% bond portfolio was surviving nicely.

Then I looked at the ICEX (Icelandic stock exchange) down like 95% with inflation in Iceland running about 19%.

Then I started seriously thinking about the value of marketable skills.

 

[Lsbcal]

I really like FIRECalc and have the spreadsheet data from it that told me how things would have gone in the Great Depression and also the great inflation of the 70's. I knew I'd be a nervous wreck if the portfolio went down as badly over several years like the worst case that FIRECalc showed -- even if it had a 100% success rate.

BUT, it does not prepare one for the emotional turmoil of watching things go down. The decline last fall was kind of shocking to me even though I've been investing for many years and consider myself a thoughtful, careful investor. We are down to about 77% of what we had in Oct 2007 including expenses and all.

So...even at this point I'm making some portfolio changes that hopefully will get us a smoother ride going forward. Spent a lot of time since last September crunching models and looking at historical results.

 

[Lsbcal]

Well the other day I updated a "FIRECalc like" spreadsheet I put together using data from Japan instead of the US (Nikkei index, Japanese government bond yields and prices, Japanese CPI). It wasn't pretty. Assuming the retiree pulled the plug after the Nikkei had already lost 40% of its peak value (like now with the SPX) a 3% withdrawal rate and a 60/40 equity allocation was close to failing after 20 years. On the positive side, a 100% bond portfolio was surviving nicely.
...

That's why we have some reasonable percentage of international exposure in equities. I've got one model that looks at the Nikkei and SP500 and moves between them based on the price changes over recent months. For 1985-2009 the results were Nikkei CAGR=-1.6% whereas SP500 had CAGR=6.6% (without dividends). The model does less then 1 move per year and had CAGR=7.5%. So if you believed the Japan market was great in the 80's but were willing to move your money between major developed markets you would have done OK. Of course, this is only backtested results but I'm willing to take that risk.

 

[jdw_fire]

Well, a little more cushion never hurt anyone .

that sounds like the "1 more year syndrome"

 

[Rich_by_the_Bay]

that sounds like the "1 more year syndrome"

JDW - it's a longstanding joke around here -- just making sure REW knows I haven't retired yet.