Help ASAP: FIRE Calculator

[tangomonster]

I'm about to capitulate and need to run a FIRE calculator....can't find one. They all seem to be about planning for retirement. I'm already in retirement. I need to know what our chances are of outliving our funds (what's left of them) in fixed investments.....

Can someone steer me in the right direction?

[REWahoo]

You're not familiar with FIRECalc, developed by the founder of this forum?

[haha]

Quote:

Originally Posted by tangomonster I'm about to capitulate and need to run a FIRE calculator....can't find one. They all seem to be about planning for retirement. I'm already in retirement. I need to know what our chances are of outliving our funds (what's left of them) in fixed investments..... Can someone steer me in the right direction?

Did you go ahead and close out your stocks?

If you are really trying to go it with bonds, see how close you are with spending only the real return on TIPS. Any other approach speculates. Speculates against inflation, which seems to be to be a bad long term bet. Or speculating by buying corporates, which might be better than stocks, or might not.

I do think that if you can make it on TIPS real return only, you might do worse than to just buy some long term TIPS. I think you are young, so you will have re-investment risk. But there should be opportunities to roll out your maturities as you go along.

In a low treasury rate environment, you will have to take credit risk or duration risk to beat inflation even before tax. (With nominal bonds.)

Overall, that seems a poor bet.

Ha

[tangomonster]

REW, yes, I did use the FIRE calculator two years ago before retiring. But I wanted to check out how it would do now that we have lost 25% of what we had when we FIREd. All the FIRe calculator lets me do is put in our annual spending, our portfolio, and amount of years we expect to live. It doesn't ask for a rate of return, like the 3 to 4 percent that I would get in fixed. And it's not giving me a success rate....?

Ha, I've not capitulated yet. But with the market going down everyday, I just realize it's going to take that much longer to recoup, so I may as well have the peace of mind and just accept that my net worth is 25% less than it was two years ago and that I probably wouldn't have FIREd on this lesser amount.

I just want to see if it's at all possible that I won't outlive my assets----I'm 54, likely to live 40 more years....

[REWahoo]

Quote:

Originally Posted by tangomonster All the FIRe calculator lets me do is put in our annual spending, our portfolio, and amount of years we expect to live. It doesn't ask for a rate of return, like the 3 to 4 percent that I would get in fixed. And it's not giving me a success rate....?

Tango, take a deep breath...

Sounds like you aren't using all the features of FIRECalc, specifically the options provided on the row of tabs located just under the green FIRECalc heading. Be sure to go through all of them to input the specifics of your situation. The "Portfolio" tab allows you to select and input all sorts of options about your expected rate of return.

[tangomonster]

Thanks, REW...I used the tabs but it doesn't seem to be working---just give the results of a $750,000 that wasn't mine....

[DblDoc]

Quote:

Originally Posted by tangomonster REW, yes, I did use the FIRE calculator two years ago before retiring. But I wanted to check out how it would do now that we have lost 25% of what we had when we FIREd. All the FIRe calculator lets me do is put in our annual spending, our portfolio, and amount of years we expect to live. It doesn't ask for a rate of return, like the 3 to 4 percent that I would get in fixed. And it's not giving me a success rate....? Ha, I've not capitulated yet. But with the market going down everyday, I just realize it's going to take that much longer to recoup, so I may as well have the peace of mind and just accept that my net worth is 25% less than it was two years ago and that I probably wouldn't have FIREd on this lesser amount. I just want to see if it's at all possible that I won't outlive my assets----I'm 54, likely to live 40 more years....

Tangomonster take another deep breath.

When you ran FIRECalc 2 years ago it ran through scenarios as bad and worse then what we have seen to date and you presumably had a comfortable success rate. Now is not the time to capitulate unless you had some fundamental flaw in your plan. If you have a cash/fixed income cushion to last several or more years and can trim expenses now is the time to do so. Don't rebalance into equities if it means significantly reducing your cushion but understand your long term return and how quickly you recover will be affected. You have to balance that against your sleep at night comfort zone.

DD

[REWahoo]

Quote:

Originally Posted by tangomonster Thanks, REW...I used the tabs but it doesn't seem to be working---just give the results of a $750,000 that wasn't mine....

Are you entering the amount of your portfolio and expected life expectancy in the "Start Here" box on the very first page of FIRECalc? I ask because the portfolio amount defaults to $750,000 for 30 years if you don't input your own numbers.

[ERD50]

do you have pop-ups disabled? The "results" window opens in a new window. Depending on browser setup, this might be blocked, or show up *behind* another window, unseen. I think that threw me a time or two.

Oh, don't forget to exhale, too!


-ERD50

[Finance Dave]

Not sure what you're looking for, but this is one of my fav calculators since it includes Monte Carlo simulation. You can accept defaults if you're not sure what to use.

Monte Carlo Retirement Planning

[tangomonster]

Deep. Breaths. And exhales, too (thanks, guys for the reminder as well as all your help).

Not only has the past weeks eroded my net worth, but it's also zapping my self-image as a calm person and a sophisticated investor.

I did get the FIRE Calc to work some (but geessh, all those lines are do distracting!). As you said DD, it still looks like 100% success rate, although there were some problems---I wanted to do it as a fixed income portfolio with muni bonds...didn't have that as an option, so I did corporate bonds, setting it at a low interest rate for the return.

FDave, I liked playing with the Monte Carlo calc, although there was a scenario where I would have run out of money---and I think in about 20 or 25 years...with a high volatility rate of 7.5%, which of course doesn't pertain if it's in fixed income stuff only earning 3 percent.

I guess I just want out of the market. When to bail out is anyone's guess. I do anticipate that there will be a 30% upswing at some point----but I do think it could take years---and there will be further declines. Tell me if this is illogical reasoning/math:

Right now I have about a million left in the market (going down every day). If I cashed out now and put it in 4 percent munis, in 5 years I would have 1.2 million (reinvesting the interest).

But if I leave the 1 million in the market trying to recoup some of what was lost, at this rate, it may very well go down to 700,000. If there is an upswing of 30% within the next five years, I may then have $910,000---still less than the $1.2 million. I know that it COULD grow even more than 30% within five years, but does anyone think that's even likely?

I just feel like the more I wait, the more it goes down and thus I will then be trying to recoup what I lost when hesitating to bail out.

[REWahoo]

Quote:

Originally Posted by tangomonster But if I leave the 1 million in the market trying to recoup some of what was lost, at this rate, it may very well go down to 700,000.

Or worse. Or not.

Quote:

Originally Posted by tangomonster If there is an upswing of 30% within the next five years, I may then have $910,000---still less than the $1.2 million.

Or you could have $1.3 million...or more.

Quote:

Originally Posted by tangomonster I know that it COULD grow even more than 30% within five years, but does anyone think that's even likely?

Who knows? What we do know is your move to fixed investments will probably net you around $200,000 over 5 years --- I say probably since nothing is guaranteed. If you think that will get you where you need to be, fine. My numbers look very similar to yours, and with 8+ years of expenses in cash and bonds (including SS income) there is no way in heck I'm bailing out now. I strongly believe we are close to the bottom - certainly a lot closer than we were a year ago. I've got staying power and to sell out now will insure I'm not positioned to benefit from the eventual turnaround.

But you gotta do what you gotta do...

[tangomonster]

All your points are good ones, REW----but----(not willing to surrender my cloud of gloom and doom):

Do you really see any meaningful upswings between now and the end of the year, with end-of the-year accounting and consumer spending decreasing (the holiday season will be dismal).

According to this Yahoo article:

Stocks plunge for third straight session - Yahoo! News

"There just doesn't appear to be an end in sight to the bad news," said Anton Schutz, portfolio manager of the Burnham Financial Industries Fund and the Burnham Financial Services Fund. "The selling is relentless."

There is some concern that the bailout funds are being depleted rather quickly, said Jason O'Donnell, senior research analyst at Boenning & Scattergood.

But investors are worried that a severe pullback in consumer spending — which drives more than two-thirds of the U.S. economy — will prolong a global economic downturn.

The market started the day falling on more signs that companies are being hurt by a severe pullback in consumer spending. Macy's Inc. said it lost $44 million in the third quarter as sales at the department store retailer fell more than 7 percent. And consumer electronics retailer Best Buy Co. slashed its fiscal 2009 guidance on fears that consumer spending will erode even further.


Meanwhile, Morgan Stanley, suffering from the ongoing losses on Wall Street, outlined plans to cut 10 percent of staff in its institutional securities group — its biggest business that covers everything from investment banking to stock trading


The bleak reports, which followed disappointing news from coffee retailer Starbucks Corp. and homebuilder Toll Brothers Inc. earlier in the week, made it increasingly clear to investors that companies across the economy are suffering from the aftermath of the housing and credit crises.

And to top it all, AmEx is even asking for a government boost to help its balance sheets!

So---can there be a rebound in sight in the next year or two?

[Running_Man]

Quote:

Originally Posted by tangomonster I'm about to capitulate and need to run a FIRE calculator....can't find one. They all seem to be about planning for retirement. I'm already in retirement. I need to know what our chances are of outliving our funds (what's left of them) in fixed investments..... Can someone steer me in the right direction?

From what I have been reading of your posts in the last few days, you could easily handle having 1 million when it could have been 1.3 million but cannot handle 700K when you could have 1 million.

My recomendation is that you sell all and move into short term so you can think clearly without pressure of losses upon you. Is this the best move? Only the future will show that but it will allow you to think and adjust your finances as you decide best course for your future. I take it these down days are just killing you.

[REWahoo]

Quote:

Originally Posted by tangomonster All your points are good ones, REW----but----(not willing to surrender my cloud of gloom and doom): Do you really see any meaningful upswings between now and the end of the year... So---can there be a rebound in sight in the next year or two?

You are asking me two unanswerable questions - and I can't see beyond my keyboard.

To your point, I'm not expecting a turnaround anytime soon - but I am expecting one long before my 8+ years of living money runs out.

Market investing for most of us some of us me is a long term proposition. Patience has been rewarded in the past and I see no reason to believe it won't be rewarded in the future.

[tangomonster]

REW, well, yes, you are right----long-term investors HAVE always been rewarded---I wouldn't have been able to early retire without being invested in the market, not on $80,000 combined income between the two of us and no pensions. I guess I can't totally disparage the stock market when it was so good to me/us in the past. But I've never experienced such losses---while being retired (I could have handled it just a drop better if we were still working, measly though our salaries were, although I would have been crying the blues about not being able to retire as early as hoped). And there were never so many compounding factors that made the economy seem DEA (dead on arrival, with no hope of resucitation).

RM, you astutely picked up on the fact that some of my inability to handle this is due to some arbitrary numbers that seem to tie into my comfort level (like round numbers) and are not really based on the actual financial reality of whether I could still live on the ever-dropping portfolio. I seem to be fixated on certain numbers---like that a million is okay, but $999,950 isn't! I may be able to explain this irrationality on my husband who has always insisted on celebrating certain nukmerical acgievements in our portfolio (I never saw the point since being invested 60% or more in equities, I always knew that it could go down the very next day from that specific number!).

I do think it may be right for me to sell, but not today with it going down another 411 points. One problem is that we are just in mutual funds, so you can't sell at a certain price during the day---just have to take end of the day prices.

[REWahoo]

Quote:

Originally Posted by tangomonster REW, well, yes, you are right----long-term investors HAVE always been rewarded---I wouldn't have been able to early retire without being invested in the market...

Same here. And I'm gonna dance with who brung me.

Quote:

Originally Posted by tangomonster But I've never experienced such losses---while being retired (I could have handled it just a drop better if we were still working...

You are preaching to the choir. Almost (but not quite ) wish I was still employed.

Quote:

Originally Posted by tangomonster And there were never so many compounding factors that made the economy seem DEA (dead on arrival, with no hope of resucitation).

Hey, we've got the market just where we want it - on the ropes, the financial journalists throwing in the towel. All that's needed is another Business Week "The Death of Equities" cover story and we're off and running again!

[Gotadimple]

TM:

I don't believe the market is DOA (dead on arrival). To believe that means there are no businesses of any size in the United States or the world that are viable economic entities, i.e., they make a profit generally for their owners and buy from others to maintain their busines that provides goods or services.

But, I need to ask you another question: If we were not watching Mr. Market dealing with his case of 'flu,' (and I really hate it when he's sick to his stomach) what was your family's mental preparedness for watching the nest egg fall over time as you consumed your nest egg. Were you and your husband prepared to see the total balance fall?

This is an important question to me, after years of accumulation, to get myself ready for the fact the balance was going to go down now that I was drawing on it.

-- Rita

[Bikerdude]

Maybe all you have to do is tweak your portfolio a little and not have to make a drastic change. say going from 60/60 to 40/60 slowly into rallies. However the forum would need more information to help.

Are you able to live on what your portfolio kicks off in interest and dividends?

How will SS impact what you need from your portfolio?

Do you have a cash cushion? How many years when added to interest and dividend income will it last?

How is your portfolio invested (asset allocation)?

[Jarhead*]

Quote:

Originally Posted by REWahoo Or worse. Or not. Or you could have $1.3 million...or more. Who knows? What we do know is your move to fixed investments will probably net you around $200,000 over 5 years --- I say probably since nothing is guaranteed. If you think that will get you where you need to be, fine. My numbers look very similar to yours, and with 8+ years of expenses in cash and bonds (including SS income) there is no way in heck I'm bailing out now. I strongly believe we are close to the bottom - certainly a lot closer than we were a year ago. I've got staying power and to sell out now will insure I'm not positioned to benefit from the eventual turnaround. But you gotta do what you gotta do...

ReWahoo and Ha:

As you both are aware, I very seldom read or post anymore. However, I

find it interesting to see how retirees living off invesments only are

handeling the recent downdraft we are having.

Before spending any more time on Tango, I'd suggest you check out her

original post on 3-2-06. (I have a pretty fair memory for an old phfart)

Tango: You are in dire need to find something to occupy your mind with.

Sorry guys, you don't get the time back, but what the hell you're retired.