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Old 08-26-2013, 12:11 PM   #41
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7+ years into ER, I find I'm well within the range of possible outcomes given by FireCalc. My graph is similar to REWahoo's in post #2 above except my dip comes earlier since I retired a year later (a year closer to the 2008 - 09 swoon).

Admittedly, having the Great Recession come pounding on my door about two years in gave me a few moments of concern. Not only for the condition of my portfolio but for the well being of my extended family and the possibility of needing to help them out if layoffs or other issues became part of their life.

It's worked out OK. The portfolio has fully recovered in real terms. And there were no family financial disasters crying for help.
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Old 08-26-2013, 01:29 PM   #42
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Has there been more than a couple of people, if that, who've expressed regret here for retiring when they did?

Or said that they realized they weren't quite ready?

This is a self-selecting group so what are the chances that people will say ER wasn't the right thing to do, at least at the time they FIRE'd?
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Old 08-30-2013, 01:06 PM   #43
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Originally Posted by ERD50 View Post
Sure, 'dramatic change' could happen (heck, I've already seen my portfolio down ~ 40%). But wouldn't it still be better to have about a third more after that drop (roughly - the portfolio to support 3% versus 4% WR)?

This is getting to sound a little like saying that I decided not to carry a spare tire, because I could have two flats at the same time, and then that single spare won't help me. But the single spare will help in most cases.

There is no certainty, and we can't plan for every possible future extreme. I've decided to plan for at least what we have seen, and not ignore history.

-ERD50
I agree that almost certainly those of us that prepare will be better off in the case of dramatic change, if that should happen. The difference between ant and grasshopper will just be a bit smaller. But my tire analogy would be that we are twiddling inputs to predict that we'll get 9,999 miles out of these tires, but changing assumptions, it could be only 9,950 miles. But we've got 30 years of potholes to dodge, and any one road hazard hit squarely could knock 2,000 miles of life off the tires.
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Old 08-30-2013, 02:12 PM   #44
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I agree that almost certainly those of us that prepare will be better off in the case of dramatic change, if that should happen. The difference between ant and grasshopper will just be a bit smaller. But my tire analogy would be that we are twiddling inputs to predict that we'll get 9,999 miles out of these tires, but changing assumptions, it could be only 9,950 miles. But we've got 30 years of potholes to dodge, and any one road hazard hit squarely could knock 2,000 miles of life off the tires.
OK, but in your analogy you are grossly underestimating the differences I'm talking about. That minimizes the real effects.

9999/9950 is not even one-half of a % more. I'm talking in the range of 4% WR versus 3.2% WR. The 3.2% WR requires a portfolio that is 25% larger.

A 3.2% WR has been historically 100% safe for over 46 years. A 4% WR fails 5% of the time over 30 years. So to scale that to tire terms, say you were made the following offers:

A) A set of tires for $500 that had a history of blowing out 5% of the time within 30,000 miles.

B) A set of tires for $625 that had a history of zero blow outs and the tests ran to over 46,000 miles.

That sounds like cheap insurance to me, considering how dangerous, or just plain inconvenient a blow out can be.

-ERD50
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Old 08-30-2013, 02:19 PM   #45
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I created my own spreadsheet and retired at age 55, that was 10 years ago. I still use that spreadsheet to help my decisions in retirement. I don't spend a lot of time on financial management, I am a retired engineer and spend much of my time doing volunteer work. My point is that I don't live and breathe financial tools or topics. But my experience with FIRECalc has NOT made me a big believer. My approach was to use my actual data starting 10 years ago, including pension and SS info and enter it into FIRECalc. According to the results, the last 10 years of stock market performance would have to rank as one of the top 6 such periods in history for my assets to achieve the growth that has actually happened. I don't think so and I've not seen any headlines proclaiming 'unprecedented 10 year stock market performance', so I have to doubt the significance of FIRECalc. And it doesn't seem that anyone else has tried to benchmark FIRECalc with real world data.
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Old 08-30-2013, 02:39 PM   #46
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Originally Posted by larrytbm View Post
...My point is that I don't live and breathe financial tools or topics. But my experience with FIRECalc has NOT made me a big believer. My approach was to use my actual data starting 10 years ago, including pension and SS info and enter it into FIRECalc. According to the results, the last 10 years of stock market performance would have to rank as one of the top 6 such periods in history for my assets to achieve the growth that has actually happened. I don't think so and I've not seen any headlines proclaiming 'unprecedented 10 year stock market performance', so I have to doubt the significance of FIRECalc. And it doesn't seem that anyone else has tried to benchmark FIRECalc with real world data.
FIRECalc uses 'real world data' - I'm not sure what you are looking for?

And actually, the past ten years has been fantastic for the stock market:

SPY Historical Prices | SPDR S&P 500 Stock - Yahoo! Finance

That show that with divs, SPY has about doubled in ten years. That's a good thing for a retiree, no?

163.75 / 83.04 = 1.97x

Anyhow, I'm not sure what that has to do with FIRECalc - if you look there are a lot of lines, I'm sure some look very much like your path. The failures are the worst case scenarios, not the average, not the typical, not the median.

In fact, if you set it for ten years and a $40K/$1M spend/portfolio, here's where history has taken us:

Quote:
The lowest and highest portfolio balance throughout your retirement was $373,216 to $2,775,650, with an average of $1,272,708. (Note: values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
And the absolute values would be higher, due to inflation. Are you saying your results (adjusted for your spend/income) are radically different?

-ERD50
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Old 08-30-2013, 03:44 PM   #47
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Originally Posted by ERD50 View Post

And actually, the past ten years has been fantastic for the stock market:


Anyhow, I'm not sure what that has to do with FIRECalc - if you look there are a lot of lines, I'm sure some look very much like your path. The failures are the worst case scenarios, not the average, not the typical, not the median.



And the absolute values would be higher, due to inflation. Are you saying your results (adjusted for your spend/income) are radically different?

-ERD50
If the past 10 year performance of the stock market is one of the top 6 ten year periods out of 131, then everything is great. And if that is the case, then we aren't likely to see our portfolios perform as well in the next few decades as we have just experienced. Or, there is an unexplained 'new norm' that FIRECalc using historical data will not predict.
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Old 08-30-2013, 04:00 PM   #48
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If the past 10 year performance of the stock market is one of the top 6 ten year periods out of 131, then everything is great.
I'm curious where you are coming up with this 6/131 number. I'm not saying it's wrong, I just don't know how this fits in to the discussion.


Quote:
And if that is the case, then we aren't likely to see our portfolios perform as well in the next few decades as we have just experienced.
Well, generally the market runs in cycles. I lean towards thinking the next ten years will not perform as well, but anything can happen.


Quote:
Or, there is an unexplained 'new norm' that FIRECalc using historical data will not predict.
You lost me. FIRECalc does not predict anything.


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Old 08-30-2013, 05:07 PM   #49
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Originally Posted by ERD50 View Post
FIRECalc uses 'real world data' - I'm not sure what you are looking for?

And actually, the past ten years has been fantastic for the stock market:

SPY Historical Prices | SPDR S&P 500 Stock - Yahoo! Finance

That show that with divs, SPY has about doubled in ten years. That's a good thing for a retiree, no?

163.75 / 83.04 = 1.97x

Anyhow, I'm not sure what that has to do with FIRECalc - if you look there are a lot of lines, I'm sure some look very much like your path. The failures are the worst case scenarios, not the average, not the typical, not the median.

-ERD50
I believe the last 10 years have actually been less than average for the SP500 over the period that FIRECALC uses (starting in 1871). Here's a calculator you can play with that shows this. If you plug in the last ten years (or 1/2003 - 12/2012), you get an annualized return of about 7% and an inflation adjusted annualized return of about 4.5%. For the entire period, the values are 8.9% and 6.7%
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Old 08-30-2013, 05:48 PM   #50
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I'm curious where you are coming up with this 6/131 number. I'm not saying it's wrong, I just don't know how this fits in to the discussion.-ERD50
When I take my actual assets from 10 yrs ago, plus expenses, pension and SS and run FIRECalc, only 5 of 131 cycles have an end point higher than my current assets. That would make the past 10 years one of the best on record. Does that make sense? Is it really one of the top 6?




Quote:
Originally Posted by ERD50 View Post
Well, generally the market runs in cycles. I lean towards thinking the next ten years will not perform as well, but anything can happen.
-ERD50
It just seems to me that where the past 10 years ranks out of all 131 cycles should be very important. And since FIRECalc is using historical data, it seems that an output showing ranking should be ez. If the past 10 year cycle came in with a ranking of say 60/131 instead of 6/131, then something does not compute.

I also think that recent data 'colors' or shifts our judgement regarding risk, spending, 'should I retire early', etc. If we believe that the past 10 years was an average cycle (#60), or we really don't know, while it was really #6, then based on FIRECalc we will probably make worse decisions.
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Old 08-30-2013, 06:16 PM   #51
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I believe the last 10 years have actually been less than average for the SP500 over the period that FIRECALC uses (starting in 1871). Here's a calculator you can play with that shows this. If you plug in the last ten years (or 1/2003 - 12/2012), you get an annualized return of about 7% and an inflation adjusted annualized return of about 4.5%. For the entire period, the values are 8.9% and 6.7%
Fred123,
Thanks for the link, I just ran 10 year cycles back to 1872. Not as detailed as what FIRECalc uses since just 14 different cycles, but it shows that the most recent 10 years is one of the worst, it was 12 out of 14. Best was 1952-1962, second was 1982-1992. Still begs the question, is the last 10 years one of the best for investors or one of the worst?
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Old 08-30-2013, 06:27 PM   #52
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When I take my actual assets from 10 yrs ago, plus expenses, pension and SS and run FIRECalc, only 5 of 131 cycles have an end point higher than my current assets. That would make the past 10 years one of the best on record. Does that make sense? Is it really one of the top 6? ...
No, I don't think it makes sense. Please review my calculations and thought process to see if I'm off-base somewhere:

First, we can keep things simple and generic. Your pensions and spending are separate from whether the market was really the best 6/131. So here are my calcs:

A) I go to FIRECalc and enter a $1M portfolio, zero spend, and 10 year time frame.

B) As mentioned earlier, the 'market' about doubled in this time frame, and I checked and a more balanced approach (Wellesley) performed about the same. So I think 2X is close enough for expected gains of a 75/25 portfolio.

C) An inflation calculator shows ~ 27% inflation in that time, so I adjust the growth from $1M to $2M down to (.73 * $2M) = $1,460,000.
{edit/add: this is close to the number Fred123 supplied - 1.045^10 ~ 1.5529694 so $1,552,969}

D) Now look at the output of FIRECalc, and I eyeball $1,460,000 down around the bottom third of results. The top 6 cycles are up around $3M, around twice as good in performance.

You can run that FIRECalc profile here: link

Does that make sense?

Maybe your portfolio did much better? But that is still separate from stating that the 'market' was the best 6/131 cycles.

-ERD50
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Old 08-31-2013, 07:37 AM   #53
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The last 10 years stock market results have been good, but not stellar.

The Vanguard Index 500 Admiral shares with dividends reinvested have more than doubled and returned 7.63% annually. Total Stock has done a bit better at 8.38% annual return for the 10 years. However, the average annual return for 1926-2012 was 10% annually.

https://personal.vanguard.com/us/fun...tExt=INT#tab=1
https://personal.vanguard.com/us/fun...tExt=INT#tab=1
https://personal.vanguard.com/us/ins...io-allocations
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Old 08-31-2013, 10:18 AM   #54
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Yeah after the crash, didn't they say the S&P had been flat for 10 years?

Of course the past 5 has been good.
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Old 08-31-2013, 11:37 AM   #55
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Fred123,
Thanks for the link, I just ran 10 year cycles back to 1872. Not as detailed as what FIRECalc uses since just 14 different cycles, but it shows that the most recent 10 years is one of the worst, it was 12 out of 14. Best was 1952-1962, second was 1982-1992. Still begs the question, is the last 10 years one of the best for investors or one of the worst?
It all depends on particulars:

---Did you reinvest dividends? (you might not have, but FireCALC and other data points with ETFs might assume that, or might assume no dividends in total return)
---Did you/when did you rebalance?
---What specific investments did you have? IF there were only 3 or 4 to choose from in the entire investment world, then it's easy to compare. did you have some individual stocks, or were you 100% in S&P 500 and one Vanguard bond index fund? That will effect comparisons.
---What specific dates are you using? Using January 1 of one year vs December 31 of that same "year" for your starting/ending points can make a big difference.

While Firecalc and other calculators can be great tools, there is a limit, pending a lot of variables (a few of which are above) that can greatly effect your specific outcomes.
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Old 09-04-2013, 02:21 PM   #56
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Maybe I mis-understood FIRECALC, but I thought that it was missing updates for the last several years. Don't recall how many ... but if so, then using FireCalc to assess how it matched the last 10 years would be moot. Please correct me is I miss-state reality here.
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Old 09-04-2013, 08:11 PM   #57
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Maybe I mis-understood FIRECALC, but I thought that it was missing updates for the last several years. Don't recall how many ... but if so, then using FireCalc to assess how it matched the last 10 years would be moot. Please correct me is I miss-state reality here.
I think you are right, the data has not been updated.

But that isn't so important to the question that larrytbm has asked. He is trying to compare the past ten years with history. So take any of the published indexes, and compare to the 130 or so cycles that FIRECalc reports. He seems to be saying that the last 10 years are about #6 in rank among all those, and I don't see it.

See my post #52 in this thread.

-ERD50
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Old 09-04-2013, 08:52 PM   #58
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I think you are right, the data has not been updated.

But that isn't so important to the question that larrytbm has asked. He is trying to compare the past ten years with history. So take any of the published indexes, and compare to the 130 or so cycles that FIRECalc reports. He seems to be saying that the last 10 years are about #6 in rank among all those, and I don't see it.

See my post #52 in this thread.

-ERD50
Ahhhh ... got it. That makes more sense.
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Old 09-09-2013, 09:36 PM   #59
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We tracked our spending for quite a few years and the planned how we would allocate his pension, then mine, then our investments, etc. I would say we are semi-retired right now as we are both involved in consulting work that is quite lucrative, however, his pension would cover all of our lifestyle expenses and then some, so we are merely running up the score right now....we're still fairly young, so want to make sure the investments are well padded. It's weird because we look at each other and chuckle about where we are at this age (late 40s)----and consider ourselves so fortunate and yet we worked on it...for many years.

I've briefly looked at FIRECALC and several other types of caluculators, however, I rely more upon the data I've collected over the years regarding my spending and then what I need to earn/have as a stream of income to cover those costs. Having no mortgage really helps with that.
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