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View Poll Results: FIREcalc vs. Reality
I'm on FIRE! 7 15.56%
I'm cautiously optimistic. 16 35.56%
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Old 12-22-2014, 12:30 PM   #21
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Originally Posted by REWahoo View Post
Since you want to look at 40 year periods, FIRECalc would would begin with the period 1871-1911, then 1872-1912, 1873-1913, and subsequent periods all the way up to and including the 40 year period ending in 2013 (1973-2013), including the years of 1974 through 2013 in the appropriate sequences.

It is accurate to say FIRECalc looks at no 40 year periods "beginning 1974 or later" as there aren't 40 years of data after 1973. That is until FIRECalc gets updated next year with 2014 data...
Yes, that is what I was trying to say.

To take advantage of more/different data, I choose 20 years, rather than 40, and use 1/2 of my assets. I am not sure if that is still statistically better or worse than 40 years and 100% of my assets, but I run it just to see.

Then I use 10 years/25%, and some other options. It would be interesting to see a loop back to the data, (maybe an option?) just to get more recent starting periods. I am not sure if it would be better or worse, just different.
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Old 12-22-2014, 12:54 PM   #22
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Senator - a method suggested a while back to address the longer retirement (but it is exceptionally pessimistic) is to do the following:

Run firecalc with full portfolio for 10 years.
- Extract the LOWEST number as final amount.
Plug that in for 10 years.
Rinse and repeat 2 more times.

BUT - and this is a big but - this is repeating the same WORST 10 years, back to back, 4 times in a row. Statistically, that's not happening in real life. But it is a very conservative approach.

Unfortunately - it will put you in OMY mode till you die.

If you really want to get gloomy - do it for a 3 year or 5 year period... so you repeat back to back bears with no bulls. It's not a realistic model - but it might justify OMY forever for those that are afraid to pull the plug.
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Old 12-22-2014, 01:22 PM   #23
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Senator - a method suggested a while back to address the longer retirement (but it is exceptionally pessimistic) is to do the following:

Run firecalc with full portfolio for 10 years.
- Extract the LOWEST number as final amount.
Plug that in for 10 years.
Rinse and repeat 2 more times.

BUT - and this is a big but - this is repeating the same WORST 10 years, back to back, 4 times in a row. Statistically, that's not happening in real life. But it is a very conservative approach.

Unfortunately - it will put you in OMY mode till you die.

If you really want to get gloomy - do it for a 3 year or 5 year period... so you repeat back to back bears with no bulls. It's not a realistic model - but it might justify OMY forever for those that are afraid to pull the plug.
It's nice Firecalc give you the high, low and average, so you do not have to look at the lines . But a cut/paste of the numbers includes a comma. And the comma makes for a different result. It ignores everything after the first comma. 1,000,000 becomes 1.

It is another option. Let's hope we do not have the 'groundhog day effect', repeating the same bad years over and over...
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Old 12-22-2014, 01:26 PM   #24
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I think this may be good as I'm having difficulty understanding what you are saying/asking on this and other threads.
I had no problem understanding the question or the pun, and that's probably because I'm interested in the question and am 10 weeks from being "unemployed in a good way." That is, if I don't unemploy myself in a good way by quitting sooner.
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Old 01-04-2015, 11:21 AM   #25
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I saw this thread a while back, but only now decided to throw my 2 cents in and hopefully will not cause more confusion. I cannot read the OP's mind, but I suppose the question could be rephrased as follows: "Was your own retirement financial situation within the range of past outcomes shown by FIRECalc?".

One can set up a simple run to see the outcome range for himself. Use a $1M portfolio, an annual expense of $40K (for 4%WR), an AA of middling 50 Long Interest / 50 Total Market, no other income. I use a 10 year run because most ER's here who use FIRECalc have been retired for a shorter time than that.

And FIRECalc says that at the end of 10 years, using history as a guide, your $1M could have shrunk to $386K or grown to $2.178M. That's a huge range of 5.6:1.

I think it is rare that an individual result would fall outside the above range. I think all posters here are within this range. Well, I am sure there are some who dropped out of the forum and went back to work with their stash decimated, and the respondents here are a self-selecting group. But I hasten to add that the failed ER's most likely caused the failure themselves by buying high/selling low, or by overspending.

But that last observation brings us back to the original premise: FIRECalc shows what could have happened if you invested and spent exactly as your input data to the program. And I do not see myself doing that. I could be higher or lower, depending on how I invest and how I spend. Still, that's a huge range and one has to do a lot of lucky or bad things to fall outside.

Allow me to digress a bit here. I wonder if people who rebalance exactly on Jan 1st and control their spending to an exact WR do that to improve the chance that their outcome will stay within the realm of FIRECalc result. Even so, it's still a hell of a range though.

Finally, I remember another ER forum where a 50/50 hypothetical portfolio was tracked through the lost decade of 2000-2010. I have not been back to that forum, but as I recall the result was miserable, and did not look to be much higher than the $386K worst case shown by FIRECalc. And of course, FIRECalc by now has already incorporated that 10-year period.

So, to really answer the question of whether a user of FIRECalc (with all the caveats of his investment and spending habits being exactly like his data input) in 2000 would find his result within the program output range (as history unfolds as the result of 2000-2010 was not known back in 2000), I would have to see where the 2000-2010 period fits within all the previous 10-year periods. Ah, that takes a bit of work and I do not feel like doing it now, but suspect that the 2000-2010 did not set a new worst case.

PS. FIRECalc's results are inflation-adjusted. So, in the worst case of $386K after 10 years, our hapless retiree has more than $386K in nominal dollars. That may help alleviate his pain, as he now has more money (worth less) to count.

PPS. OK, I got the answer about the 2000-2010 period. It was lousy, but still far above the worst case 10-year periods of 1912-1922 and 1973-1983.
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Old 01-04-2015, 02:27 PM   #26
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Thanks for posting. $386K at the end of 10 years would be scary for me. This is why eliminating withdrawal amounts for discretionary spending during down markets is important, if only for psychological purposes (at least for me). According to no less than 5 calculators, I won't have to reduce withdrawals no matter what the market does, but I probably will anyway. A couple years of missed or reduced vacations is worth it when your PF is evaporating, IMO. I hadn't used CFIREsim in a while, and am glad to see you can now model variable spending. Very helpful.
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Old 01-04-2015, 03:41 PM   #27
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Not direct, but an experience that tracks 25 years, with an original plan that projected our financial situation for 30 years, to age 83, an arbitrary 30 year time period. The plan was almost a copy of what Firecalc uses to assess financial security, if a little more complicated.
FWIW, we're getting close to the original endpoint planning date, and can now see well beyond that... well into the 90's... safely.

Our plan was developed on large spreadsheets, using assumptions that sounded reasonable to us at the time... inflation, interest rates, and the type of investments (ultra conservative) that we had already decided on. Our "portfolio" would look meagre today, but the safety of our debt free net worth, allowed for a relatively easy plan.

We included everything we could think of, in terms of foreseeable major money outlays... housing, autos, healthcare costs, trips, and a cushion for the unknown.

Each year was planned... When we would move from our campground to be a snowbird... When we would buy a car... and then the details that were known:
Taxes... which we have avoided since retirement.
Social Security at age 62
Healthcare at age 65...
Regular home purchase before age 70 to insure surviving spouse some security (medicaid) in the event of long term nursing home stay.

This, on the basis of a very low net worth, compared to todays planners. I would guess that if Firecalc were to be reverse engineered to begin 25 years ago, we might have seen a result, similar to where we are today.

In any case, despite the obvious impossibilities of reality following any plan, our financial situation is almost exactly what our spreadsheets predicted. Putting current numbers into firecalc today, shows a 100% success.

Our current spending level has been level for several years. With a relatively low annual expense, the Social Security income is quite important. I see some members here on ER, who choose not to include this in their planning. Unless one is very happy continuing employment to accumulate a greater nest egg, those extra years might be better spent enjoying freedom. Our current SS (for two) is $25+K/yr.

Probably not germaine to the OP subject, but a real life experience... a look back, rather than a look ahead.
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Old 01-04-2015, 05:51 PM   #28
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$386K at the end of 10 years would be scary for me. This is why eliminating withdrawal amounts for discretionary spending during down markets is important, if only for psychological purposes (at least for me). According to no less than 5 calculators, I won't have to reduce withdrawals no matter what the market does, but I probably will anyway. A couple years of missed or reduced vacations is worth it when your PF is evaporating, IMO...
In the above scenario with 4%WR, going out to 25 years, in the worst case that initial $1M would have gone down to a pitiful $27K. Our retiree is pushing a shopping cart soon, if he insists on maintaining the same lifestyle all this time. At $40K a year, his $27K will last another 8 months.

The recent market drops have been followed by a quite sharp recovery, and most people think that they are tough or smart. Let's hope that we will not see the terrible periods as already happened in the past.

A $1M portfolio invested in S&P 500 on Oct 12 2007 became $455K on Mar 6, 2009 without any withdrawal. Good thing it rebounded quickly. How soon people forget!

Suppose the market lingered down there for a while. We would not have so many people talking about retirement or buying fast cars. And people already retired would not talk about just skipping vacation. I would be seriously thinking about living in an RV by the river.

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... I see some members here on ER, who choose not to include this in their planning. Unless one is very happy continuing employment to accumulate a greater nest egg, those extra years might be better spent enjoying freedom...
Until recently, I did not include our SS in the planning. The reason was to keep that SS as reserve, and I think many posters here have the same idea. Only recently, I decided to check to see the size of my "reserve". I still do not plan to "spend" it, meaning to increase our current spending in anticipation of it. When I get there and actually get it, then I may spend more.

Young ER's in their 40s or early 50s are even further from SS eligibility, hence I understand why they want to be more cautious. It's tough having to live under a bridge till you get to 62 to get some SS. Well, it may not be that bad, but living in fear is no way to enjoy an early retirement.
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