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Re: Question for Dory36 on FIRECalc
Old 03-05-2004, 02:30 PM   #21
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Re: Question for Dory36 on FIRECalc

Dory, I agree with the intent behind your statement that the tips rate is ignored for all except tips investments, but if I run the above scenerio with 30 year treasuries, and with 0 in the tips box, I get:

You have proposed a withdrawal of 14.55% of your starting portfolio.

We looked at the 96 possible 35 year periods from 1871 until 2002, and the 35 partial periods from 1967 until 2002, starting with a portfolio of $330,000 and taking out $48,000 the first year, and the same amount after adjustments for inflation (PPI) each year except as follows:

...

Your Success Rate is 100.0%
In 100.0% of the years, the portfolio would have maintained a positive balance through the withdrawal in year 35.

The average (mean) portfolio balance following the withdrawal in year 35 was $2,844,170.

(This assumes your portfolio consists of 80% in 30 Year Treasuries and 20% in equities that behave like the market as a whole, with an overall expense ratio of 0.18%.)

----------------------------------------------------------------------
and with 10 in the tips box I get:
You have proposed a withdrawal of 14.55% of your starting portfolio.

We looked at the 96 possible 35 year periods from 1871 until 2002, and the 35 partial periods from 1967 until 2002, starting with a portfolio of $330,000 and taking out $48,000 the first year, and the same amount after adjustments for inflation (PPI) each year except as follows:

...

Your Success Rate is 100.0%
In 100.0% of the years, the portfolio would have maintained a positive balance through the withdrawal in year 35.

The average (mean) portfolio balance following the withdrawal in year 35 was $3,908,531.

(This assumes your portfolio consists of 80% in 30 Year Treasuries and 20% in equities that behave like the market as a whole, with an overall expense ratio of 0.18%.)

--------------------------------------------------------------------------
and with 80 in the tips box I get:
You have proposed a withdrawal of 14.55% of your starting portfolio.

We looked at the 96 possible 35 year periods from 1871 until 2002, and the 35 partial periods from 1967 until 2002, starting with a portfolio of $330,000 and taking out $48,000 the first year, and the same amount after adjustments for inflation (PPI) each year except as follows:

...

Your Success Rate is 100.0%
In 100.0% of the years, the portfolio would have maintained a positive balance through the withdrawal in year 35.

The average (mean) portfolio balance following the withdrawal in year 35 was $2,889,998,211.

(This assumes your portfolio consists of 80% in 30 Year Treasuries and 20% in equities that behave like the market as a whole, with an overall expense ratio of 0.18%.)
-----------------------------------------------------------------

I think Dogcliff has uncovered something! You can see that firecalc agrees 30 year treasuries were selected in the output!

Wayne
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Re: Question for Dory36 on FIRECalc
Old 03-05-2004, 03:37 PM   #22
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Re: Question for Dory36 on FIRECalc

Wayne, you're right! I ran my numbers again. Changing the yield in the TIPS field changes the output - even if you tell FIRECalc there are no TIPS in the portfolio! Dogcliff is on to something.
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Re: Question for Dory36 on FIRECalc
Old 03-06-2004, 03:46 AM   #23
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Re: Question for Dory36 on FIRECalc

Yikes! You are right! You have discovered a bug that has been lurking a long time. OK, everybody who has retired, you go back to work, right away! *

Here is what I found:

First, most prior calculations should have still been pretty close to the mark, as you'd only see the problem creep in to a significant degree if you select Treasuries as your investment choice, and you typed in an unrealistic TIPS coupon, as was done accidently by Dogcliff and then illustrated by wzd.

The effect of the bug is that during the years when there were no such thing as 5 or 30 year Treasuries, Firecalc used theoretical TIPS returns as a substitute (for those years only). Since all these interest rates track each other fairly closely, the impact would only be dramatic with unrealistic entries in the TIPS coupon box. But obviously no one would bother insuring that vaue is realistic when they are using Treasuries as a choice of fixed income investment.

(TIPS are a recent option, but their return is theoretically predictable from other known values plus a user-entered coupon, thanks to Intercst's work. So the older TIPS returns are what TIPS would have returned if there were such things as TIPS back then.)

I have changed it now, to use Commercial Paper as a substitute for Treasuries for those years before Treasuries existed.

Dory36
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Re: Question for Dory36 on FIRECalc
Old 03-06-2004, 04:42 AM   #24
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Re: Question for Dory36 on FIRECalc

Dory36

Not to worry. Back in 93, no computer at home, plenty of dryer sheets, and no work. Actually used TABLES IN A BOOK! 6-8% was considered a doable range back then(?Vanguard if memory serves?).

Debug on Dory but remember its only second to ER - your primary mission or did you give up mission statements when you left work. I threw mine the same place my Daytimer went.
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Re: Question for Dory36 on FIRECalc
Old 03-06-2004, 06:03 AM   #25
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Re: Question for Dory36 on FIRECalc

Joy...finally a Doglliffproof calculator. Thanksall...

dc
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