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Old 12-25-2013, 12:06 PM   #21
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I've been a Quicken user for 20 years, and have played with QLP over the years but never found it all that useful. I see a lot of people recommending it in this forum, and I occasionally go back to see what I'm missing. My biggest complaint with it is that I have to plug in the forecasted returns on my investments, rather than using historical data as Firecalc does, or Monte Carlo simulation like other financial calculators.

So of course, when I plug in high values for investment returns (7% or greater), it says I'm going to be giving away millions of dollars to charity when I die. When I drop the rate down to 4%, it pretty much has me spending every last penny. But why do I need QLP for to tell me this? Isn't it obvious that higher returns mean good times ahead, and lean returns mean having to be more frugal? I don't see why I need QLP to tell me this. It just makes common sense to me.
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Old 12-25-2013, 06:16 PM   #22
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Originally Posted by Ready View Post
I've been a Quicken user for 20 years, and have played with QLP over the years but never found it all that useful. I see a lot of people recommending it in this forum, and I occasionally go back to see what I'm missing. My biggest complaint with it is that I have to plug in the forecasted returns on my investments, rather than using historical data as Firecalc does, or Monte Carlo simulation like other financial calculators. So of course, when I plug in high values for investment returns (7% or greater), it says I'm going to be giving away millions of dollars to charity when I die. When I drop the rate down to 4%, it pretty much has me spending every last penny. But why do I need QLP for to tell me this? Isn't it obvious that higher returns mean good times ahead, and lean returns mean having to be more frugal? I don't see why I need QLP to tell me this. It just makes common sense to me.
I agree that it's mostly common sense. I take my expected years in retirement multiplied by my annual spending to arrive at my required nest egg. And then invest to keep pace with inflation. If I blow inflation out of the water in a given year, I'll peal off some risk. The planning tools are fun but they can't do your thinking for you.
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Old 12-25-2013, 07:36 PM   #23
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Originally Posted by Ready View Post
I've been a Quicken user for 20 years, and have played with QLP over the years but never found it all that useful. I see a lot of people recommending it in this forum, and I occasionally go back to see what I'm missing. My biggest complaint with it is that I have to plug in the forecasted returns on my investments, rather than using historical data as Firecalc does, or Monte Carlo simulation like other financial calculators.

So of course, when I plug in high values for investment returns (7% or greater), it says I'm going to be giving away millions of dollars to charity when I die. When I drop the rate down to 4%, it pretty much has me spending every last penny. But why do I need QLP for to tell me this? Isn't it obvious that higher returns mean good times ahead, and lean returns mean having to be more frugal? I don't see why I need QLP to tell me this. It just makes common sense to me.
+1 My exact complaint with all deterministic calculators as well.
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Old 12-26-2013, 04:03 AM   #24
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I take my expected years in retirement multiplied by my annual spending to arrive at my required nest egg. And then invest to keep pace with inflation.
I think that's great if you have enough financial resources to limit the utility of gain to no more than keeping up with inflation, but projecting that that's the only way to think about it is akin to saying that 80% of people should simply aim to work until they die.
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Old 12-26-2013, 05:46 AM   #25
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Okay, still no joy.
Okay digging into this a little more this morning, I see that QLP is doing a lot of work that I didn't expect it to do, and because I wasn't expecting it, when I reviewed the data earlier I didn't see it. The numbers looked correct because they are, but I didn't realize what I was seeing was a lot of double counting of expenses.

I included our mortgage payment, and income and property taxes in my estimate of expenses. As far as I can tell, that's the way that FireCalc expects the spending number to be determined. By contrast, I can see in the year-to-year detail that QLP subtracts all those things out, separately, drawing the mortgage pay-down info from the mortgage data in Quicken, itself, and even doing its own estimated calculations of income taxes. It even subtracts out savings, itself.

As you can well imagine, eliminating all that double-counting changes the red light in QLP into a green light, and by a mile. (Whew!)

I need to go back over Fidelity RIP because I see now the advisory there, "Do not include estimated income taxes, however, as they are calculated for you." Though, a quick look-see doesn't give me much confidence that the taxes are calculated and subtracted.
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Old 12-26-2013, 08:30 AM   #26
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Hi bUU,

Could you give us a final report on your thoughts and another set of the resulting graphs when you have all the tools working as close to the same data as they can?
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Old 12-26-2013, 09:21 AM   #27
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I think that's great if you have enough financial resources to limit the utility of gain to no more than keeping up with inflation, but projecting that that's the only way to think about it is akin to saying that 80% of people should simply aim to work until they die.
I didn't mean to infer that I invest to match inflation. Rather that I expect/ hope/ need my investments to produce at least a 0% real return. My first year results were well above that. Lucky lucky. What returns are you planning for?
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Old 12-26-2013, 10:03 AM   #28
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Could you give us a final report on your thoughts and another set of the resulting graphs when you have all the tools working as close to the same data as they can?
I think I am as confident with QLP as anything right now (remarkably, given my earlier problems with it), and have attached an updated chart, but my confidence in Fidelity RIP has been disrupted (because it says that it handles income taxes but I don't see where that is the case, in the yearly tables it generates). I'm not sure what I can do to gain more confidence in FireCalc, other than to compare QLP to it and and determine whether QLP's projection fits comfortably within the range of possibilities that FireCalc outlines. As soon as I get Fidelity RIP straightened out in my head I'll post an update, including an updated chart for it, with the amounts removed, as above.

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Originally Posted by Gatordoc50 View Post
I didn't mean to infer that I invest to match inflation. Rather that I expect/ hope/ need my investments to produce at least a 0% real return. My first year results were well above that. Lucky lucky. What returns are you planning for?
In QLP I've entered the following:
Type of AccountReturn Before RetirementReturn After Retirement
Taxable accounts:8%6%
My Tax-deferred:6%4%
Spouse Tax-deferred:6%4%
Attached Images
File Type: jpg QLP2013-12-26.jpg (40.6 KB, 19 views)
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Old 12-26-2013, 10:23 AM   #29
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Originally Posted by Ready View Post
I've been a Quicken user for 20 years, and have played with QLP over the years but never found it all that useful. I see a lot of people recommending it in this forum, and I occasionally go back to see what I'm missing. My biggest complaint with it is that I have to plug in the forecasted returns on my investments, rather than using historical data as Firecalc does, or Monte Carlo simulation like other financial calculators.

So of course, when I plug in high values for investment returns (7% or greater), it says I'm going to be giving away millions of dollars to charity when I die. When I drop the rate down to 4%, it pretty much has me spending every last penny. But why do I need QLP for to tell me this? Isn't it obvious that higher returns mean good times ahead, and lean returns mean having to be more frugal? I don't see why I need QLP to tell me this. It just makes common sense to me.
But what is common sense to you may not be common sense to others who are less fluent in finances.

I think what you say about QLP confirming the obvious (higher returns = higher nest egg and lower returns = lower nestegg) is true, but many people just don't have the vaguest idea of how close or far they are from having enough to retire. The thing that I like about QLP is that it "covers the bases" of most items that people should think through in planning their retirement like college expenses, pensions, SS, taxes, inflation, savings, investments and rates of return, homes, debt paydown, living expenses and special expenses (a wedding in my case). It also has an intuitive interface for people who are not as comfortable with spreadsheets.

The what-if function can also give anyone a good idea of how things change if they change other variables (like, can they afford that second home in a warmer climate or that summer beach house, or how do changes in returns affect their portfolio survive-ability).

I don't see having to input an assumption for the projected rate of return as being a fatal flaw like you seem to. For me I looked to historical returns for a portfolio with my AA and then dialed it down a bit to be conservative. Nothing hard about that.
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Old 12-26-2013, 11:08 AM   #30
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I think I am as confident with QLP as anything right now (remarkably, given my earlier problems with it), and have attached an updated chart, but my confidence in Fidelity RIP has been disrupted (because it says that it handles income taxes but I don't see where that is the case, in the yearly tables it generates). I'm not sure what I can do to gain more confidence in FireCalc, other than to compare QLP to it and and determine whether QLP's projection fits comfortably within the range of possibilities that FireCalc outlines. As soon as I get Fidelity RIP straightened out in my head I'll post an update, including an updated chart for it, with the amounts removed, as above.

In QLP I've entered the following:
Type of AccountReturn Before RetirementReturn After Retirement
Taxable accounts:8%6%
My Tax-deferred:6%4%
Spouse Tax-deferred:6%4%
Thanks for the feedback bUU,

I agree with you on FireCalc. It gets me away from thinking in terms of one magic number at the end of the game.
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Old 12-26-2013, 11:25 AM   #31
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I've spent quite a bit of time playing with Firecalc, Vanguard Nest Egg Calculator, Fidelity RIP, and QLP. Running my scenario for a 40 year time frame with a 50/50 AA, every calculator tells me my SWR is somewhere between 3.2% - 3.6%, so I don't see much variation among any of them. Of course with QLP it all depends on what returns you project, but if you go with worst case scenarios, which is really what SWR is all about, you get the same results.

The long term historical average returns for a 50/50 AA is still around 8%, so planning for a withdrawal rate in the low 3's seems extremely conservative. But that's really what these calculators are there for. We all hope that the future returns in the market resemble the past, but we plan for the worst case just to be safe.

If the markets do well in the next 20 years, I'm sure we will all be recalculating our new SWR based on the new market value of our portfolios, and wondering what all the fuss was about 20 years ago.
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Old 12-26-2013, 11:33 AM   #32
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I think I am as confident with QLP as anything right now (remarkably, given my earlier problems with it), and have attached an updated chart, but my confidence in Fidelity RIP has been disrupted (because it says that it handles income taxes but I don't see where that is the case, in the yearly tables it generates). I'm not sure what I can do to gain more confidence in FireCalc, other than to compare QLP to it and and determine whether QLP's projection fits comfortably within the range of possibilities that FireCalc outlines. As soon as I get Fidelity RIP straightened out in my head I'll post an update, including an updated chart for it, with the amounts removed, as above.

In QLP I've entered the following:
Type of AccountReturn Before RetirementReturn After Retirement
Taxable accounts:8%6%
My Tax-deferred:6%4%
Spouse Tax-deferred:6%4%
So you only calculated out 30 years, 2013 to 2044?
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Old 12-26-2013, 12:11 PM   #33
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I can cobble such info together from Quicken (what the heck? - no reporting from QLP?? - that's ridiculous!), but don't see any of getting similar info from FireCalc for comparison. That's not really how FireCalc works, I don't think. It doesn't choose a specific model, like QLP does, but instead gives you a range of models. There is no way to pick out the worst case model (which, remember, succeeds in my case) from FireCalc, and get an income and expense detail from it, as far as I can see.

The "Your Portfolio" portion of FireCalc seems to be the biggest motivator of success or failure. I left the default "Total market" changing only the ER (1.3%) and Fixed Income parameter ("Commercial Paper"). Switching to "consistent annual market growth" with estimates 8.6%/3%/3% paints a picture closer to QLP. But are those estimates right? And if so, why do these two alternative ways of viewing portfolio performance vary so much?
Your more recent posts suggest you have moved beyond this, but just be aware that the "consistent annual market growth" thing does not work.

A portfolio with consistent annual market growth of ...
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Old 12-26-2013, 12:31 PM   #34
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So …

Is ER going to keep the front page link to FireCalc?

Seems to be a growing consensus that FC is limited ...
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Old 12-26-2013, 12:33 PM   #35
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So

Is ER going to keep the front page link to FireCalc?

Seems to be a growing consensus that FC is limited ...
I don't see any consensus.
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Old 12-26-2013, 12:44 PM   #36
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I don't see any consensus.
+1 and haven't seen anything better in a stochastic-type tool
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Old 12-26-2013, 01:45 PM   #37
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So you only calculated out 30 years, 2013 to 2044?
Yes. That was unintentional. I went out to 2049 with FireCalc and Fidelity RIP. I just switched QLP to 2049 as well. Not a problem. I did a What-if for QLP pushing our longevity out far beyond anything reasonable (afaic) and we're still okay, given the other assumptions.

Playing with Fidelity RIP this afternoon was interesting. It has a lot of very direct input regarding medical expenses, which I employed. I'm going to have to carry that intelligence into QLP I think. It does send our assets on a much steeper slope down, so it could put us in trouble again. I don't think I can push longevity very much before we run out of money with the Fidelity RIP model now with all these medical expense related updates Fidelity recommended. Another interesting thing about this model: First year withdrawal rate is 5.36%, way higher than most folks would say is safe.
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Old 12-26-2013, 02:53 PM   #38
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Ok - here's something that might make a difference - it may be obvious to some, but wasn't to me for over a year.

Firecalc assumes your spend is Gross - and you'll pay taxes out of the annual spend.
QLP wants you to input the NET amount - and it gathers tax data elsewhere - based on your inputs.

If you mis-input the taxation, or the annual spending, in quicken, it will throw it way off.

I was horribly depressed till I realized I was taxing my annual spend twice in QLP... I reduced it to the net amount and QLP got happy. Then I took out some other savings targets (kids college) that QLP was also accounting for elsewhere, and I started showing 100% success rates.

Like I said - it may be obvious to folks who started out with quicken - but I started out with other calculators that assumed gross annual spending - a much larger number than I needed to input into quicken's QLP calculator.
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Old 12-27-2013, 04:09 PM   #39
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Playing with Fidelity RIP this afternoon was interesting. It has a lot of very direct input regarding medical expenses, which I employed. I'm going to have to carry that intelligence into QLP I think. .
BUU, I have been a QLP user for a while and feel it is a good directional tool. That said, in reading your post above, I sense you are where I was a few months ago, trying to take the Fidelity RIP concepts and drive them into my QLP model. Where I ended up was coming to terms that there was no way to bridge the stochastic methods (RIP) into the deterministic tools (QLP). I am more comfortable using the two tools independently, and setting goals to improve both models. That approach gives me more year to year targets that I try to hit as I work to improve my success rate across both tools.

READY, as for you comments, there is some interesting reading on SWR and if Bergen's model still applies (the 4% rule). Some researchers suggest the 8+% growth rates are a thing of the past. The one interesting fact, which is still true regardless of growth rates is that the SWR will level out as you get to longer retirement plans. Somewhere around 45 years, the SWR will stabilize and most advisors will converge toward a tight SWR range.

For example, in Bergen's model, which may no longer be correct, most researchers would say the SWR is between 3.3 - 3.6 with a Bergen recommended AA.
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Old 12-27-2013, 04:18 PM   #40
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....Some researchers suggest the 8+% growth rates are a thing of the past. ....
While I don't disagree, it is worth noting that four of the last five years blew away 8% by a VERY wide margin so I'll admit to a bit of a chuckle when i read that sentence.
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