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So many calculators, so little time
Old 03-07-2012, 09:17 AM   #1
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So many calculators, so little time

I've used FIRECalc, Vanguards Portfolio Longevity calculator, Fidelity Retirement Income Planner, and T Rowe Price Retirement Income Calculator.

FIRECalc and Fidelity both give me results I like very much ! 90% or better confidence level of my portfolio lasting 35 years (75% of it lasting to 45 years).

Vanguard is more conservative - 80% chance of my portfolio lasting 30 years.

The T Rowe Price calculator is downright depressing, 80% chance of my porfolio lasting 26 years and 40% chance of my portfolio lasting 40 years.


I understand that these calculators are just "tools" but how do you know if you've reached FI with such varying results ?
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Old 03-07-2012, 09:29 AM   #2
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I'm no expert, but I figure if I can live off the lowest potential return without touching principal, then I'm set. I'm using 2% - 3% in my current calculations. The day will probably come that I have to dig into principal. Perhaps not, if I'm fortunate [or my son is lol]. If I'm REALLY lucky, the principal may increase.

That's just my comfort level. FIRECalc gave me a %100. Haven't tried the others yet.
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Old 03-07-2012, 09:40 AM   #3
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Calc differences prob have to do with assumptions (e.g. inflation, etc.). I haven't compared calc's exactly, but small differences get magnified a lot projected over 40yrs and range of uncertainty widens a lot. Uncertainty makes it hard to bet your future on one roll of the dice
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Old 03-07-2012, 09:49 AM   #4
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I understand that these calculators are just "tools" but how do you know if you've reached FI with such varying results ?
Wait 30 years, look back and then you'll know for sure.

Otherwise you have to take your best educated guess. If you knew when you'll die, what returns and actual expenses will be then it would be academic.

You could save up enough to live off returns alone, but then you'll work a lot longer. Perhaps the best bet is not to burn bridges when one retires, just in case.
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Old 03-07-2012, 10:08 AM   #5
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I have run no other calculators than FIRECalc, and this only for a few times. There is no point in agonizing too much over it. I have been trying to lower my expenses so I can live on 3.5%, and if I happen to have more money than projected, it is a nice problem to have and I will deal with that later.

On the other side of the coin, if things get bleak, I will do like Uncle Mick: stay mobile and hostile (can I talk RV now?). Heh heh heh...
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Old 03-07-2012, 10:15 AM   #6
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The takeaway from all this then is...

Don't plan your retirement to the 3rd decimal point.

Have some cushion in your plan

Be flexible in your spending.
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Old 03-08-2012, 02:37 AM   #7
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Interesting question. My favorite online tool is this one, maybe because the results I get are closest to the results of my own home-made spreadsheet : Merrill Edge| See Where You Stand


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I understand that these calculators are just "tools" but how do you know if you've reached FI with such varying results ?
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Old 03-08-2012, 09:46 AM   #8
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Interesting question. My favorite online tool is this one, maybe because the results I get are closest to the results of my own home-made spreadsheet : Merrill Edge| See Where You Stand
Wowza. It told me my portfolio would support a 4.3% WR even with "Poor Market Performance" and 4.8% WR with "Average Market Performance." At 57 yo, that seems way aggressive to me. I see that it's a Monte Carlo type calculator, I like to see actual historical (like FIRECALC) too. YMMV
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Old 03-08-2012, 10:16 AM   #9
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Wowza. It told me my portfolio would support a 4.3% WR even with "Poor Market Performance" and 4.8% WR with "Average Market Performance." At 57 yo, that seems way aggressive to me. I see that it's a Monte Carlo type calculator, I like to see actual historical (like FIRECALC) too. YMMV
+1

That Merrill calculator scares the cr*p out of me.
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Old 03-08-2012, 11:06 AM   #10
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I had a 401k with Merrill-Lynch for several years. Sorry, but I do not trust anything they say.
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Old 03-08-2012, 11:32 AM   #11
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Interesting question. My favorite online tool is this one, maybe because the results I get are closest to the results of my own home-made spreadsheet : Merrill Edge| See Where You Stand
That calculator was way too inflexible for me. One problem is that it requires that you and your partner retire in the same year. The other is that it assumes taking SS at 67. Also you couldn't plug in variable expenses for particular years.
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Old 03-08-2012, 12:39 PM   #12
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I understand that these calculators are just "tools" but how do you know if you've reached FI with such varying results ?
1. Understand exactly what question the calculator is answering. In FireCalc's case, there is no prediction of future results whatsoever. FireCalc answers the question "Given a level of retirement income (SS, pensions, etc) and portfolio value and AA, plus inflation levels and withdrawal rates, how often would I have run out of money during a withdrawal period historically?" Other calculators are answering somewhat different questions. It's up to you to decide which "test" gives you the best information for your case.

2. Become comfortable with the fact that there will not only be significant variation from test to test (from FireCalc to Merrill to TRP to etc.) but there will also be significant variation within one particular test. In my own FireCalc run, results say that historically my scenario would have been 100% successful. I would never have run out of money. However, at the end of 30 years I may be close to broke or have much more than I started with depending on how things go.

I'm comfortable with variation. Lots of statistical analysis work in my professional background. The fact that my ending portfolio could have me going to the grave near broke or fabulously wealthy makes sense to me given the wide range of economic factors our economy has experienced historically and which I fully expect to continue into the future.

If you're looking for a calculator you can use as a black box and simply feed inputs into and get accurate predictions of how your scenario will work out over the next few decades, you're looking for something that doesn't exist. Accept variability. Get used to it.
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Old 03-08-2012, 01:39 PM   #13
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Interesting question. My favorite online tool is this one, maybe because the results I get are closest to the results of my own home-made spreadsheet : Merrill Edge| See Where You Stand
Not as positive for me as some others in this thread, but it did say my savings should last between the ages of 85 and 90 excluding SS. If I allow it to assume SS then I could have retired last year

My homegrown spreadsheet gets me to full portfolio depletion at 82.
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Old 03-08-2012, 01:49 PM   #14
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My homegrown spreadsheet gets me to full portfolio depletion at 82.
In that case, if your spreadsheet is well designed and does not have computational flaws, do not retire unless you can count on large SS or other pension that your spreadhseet does not account for.

I basically am not able to believe that any significant number of retirees will be able to happily watch their portfolios deplete as they themselves age; or that they will be able to calmly accept huge drawdowns after the option of returning to work is clearly closed. The next time you pass a homeless man or woman ask yourself if you would be able to pass this person without feeling personal terror if you were 78 and your spouse is sick and you are down to your last $150,000.

Ha
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Old 03-08-2012, 02:21 PM   #15
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I've used FIRECalc, Vanguards Portfolio Longevity calculator, Fidelity Retirement Income Planner, and T Rowe Price Retirement Income Calculator.

FIRECalc and Fidelity both give me results I like very much ! 90% or better confidence level of my portfolio lasting 35 years (75% of it lasting to 45 years).

Vanguard is more conservative - 80% chance of my portfolio lasting 30 years.

The T Rowe Price calculator is downright depressing, 80% chance of my porfolio lasting 26 years and 40% chance of my portfolio lasting 40 years.


I understand that these calculators are just "tools" but how do you know if you've reached FI with such varying results ?
If you're a VG customer you should be able to use Financial Engines (just another calculator to try )
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Old 03-08-2012, 02:42 PM   #16
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If you're a VG customer you should be able to use Financial Engines (just another calculator to try )
I second Alan's suggestion.

Just be aware that FE (offered by VG) will not give you a "plan end date", by age.

It uses internal tables of average lifespans in its calculation and will only tell you if your spending target will survive, as long as you do ...

Also be aware (as shown on the link Alan provided) that it is not designed to be used by a retiree. There is a way to "fool it" (change your birth and retirement dates) to get it to run, but it is less than a satisfactory solution, IMHO.
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Old 03-08-2012, 03:25 PM   #17
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I've used FIRECalc, Vanguards Portfolio Longevity calculator, Fidelity Retirement Income Planner, and T Rowe Price Retirement Income Calculator.

FIRECalc and Fidelity both give me results I like very much ! 90% or better confidence level of my portfolio lasting 35 years (75% of it lasting to 45 years).

Vanguard is more conservative - 80% chance of my portfolio lasting 30 years.

The T Rowe Price calculator is downright depressing, 80% chance of my porfolio lasting 26 years and 40% chance of my portfolio lasting 40 years.


I understand that these calculators are just "tools" but how do you know if you've reached FI with such varying results ?
Most of them have an "assumptions" page somewhere. Look at that, and pick the one that assumes things closest to your internal beliefs. Then, if you're wrong, you have no one to blame but yourself.

For example, I've used some that don't allow different assumptions for "after retirement" returns than "pre retirement" returns. That's just not very bright IMO. Heck, even if they allow both, that's not reality, as we change our allocations slowly over time.
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Old 03-08-2012, 04:34 PM   #18
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In that case, if your spreadsheet is well designed and does not have computational flaws, do not retire unless you can count on large SS or other pension that your spreadhseet does not account for.

I basically am not able to believe that any significant number of retirees will be able to happily watch their portfolios deplete as they themselves age; or that they will be able to calmly accept huge drawdowns after the option of returning to work is clearly closed. The next time you pass a homeless man or woman ask yourself if you would be able to pass this person without feeling personal terror if you were 78 and your spouse is sick and you are down to your last $150,000.

Ha
My homegrown spreadsheet assumes 4% annual return and 3% inflation. I've only included 67% of what SS says I will get. However .... I think you're right. I can survive for some period of time but I'm thinking I need to be w*rking another 5 years (bummer). Maybe we'll stop having sideways years in the market over that period too ! (LOL a girl can dream, no ?)

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If you're a VG customer you should be able to use Financial Engines (just another calculator to try )
Not a VG customer. I do have access to the "non monte carlo" version of FE. That one is telling me I'm good to age 85.
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Old 03-08-2012, 08:30 PM   #19
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My homegrown spreadsheet assumes 4% annual return and 3% inflation. I've only included 67% of what SS says I will get. However .... I think you're right. I can survive for some period of time but I'm thinking I need to be w*rking another 5 years (bummer). Maybe we'll stop having sideways years in the market over that period too ! (LOL a girl can dream, no ?)



Not a VG customer. I do have access to the "non monte carlo" version of FE. That one is telling me I'm good to age 85.
Seems very conservative, particularly the 67% of SS. What do you get with 90% or 100% of SS? More than 82 I assume.
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Old 03-08-2012, 08:46 PM   #20
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I basically am not able to believe that any significant number of retirees will be able to happily watch their portfolios deplete as they themselves age; or that they will be able to calmly accept huge drawdowns after the option of returning to work is clearly closed. The next time you pass a homeless man or woman ask yourself if you would be able to pass this person without feeling personal terror if you were 78 and your spouse is sick and you are down to your last $150,000.
Yes, most people would cut way back on their expenses and not continue to spend like any of these calculators assume.

Still, if one finds himself in the predicament that you described, then it is time to sell the house and to get "hostile and mobile" like Uncle Mick likes to say. Even if one does not have a house, the $150K still leaves enough to get a used RV and hit the road. There are plenty of people who survive on just SS alone. One just has to become more resourceful, to avoid living in terror.
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