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View Poll Results: Which Spending Model in Firecalc do you prefer/rely on most?
Constant Spending Power 56 73.68%
Bernicke's Reality Retirement Plan 6 7.89%
Percentage of Remaining Portfolio 8 10.53%
Manual Entry of Spending Changes 3 3.95%
None of the above - other 3 3.95%
Voters: 76. You may not vote on this poll

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Old 12-16-2018, 09:37 AM   #21
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Originally Posted by pb4uski View Post
Constant Spending Power... even though I think it might be conservative compared to what we might eventually do... I think that as we age we might be less active and therefore spend less, but that could be partially or even fully offset by higher health care costs.
Bold by me.

We hear this a lot, but is actually true after medicare kicks in? (Aside from IRMAA). Asking those that have been on Medicare for a while: Have Medicare rates and Medigap plans been rising at a much faster rate than inflation?

FWIW, I also use the Constant Spending Power as my baseline, and think it is conservative.
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Old 12-16-2018, 09:39 AM   #22
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Originally Posted by Dtail View Post
A variation on this topic.

If one uses the Constant Spending yearly on Firecalc just for a continuing guideline that their plan is working, is it a viable metric once they reach 75 yo for example and put in 20 years left?

My question is the data used is less than 30 years and thus leaves out more market scenarios. For example the 1966 retiree's portfolio only became solvent by including years after 1982.....
The result would still be valid.

A 75-year old in 1966 would be 91 in 1982. He would be near death, and would not live long to see the stock market went on the great bull period from 1982 to 2000. What of concern to him would be whether he went broke before his death.
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Old 12-16-2018, 09:43 AM   #23
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The result would still be valid.

A 75-year old in 1966 would be 91 in 1982. He would be near death, and would not live long to see his stash recovered or not after 1982. What of concern to him would be whether he went broke before his death.
I see your point and agree with that concept.
A twist on that is would the guideline max spending by Firecalc be artificially conservative due to using effectively a negative 15 year scenario related to the 1966 situation?
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Old 12-16-2018, 09:44 AM   #24
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Originally Posted by Dtail View Post
A variation on this topic.

If one uses the Constant Spending yearly on Firecalc just for a continuing guideline that their plan is working, is it a viable metric once they reach 75 yo for example and put in 20 years left?
Yes.
Quote:

My question is the data used is less than 30 years and thus leaves out more market scenarios. For example the 1966 retiree's portfolio only became solvent by including years after 1982.....
It is what it is. Just think through what test you are constructing. In this case, you're asking what happens if I FIRE in future year X and spend Y dollars (inflation adjusted) for 20 years. FireCalc tests this by looking at sequential 20 year periods of historical investment returns and inflation and gives you an ending value. This is different than entering 30 year periods and looking at the results at year 20.
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Old 12-16-2018, 09:48 AM   #25
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I see your point and agree with that concept.
A twist on that is would the guideline max spending by Firecalc be artificially conservative due to using effectively a negative 15 year scenario related to the 1966 situation?
You can't really look at it that way....... You're suggesting entering 30 years periods and then looking at the status in year 20. Rather than do that, I'd enter 20 year periods and look at the ending status. There is a difference, as NW-Bound points out.
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Old 12-16-2018, 09:55 AM   #26
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(Aside from IRMAA).
Hee.... hee....

Setting aside taxes might be fun, but it's not realistic. While some might say that DW and I are fortunate in having enough income to trigger IRMAA, we look at it as something we spend in lieu of a significant trip annually.

For folks whose income is just enough to trigger taxes such as IRMAA (our situation) or losing the ACA subsidy, HI expenses in retirement can be surprisingly intrusive bumped against alternative uses of the money!

If you have an extremely high income, you don't care. But at the trigger margins, ouch!

Also, regarding healthcare costs as you age, there are many issues to consider beyond insurance premiums, deductibles, co-pays and all that. We've found that age related health expense scenarios are creeping into our budget due to loss of "robustness." We now use a lawn service, fishing guides, auto mechanics, handyman services, etc., with much more frequency than a decade ago due to health and aging issues. We're also getting estimates for "stay in place" modifications to the house in anticipation of possible future age-related health issues. Then there's the cost of estate planning and all that.

There's a lot more to it when the statement "health related costs increase as you age" is made than just HI premiums, deductible, co-pays, etc.
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Old 12-16-2018, 09:56 AM   #27
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You can't really look at it that way....... You're suggesting entering 30 years periods and then looking at the status in year 20. Rather than do that, I'd enter 20 year periods and look at the ending status. There is a difference, as NW-Bound points out.
Actually yes I am saying that the 75 yo would naturally enter a 20 yr remaining period, so then wouldn't Firecalc look at all the 20 year periods and come up with the 1966 scenario further separating on the downside from other bad starting years vs. when they are 65 yo and 1966 spits out a conservative result, but nearly as conservative as when it is used as a 20 yr scenario (which a 75 yo retiree first time or continuing retiree would use).
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Old 12-16-2018, 10:07 AM   #28
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Hee.... hee....

Setting aside taxes might be fun, but it's not realistic. While some might say that DW and I are fortunate in having enough income to trigger IRMAA, we look at it as something we spend in lieu of a significant trip annually.

For folks whose income is just enough to trigger taxes such as IRMAA (our situation) or losing the ACA subsidy, HI expenses in retirement can be surprisingly intrusive bumped against alternative uses of the money!

If you have an extremely high income, you don't care. But at the trigger margins, ouch!
Fair point, but I guess was asking if the base rates have been increasing much faster than inflation.

FWIW, I have no doubt we will be hit by IIRMA at RMD time.
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Old 12-16-2018, 10:49 AM   #29
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Actually yes I am saying that the 75 yo would naturally enter a 20 yr remaining period, so then wouldn't Firecalc look at all the 20 year periods and come up with the 1966 scenario further separating on the downside from other bad starting years vs. when they are 65 yo and 1966 spits out a conservative result, but nearly as conservative as when it is used as a 20 yr scenario (which a 75 yo retiree first time or continuing retiree would use).
Don't try to read so much into it.

The 1966 starting scenario would be based on spending, investment returns and inflation for the 20 year period beginning in 1966 and stands alone. The same for each of the other starting years. Then they are all displayed in the output graph. Much earlier versions of FireCalc had an additional bar chart which showed ending values labeled by year so you could pick out the best and worse starting years at a glance. Today, you have to drop the spread sheet to determine the outcome for a specific year.

It answers the question as to what would have happened historically if you retired in 1966 with the parameters you choose regarding spending, other income and portfolio size and make-up.

Have you tried dropping a spreadsheet from FireCalc and inspecting the formulas and outcomes? It helped me understand what's going on inside the "black box."
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Old 12-16-2018, 11:02 AM   #30
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Fair point, but I guess was asking if the base rates have been increasing much faster than inflation.
No, the base rates have not increased significantly beyond inflation. But, and this is key, extras such as IRMAA, the deductibility of medical expenses, the size of deductibles and co-pays and non-health insurance related expenses are very real. The fact that the "base" rises similarly to inflation doesn't make me feel any better when I'm writing an end-of-year IRMAA check to Uncle for DW (who's SS is far less than IRMAA so she gets an invoice). Or when I'm paying to have geezer-friendly modifications done to the house.

The "base" just isn't a very useful number to me for planning purposes since it's so unrelated to what I must spend. It might trick me into thinking that my health related expenses won't be rising as I age.
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Old 12-16-2018, 11:04 AM   #31
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Don't try to read so much into it.

The 1966 starting scenario would be based on spending, investment returns and inflation for the 20 year period beginning in 1966 and stands alone. The same for each of the other starting years. Then they are all displayed in the output graph. Much earlier versions of FireCalc had an additional bar chart which showed ending values labeled by year so you could pick out the best and worse starting years at a glance. Today, you have to drop the spread sheet to determine the outcome for a specific year.

It answers the question as to what would have happened historically if you retired in 1966 with the parameters you choose regarding spending, other income and portfolio size and make-up.

Have you tried dropping a spreadsheet from FireCalc and inspecting the formulas and outcomes? It helped me understand what's going on inside the "black box."
Played around a bit last year, but not specifically now in reference to my theoretical scenario.
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Old 12-16-2018, 11:31 AM   #32
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Thanks to all for the responses so far. Very eye opening because I wasn't expecting the vast majority to be using Constant Spending.

Follow up question - On the Your Portfolio tab under the section titled "FIRECalc's calculations should be based on a portfolio invested in...", I'm assuming most here use the Total Market option. If that's true, what year do you use for the 'Include performance since...' box? 1871?

And what year do you use on the Investigate tab in the section "Display the results of the retirement plan"?
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Old 12-16-2018, 11:38 AM   #33
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Thanks to all for the responses so far. Very eye opening because I wasn't expecting the vast majority to be using Constant Spending.

Follow up question - On the Your Portfolio tab under the section titled "FIRECalc's calculations should be based on a portfolio invested in...", I'm assuming most here use the Total Market option. If that's true, what year do you use for the 'Include performance since...' box? 1871?
Bolded - yes but keep in mind, we haven't really heard of any real examples on this site of one actually spending using the Constant Spending scenario. So thus just a guide for those not yet retired, am I in good shape, plus a continuing guide in retirement for some.
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Old 12-16-2018, 11:43 AM   #34
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Bolded - yes but keep in mind, we haven't really heard of any real examples on this site of one actually spending using the Constant Spending scenario. So thus just a guide for those not yet retired, am I in good shape, plus a continuing guide in retirement for some.
Right. And that makes me wonder how folks are deciding on what to enter as their constant spending amount. A person could simply enter an amount equal to 4% of their portfolio but then, you don't really need Firecalc to know that will most likely be 100% success. I'm guessing that people are using their highest estimated spend and adding some percentage to it for cushion.
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Old 12-16-2018, 11:51 AM   #35
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Right. And that makes me wonder how folks are deciding on what to enter as their constant spending amount. A person could simply enter an amount equal to 4% of their portfolio but then, you don't really need Firecalc to know that will most likely be 100% success. I'm guessing that people are using their highest estimated spend and adding some percentage to it for cushion.
Actually 4% for 30 years gives you 95%, but I hear ya.
From many posts, it does appear that many pad their expenses for conservatism and to feel more comfortable with the results.
Personally, I enter a realistic budget, but am using a 3%WR rate for my version of conservatism. Perhaps all the same in the end.

I think Firecalc is very useful for "what if" scenarios, plus the effect of other inputs besides annual expenses.
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Old 12-16-2018, 12:21 PM   #36
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Follow up question - On the Your Portfolio tab under the section titled "FIRECalc's calculations should be based on a portfolio invested in...", I'm assuming most here use the Total Market option. If that's true, what year do you use for the 'Include performance since...' box? 1871?

And what year do you use on the Investigate tab in the section "Display the results of the retirement plan"?
Total Market, 1871, but I change the equity allocation percentage from the default value to my current actual allocation. On that tab I also change the expense ratio to my current actual expense ratio.

In general, I enter values consistent with current actual values and most likely future values. I run FIREcalc on a regular ongoing basis. I find taking the current actual values and most likely future values tends to create a rising glide slope of my financial situation; the reason for this is that while FIREcalc plans for the worst situation in history, the average situation is always better and often much better.

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Right. And that makes me wonder how folks are deciding on what to enter as their constant spending amount. A person could simply enter an amount equal to 4% of their portfolio but then, you don't really need Firecalc to know that will most likely be 100% success. I'm guessing that people are using their highest estimated spend and adding some percentage to it for cushion.
I enter my last six months actual expenses from Quicken, annualized. I subtract out for college expenses, since those are paid for from a separate stash.
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Old 12-16-2018, 12:25 PM   #37
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I use the Investigate tab and let FireCalc determine the spending level.
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Old 12-16-2018, 09:51 PM   #38
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Originally Posted by Carpediem View Post
Thanks to all for the responses so far. Very eye opening because I wasn't expecting the vast majority to be using Constant Spending.

Follow up question - On the Your Portfolio tab under the section titled "FIRECalc's calculations should be based on a portfolio invested in...", I'm assuming most here use the Total Market option. If that's true, what year do you use for the 'Include performance since...' box? 1871?

And what year do you use on the Investigate tab in the section "Display the results of the retirement plan"?
The vast majority are not actually using the constant spending model after retirement.

They just looked at it when getting ready to retire.

Most people here seems to check their annual spending against their portfolio each year, calculate the % ratio, and decide it’s OK as long as it’s under some predetermined “safe enough” X%. Maybe they got that X% from their initial Firecalc models.
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Old 12-17-2018, 10:19 PM   #39
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IIRMA? Google was not my friend in this case.


Edit: It was a spelling issue.


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Since 2007, the Medicare Modernization Act of 2003 has required high-income Medicare enrollees to pay an “Income-Related Monthly Adjustment Amount” (IRMAA) surcharge on their Medicare Part B premiums, which lifts the Medicare Part B premium from covering “just” 25% of costs up to as high as 80% of results, increasing Medicare Part B premiums by as much as 219% in 2017.
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Old 12-18-2018, 07:27 PM   #40
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I use Constant Spending Power but suspect our behavior will be more like the Bernicke. (However DW is 4 years younger, so there is that.)
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