Your 'go to' Spending Model in Firecalc?

[Carpediem]

Curious to know which Spending Model in Firecalc you used that gave you the most confidence in the resulting % success rate. I'm guessing y'all used them all but is there one you wanted to see a 95+ % success rate to give you the most confidence in your plans?

Personally, I rely most on the Manual Spending option.

 

[Red Badger]

Constant. But I sanity check myself with the Bernacke model as I suspect that may be where we end up.

 

[Dtail]

I use Constant and % of remaining portfolio for 2 different scenarios. The Bernacke model appears very optimistic to me, but might be reasonable.
IIRC, the Manual Entry choice is only open to Firecalc supporters?

 

[pb4uski]

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.

 

[Carpediem]

The Bernacke model appears very optimistic to me, but might be reasonable.
IIRC, the Manual Entry choice is only open to Firecalc supporters?

As much as I want to rely on it, I too thought the Bernicke model was overly optimistic.

Yes, the Manual Entry is only for FC supporters.

 

[NW-Bound]

I tried "Constant Spending". Liked what I saw.

Then, tried "Bernicke's Model". Liked that even more.

My spending hopefully will be somewhere in between.

So, I answered "Other".

 

[tmm99]

Constant. I sometimes check Bernicke's, but just to make myself feel good.

 

[Dtail]

As much as I want to rely on it, I too thought the Bernicke model was overly optimistic.

Yes, the Manual Entry is only for FC supporters.

As an example, if one wishes for 100% success using the Bernicke model, one can spend a maximum of WR 5.81%.
Not sure many folks on this site are willing to start spending 5.81% at age 58.

 

[USGrant1962]

Constant spending power but I manually drop my spending at 65 (Medicare - I budgeted for unsub ACA), 75 (go slow), and 85 (no go).

 

[GalaxyBoy]

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.

+1. Exactly.

 

[SecondCor521]

Constant Spending Power, because that most closely matches my past 12 years spending pattern. Honestly I haven't even looked at the others.

I target 95% historically safe, because I think the future will be slightly better than the past.

But then I have been under-spending that rate for my planning horizon (40 years). No real good reason now that I'm highly confident that my kids will be able to graduate from college debt free if they do reasonably well.

It looks like the constant spending / 95% safe / 40 years / 91% stocks / 0.05% ER rate is just about 5%. I'm at about 1.5%. A childhood friend died this week. I think I need to go blow some dough.

 

[Katsmeow]

I have mostly used Manual Spending. Lately since we have a new mortgage I have been backing out the mortgage payment for my annual spending and then showing it as a non-inflation adjusted spending.

We are now at a point where I think after next year I can use constant spending as I don't think there will be a lot of variation (at least not predicted variation). The past several years there has been a lot of variation and while kids were still in school especially we had higher expenses than we will have in future.

 

[flintnational]

Constant spending power - But, I suspect the Bernicke model does a better job of reflecting what most people will encounter. Although, I think the Bernicke model starts reducing spending too early. When I use it, I alter the age/dates to force later annual spending reductions.

 

[audreyh1]

That’s very interesting that folks overwhelmingly favor the constant spending model in Firecalc, but very few here actually use it after retiring!

 

[USGrant1962]

That’s very interesting that folks overwhelmingly favor the constant spending model in Firecalc, but very few here actually use it after retiring!

In my view, the real value of FIRECalc is to show that you are relatively safe to retire. Then life happens.

 

[Rianne]

Constant spending model. Then I go to lump sum changes and fiddle around with possible unusual spending in a given year. Two years down the road, car. Five years, unexpected medical, then the vacation of a lifetime...a few months in Europe, first class.

 

[youbet]

Curious to know which Spending Model in Firecalc you used that gave you the most confidence in the resulting % success rate. I'm guessing y'all used them all but is there one you wanted to see a 95+ % success rate to give you the most confidence in your plans?

Personally, I rely most on the Manual Spending option.

As your post clearly says, there are two questions here.

1. What model do you use to test your RE plans in FireCalc?

2. What have you been doing since you actually FIRE'd?

I've been fully FIRE'd (no PT job, no working DW, no hobby business, no bluebird inheritance, etc.) for going on 13 years. (Not that there's anything wrong with any of those scenarios! They're just not what I'm doing.)

1. For original planning, I used a conservative forecast of my anticipated retirement budget + the constant spending model. There was enough in my forecasted budget to accrue for lump sum expenditures such as new cars, remodels, etc. I chose historical CPI.

2. For the first 12 complete years of FIRE, we've easily spent less than the original budget + inflation and were probably too conservative in our planning. I chose not to remove the dollars not spent from my FIRE portfolio and it's been a great time for portfolio growth, so things are looking fairly rosey in terms of current portfolio value.

Each year, our actual withdrawal amounts are calculated manually with our FireCalc budget as a guideline. That is, we use "constant spending" to test our future plans vs historical data in FireCalc, but that outcome is only one of several factors that influence what we actually do when the time comes in terms of spending.

We've learned that, by far, time is our most important and scarce resource. We make general plans within the broad financial guidelines of "FireCalc constant spending" and then modify them as we go along to maximize our enjoyment of our time generally within our broad spending constraints.

DW RE'd at 55 and I at 58. (Actually, I'm not retired, I'm "long term unemployed as I was unceremoniously canned by MegaCorp as I neared career end.) We're both 71 now. So far, we have definitely not seen any reduction in spending as we've aged. We do pretty much everything we'd like to do but there continues to be a list of activities we would gladly trigger if our budget were bigger.

In general, budgeting time is a LOT tougher than budgeting money. It seems so scarce and hard to control. Budgeting finances to support using time pleasantly is the target so we don't assume less spending power going forward.

 

[youbet]

That’s very interesting that folks overwhelmingly favor the constant spending model in Firecalc, but very few here actually use it after retiring!

Not sure exactly what you mean by "interesting" in this case, but using the constant spending model to test and then modifying actual spending over time and circumstances is exactly what I would have expected.

There are two distinct questions:

What model do you feel gives you the most appropriate test of future spending plans?

As the reality of the present looms in, what do you actually do (with the constant spending testing as a general guideline)?

 

[Dtail]

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.....

 

[youbet]

In my view, the real value of FIRECalc is to show that you are relatively safe to retire. Then life happens.

You betcha!

 

[CardsFan]

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.

 

[NW-Bound]

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.

 

[Dtail]

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?

 

[youbet]

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.

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.

 

[youbet]

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.