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Am I missing something?
Old 09-21-2015, 04:18 PM   #1
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Am I missing something?

I'm currently 28 months out from early federal retirement at age 56. Retired military as well with a 30% disability. Just ran Firecalc for the first time and am surprised at the result.

"Because you indicated a future retirement date (2018), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 3 years of preretirement plus 32 years of retirement, or 35 years.
FIRECalc looked at the 110 possible 35 year periods in the available data, starting with a portfolio of $276,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 110 cycles. The lowest and highest portfolio balance at the end of your retirement was $-326,153 to $4,857,137, with an average at the end of $1,219,056. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 35 years. FIRECalc found that 6 cycles failed, for a success rate of 94.5%."

I plugged in my portfolio balances on page 1, pension and SS information on page 2, and selected the constant spending model on page 3.

Did I do this correctly? The results just seem overly optimistic.

Thanks,

Marco
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Old 09-21-2015, 04:22 PM   #2
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Did you adjust the Your Portfolio tab to be consistent with your intended investment asset allocation? The default is 75% equities/25% long interest and that high equities allocation might be part of the cause of the results you are getting.
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Old 09-21-2015, 04:24 PM   #3
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I just noticed that we now have a "Marco" and a "marko".... it could get confusing.
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Old 09-21-2015, 04:39 PM   #4
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With those numbers it looks like you have spending under control.
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Old 09-21-2015, 04:46 PM   #5
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Can't really say much about it without more info, withdrawals for one. I'd be happy with that result. You just need to be willing to reduce spending a bit if it looks like you're on one of those failure scenarios.

There can be a very wide range of outcomes, as you saw. And the average outcome will be pretty large when what you're trying to do is make it through the worst case.
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Old 09-23-2015, 03:50 PM   #6
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@ pb4uski: Ok, so I changed my portfolio holding to more accurately match the mix I prefer. Here are the new results.


"Your spending in every year after the first year will be adjusted for inflation, so the spending power is preserved.

Because you indicated a future retirement date (2018), the withdrawals won't start until that year. Your contributions will continue until then. The tested period is 3 years of preretirement plus 32 years of retirement, or 35 years.
FIRECalc looked at the 44 possible 35 year periods in the available data, starting with a portfolio of $276,000 and spending your specified amounts each year thereafter.
Here is how your portfolio would have fared in each of the 44 cycles. The lowest and highest portfolio balance at the end of your retirement was $-366,670 to $9,993,141, with an average at the end of $2,582,479. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
For our purposes, failure means the portfolio was depleted before the end of the 35 years. FIRECalc found that 4 cycles failed, for a success rate of 90.9%."


Still very optimistic.


@GrayHare: Yes we are a very frugal couple, my better half especially, she keeps me on track.


@Animorph: Spending is one of those things that is hard to predict. Capital expenses mostly like a new roof, new car, etc. We plan on going into retirement in good shape, and will have contingencies in place for those unplanned events.


Love running these sims in all of the different forms. I'm still looking to find the 100% success rate!
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Old 09-23-2015, 03:51 PM   #7
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Thanks all for your suggestions.


Regards,


Marco
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Old 09-23-2015, 04:18 PM   #8
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Quote:
Originally Posted by pb4uski View Post
I just noticed that we now have a "Marco" and a "marko".... it could get confusing.
I was here first!

I am THE marko! I could change my name to "marko the great" if anyone likes that.
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Old 09-23-2015, 10:12 PM   #9
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Where is the emoticon for "big head"?
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Old 09-27-2015, 10:20 AM   #10
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Welcome to the forums, Marco.
Quote:
Originally Posted by Marco View Post
Love running these sims in all of the different forms. I'm still looking to find the 100% success rate!
Note that nine times out of ten you're already guaranteed to finish your life with more money than you need... in at least one case, millions of dollars more.

Reaching a 100% success rate would require you to work and save for at least several more years to reduce your withdrawal rate to under 3%. Very few people are willing to work the extra time to insure that they'll always have more money than they need. (In most cases, way more.) It's the clothing equivalent of a belt, suspenders, a rope through the belt loops tied around your neck, and a staple gun.

Instead what you could focus on is the 10% failure rate. The cure is longevity insurance in the form of an annuity like Social Security... or a military pension. Every year of retirement, you could re-run your portfolio through FIRECalc to reach the same 90% success rate. If your portfolio suffers from an adverse sequence of returns (and withdrawals) during the first decade, then you could cut your spending back to within your military pension (and SS) to let your investments recover.

But if you make it through the first decade of a 90% success rate, then you'll always make it through the next two decades.

Note that your military pension gives you an inflation-fighting COLA and cheap healthcare-- two factors that FIRECalc can't simulate. In other words, with those factors and the ability to vary your retirement spending, you're already at a 100% success rate.

That's all you're "missing". You're already FI, and the RE part is up to you!
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Old 09-27-2015, 11:54 AM   #11
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Thanks for those excellent points.
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Old 10-22-2015, 02:48 PM   #12
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Hi all -

I am finding myself in a similar situation, I am using FIREcalc for the first time (though I have run through several different scenarios - changing one input at a time, etc.) and I am getting what appear to be surprisingly optimistic results.

I downloaded the excel output which is available on the results page (the one that shows year by year inputs, data, and formulas). The top half is just a data dump, but the bottom section shows you the corresponding formulas it is using. It is odd though because the bottom section (beginning on row 70) is supposed to match the top section, but it doesn't, beginning in column J. This is concerning. Is there a problem within the calculations or is there just something I am not looking at correctly since I am new to this thing?

Thanks!
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Old 10-22-2015, 03:47 PM   #13
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If you're looking for 100%, go to the spending models tab and select Bernicke's Reality Retirement Plan. There you go. Done.
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