Another Firecalc question - Is this accurate?

[RenoJay]

I just added this same question to a running thread about Firecalc and taxes, but since the original question was already answered (thanks) I'm starting a new thread since I'm worried no one will see the question:

I put a hypothetical portfolio into Firecalc starting with $1,000,000 and $30,000 in spending. (A 3% withdrawal rate.) The portfolio was 50% in stocks and 50% in 5 year bonds. The portfolio succeeded in virtually every case except starting in 1929. What I don't understand is that, starting in 1929, the LOWEST value the portfolio hit in the first 10 years was $672,000. How is that possible, especially given 3% annual withdrawals? Didn't the stock market fall about 90% between 1929 and 1937? I don't imagine 5 year notes were yielding enough to dampen the difference this much. What am I missing?

 

[ERD50]

I think that some of those years after '29 were deflationary. So in 'inflation adjusted' terms, a portfolio increased in 'value' (and that is what FIRECALC reports).

Another way to say that is that the market downturn was not as severe, after factoring the increased buying power of the dollar. The 'real return' was higher.

But I'm not sure what those numbers are, but they are out there.

-ERD50

 

[RenoJay]

I think that some of those years after '29 were deflationary. So in 'inflation adjusted' terms, a portfolio increased in 'value' (and that is what FIRECALC reports).

Another way to say that is that the market downturn was not as severe, after factoring the increased buying power of the dollar. The 'real return' was higher.

But I'm not sure what those numbers are, but they are out there.

-ERD50

Thanks, ERD50. I figured that was the reason but didn't want to plant any seeds and thereby influence the answer. Wow, that must have been some massive deflation, but I guess it makes sense given the times. Hard to have any inflation when 25% of the country is out of work.