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Does FIRECalc Invest Excess Recurring Income in Portfolio?
Old 11-27-2018, 06:28 AM   #1
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Does FIRECalc Invest Excess Recurring Income in Portfolio?

Want to make sure I understand how the program handles excess recurring income. For example, if pension income exceeds ongoing spending and off-chart expenditures each year for a period of time, does FireCalc add that excess income to the portfolio balance and invest it according to the AA?

I assume the answer is yes since the average portfolio balance at the end of the retirement period generated by firecalc and my own retirement workbook is fairly close and thatís how I handle it.

Thanks.
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Old 11-27-2018, 06:44 AM   #2
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Yes.
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Old 11-27-2018, 07:08 AM   #3
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I’m not sure I understand your question. Firecalc assumes you spend what you withdraw.

If your investments generate more income than what you withdraw, of course Firecalc reinvests it.

You have added your pension income to your Firecalc model, and your pension income exceeds your max projected spending/withdrawal? Then I guess Firecalc must reinvest the excess if that’s matching your spreadsheet.

In that latter case you don’t really need worry about portfolio survival! You’re still growing your portfolio!
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Old 11-27-2018, 07:32 AM   #4
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Originally Posted by audreyh1 View Post
Iím not sure I understand your question. Firecalc assumes you spend what you withdraw.

If your investments generate more income than what you withdraw, of course Firecalc reinvests it.

You have added your pension income to your Firecalc model, and your pension income exceeds your max projected spending/withdrawal? Then I guess Firecalc must reinvest the excess if thatís matching your spreadsheet.

In that latter case you donít really need worry about portfolio survival! Youíre still growing your portfolio!


Yes, itís the latter case. In the early years my pension income will exceed my expenses and so my question is whether firecalc adds the excess to my portfolio and invests according to the AA. It appears so, but I wanted to confirm my understanding.
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Old 11-27-2018, 12:02 PM   #5
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Yes, itís the latter case. In the early years my pension income will exceed my expenses and so my question is whether firecalc adds the excess to my portfolio and invests according to the AA. It appears so, but I wanted to confirm my understanding.
I see - your pension income is not inflation adjusted?

I know there is a way to put your pension in come in Firecalc and say whether it is inflation adjusted or not. But I haven't played around with that feature. I have to leave it to others who have input pension and SS information into their Firecalc model.

Do you also have Social Security that comes online at a certain age?
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Old 11-27-2018, 02:36 PM   #6
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Originally Posted by audreyh1 View Post
I see - your pension income is not inflation adjusted?

I know there is a way to put your pension in come in Firecalc and say whether it is inflation adjusted or not. But I haven't played around with that feature. I have to leave it to others who have input pension and SS information into their Firecalc model.

Do you also have Social Security that comes online at a certain age?
In the "Other Income Spending" section, input the Pension in the Pension/Off Chart section at the bottom section and unclick the "Inflation adj" box for a non cola pension.
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Old 11-27-2018, 07:02 PM   #7
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I see - your pension income is not inflation adjusted?



I know there is a way to put your pension in come in Firecalc and say whether it is inflation adjusted or not. But I haven't played around with that feature. I have to leave it to others who have input pension and SS information into their Firecalc model.



Do you also have Social Security that comes online at a certain age?


Thatís right. Pension is not COLAíd. So, early on Iíll have a surplus but as inflation does its dirty work that surplus shrinks (assuming constant inflation-adjusted spending levels).

I will have Social Security at 67 but how much is not clear. Since Iím retiring so early, I will lose out on years of earnings for SS purposes, so Iíve run my calculations without any SS figured in. Better to be pleasantly surprised than caught short.
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