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10-28-2016, 11:00 AM
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#1
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Dryer sheet aficionado
Join Date: Jul 2011
Posts: 48
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Fire Calculation Results
I have run fire calc with the same exact scenarios, eight to be exact, without changing any assumptions, and each time I see a different fire calc percentage success rate.
What is up with that?
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10-28-2016, 11:12 AM
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#2
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Dryer sheet aficionado
Join Date: Jul 2011
Posts: 48
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I assume this is because I am picking a retirement portfolio with a random performance, correct?
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10-28-2016, 11:53 AM
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#3
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: May 2013
Location: Les Bois
Posts: 5,761
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randomness is random
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You can't be a retirement plan actuary without a retirement plan, otherwise you lose all credibility...
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10-28-2016, 12:07 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
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Quote:
Originally Posted by MrEd
I assume this is because I am picking a retirement portfolio with a random performance, correct?
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Yes
__________________
Numbers is hard
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10-28-2016, 12:36 PM
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#5
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Dryer sheet aficionado
Join Date: Jul 2011
Posts: 48
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A random result is as good as a guess for planning purposes. So what is the value of this function?
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10-28-2016, 12:43 PM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
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Quote:
Originally Posted by MrEd
A random result is as good as a guess for planning purposes. So what is the value of this function?
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I find it of no value and never use it. Many years ago some users lamented the lack of a Monte Carlo option so the creator of FIRECalc added it for them.
__________________
Numbers is hard
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10-28-2016, 12:56 PM
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#7
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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There is a lot of info on Monte Carlo theory on the web. The stock market performance is pretty random within bounds. That type of randomness is what is being modeled. Not just one answer, but many possible answers any of which could be correct. Its the future so who knows? You can pick a percentage increase for the years in the future. That is what Quicken's planner does.
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10-28-2016, 01:21 PM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Sep 2005
Location: Northern IL
Posts: 26,821
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Quote:
Originally Posted by rewahoo
i find it of no value and never use it.
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+1 -erd50
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10-28-2016, 03:50 PM
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#9
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Thinks s/he gets paid by the post
Join Date: Sep 2016
Location: Acworth
Posts: 1,214
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Quote:
Originally Posted by MrEd
A random result is as good as a guess for planning purposes. So what is the value of this function?
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It's random results based on historic information, not random results based on WAGs. It's a predictive tool, not a psychic ball, so the results are simply one tool that can be used to determine viability (using available data) of a given scenario working out. If it says it got 100% chance of success, then the plan is "probably pretty solid". If it says it got a 25% chance of success, then the plan is not likely to work out. A 5% chance of success "could" work out (investments could average 20% per year for the next 50 years), but it is highly unlikely. That's it's value, to give "likelihood" of success based on known data.
It's not a guarantee but a tool that can help evaluate a plan. That's my take on it anyway.
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10-28-2016, 04:15 PM
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#10
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 50,004
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Quote:
Originally Posted by exnavynuke
It's random results based on historic information, not random results based on WAGs.
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If Mr Ed was referring to the fourth option under the portfolio tab, then it is a random/Monte Carlo calculation. It is my understanding that only the first two options under that tab use actual history.
__________________
Numbers is hard
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10-29-2016, 01:19 PM
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#11
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Dryer sheet aficionado
Join Date: Jul 2011
Posts: 48
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Comparative Models
How does firecalc compare to fidelity and t rowe price retirement calculators?
Are the other two worth running??
I assume I would get similar results from all three.
Is there a better retirement calculator out there
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10-29-2016, 01:46 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Oct 2012
Location: Colorado Mountains
Posts: 3,165
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I use T. Rowe Price, Vanguard Nest Egg Calculator, QLP in Quicken, Financial Engines, and others. It is always good to bounce the results against other tools. A mixture of deterministic (QLP), Monte Carlo (T. Rowe Price, Vanguard Nest Egg) and historical (FIREcalc) gives you quite a broad brush view of the future for your planning purposes.
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10-29-2016, 01:55 PM
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#13
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Moderator
Join Date: Feb 2010
Location: Flyover country
Posts: 25,199
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Quote:
Originally Posted by MrEd
How does firecalc compare to fidelity and t rowe price retirement calculators?
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I haven't used the TRP calculator, but Fidelity's version is generally considered the most conservative and will probably give you a lower success percentage. But it's worth running IMHO.
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10-29-2016, 05:04 PM
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#14
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,495
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I agree with the above statements regarding historical calculators may not reflect current or future scenarios. I'm also not a fan of/do not use deterministic calculators (e.g., i-orp) as I have no idea what returns will be in the future.
Back when I was comparing calculators, I found Fidelity's to be the most conservative. I still find Fidelity's calculator useful/instructive as it includes monte carlo results reflecting significantly below market averages, below market averages, and historical market averages. IIRC, Wade Pfau and Michael Kitces have posts indicating that MC scenarios are useful as guides in planning PF withdrawals. Regardless, the most important thing is to incorporate a margin of safety into all plans. Venture capitalists do this, as do Munger and Buffet who are strong proponents.
Examples of margins of safety in retirement planning could include, but are not limited to, saving more than retirement spending estimates require, eschewing debt (the bad kind), not buying a larger house than you need, frugality as a general principal, remaining flexible in PF withdrawals in response to market conditions, maintaining sufficient insurances account for deep risks, optimizing health, choosing the right partner in relationship (divorce can be costly/devastating to retirement plans), sufficient estate and disaster planning, etc.
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10-30-2016, 10:47 AM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,866
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In my experience, Monte Carlo simulations tend to be more pessimistic than historical calculators, which in turn are usually more pessimistic than the simplistic X% returns Y% inflation fixed models.
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"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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10-30-2016, 11:19 AM
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#16
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,171
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Quote:
Originally Posted by MrEd
How does firecalc compare to fidelity and t rowe price retirement calculators?
Are the other two worth running??
I assume I would get similar results from all three.
Is there a better retirement calculator out there
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The calculators all have benefits and assumptions.
Firecalc back tests against historical markets and allows inputs of income streams coming online at different times.
Fidelity lets you input different inflation rates for things like healthcare if you go into the details of the spending... that can be very useful. I found it helpful for fleshing out my budget and testing my assumptions.
Quicken Lifetime planner was good for mapping some future events (in my case kids college) against the savings goals for that (in my case 529's). But, as mentioned, was deterministic. It doesn't vary the return and inflation rates the way real life does. But you can make it conservative by choosing lower returns than historical average, and higher inflation than historically average.
I also used Financial Engines, Vanguard... etc..
With each calculator I uncovered something I hadn't thought of... I'd then revise my plan and rerun it on all the calculators.
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Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
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10-30-2016, 11:32 AM
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#17
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Thinks s/he gets paid by the post
Join Date: Jan 2008
Posts: 1,495
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I've used ESPlanner, which doesn't have the easiest user friendly interface,, but I found it worth the effort and would recommend it. I ran various scenarios with it for a few years, but never paid more beyond the initial download (required annual subscription to obtain each year's latest updates, including SS, tax calculations, etc.). I found it to be the second most conservative calculator after Fidelity's. It was instructional/educational at the time, but I lost it in a computer crash a couple years ago and am not interested in paying for it again.
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10-30-2016, 12:28 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2003
Location: Florida's First Coast
Posts: 7,667
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What and where does one enter in Firecalc for a complete CD & Fixed income based portfolio? Averages at about 3.25%.
Thanks.
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"Never Argue With a Fool, Onlookers May Not Be Able To Tell the Difference." - Mark Twain
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10-30-2016, 01:30 PM
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#19
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,151
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Quote:
Originally Posted by SecondCor521
In my experience, Monte Carlo simulations tend to be more pessimistic than historical calculators, which in turn are usually more pessimistic than the simplistic X% returns Y% inflation fixed models.
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I really haven't found that...... It seems like the Monte Carlo and simplistic, linear calculators are completely dependent on the parameters you input. They're under your control in terms of either the range of variation they run (Monte Carlo) or the linear inflation and investment return assumptions (simplistic) you input. So, if you want your Monte Carlo simulations to be less pessimistic, just set them up that way.
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"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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10-30-2016, 01:47 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
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Quote:
Originally Posted by ShokWaveRider
What and where does one enter in Firecalc for a complete CD & Fixed income based portfolio? Averages at about 3.25%.
Thanks.
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Where are you getting 3.25% from CDs and FI?
The last two options on the Your Portfolio tab could be used. Or 5 year treasuries in the first option.
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If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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