Firecalc over time calculations.

[slv1]

So I was wondering if anyone in here could shed some light on this.

I ran firecal and I had a 100% success rate over a 50 year and 75 year period.

I had a 100% success rate over a 20 year period as well. However, the money left at the end of that 20 years was 1/2 of what I started with. This means that somewhere at around 70 years or 75 years old I will have to be concerned about re-building my portfolio for it to last OR it is the general up and down of the market and I have to have the stomach for it.

Is that correct? Will I have to reduce spending at that 20 years mark till my funds increase again to last the next possible 30 years?

 

[REWahoo]

I suggest you spend a little time reading How FIRECalc Works.

 

[Meadbh]

So I was wondering if anyone in here could shed some light on this.

I ran firecal and I had a 100% success rate over a 50 year and 75 year period.

I had a 100% success rate over a 20 year period as well. However, the money left at the end of that 20 years was 1/2 of what I started with. This means that somewhere at around 70 years or 75 years old I will have to be concerned about re-building my portfolio for it to last OR it is the general up and down of the market and I have to have the stomach for it.

Is that correct? Will I have to reduce spending at that 20 years mark till my funds increase again to last the next possible 30 years?

Two things:
1. After 20 years, you will will be 20 years closer to death, with less time to spend down the portfolio.
2. FireCalc is just a projection. Theoretically, assuming that history repeated itself, your results after 20 years could be on any one of those lines of the graph. Or not.

It's important for retirees to reevaluate the situation periodically and adjust as needed to ensure a sustainable portfolio.

 

[youbet]

2. FireCalc is just a projection.

Not to nitpick, but..........

FireCalc is NOT a projection and the author states that and explains why in the introduction. (But, I knew whatcha meant......)

How can FIRECalc predict future returns from past performance?
It can't. And it doesn't try

 

[youbet]

I suggest you spend a little time reading How FIRECalc Works.

+1

REWahoo is, once again, right on. FireCalc is a great tool but you do need to understand what it's doing. Posts which tell me that the poster has a misconception of what FireCalc does are pretty common.

 

[slv1]

Thank you

I understand that firecalc is not a projection or a crystal ball that can foresee the future.

The questions was about how at 20 years the funds can be so much lower (at its lowest) and yet at 50 years stay exactly the same as the original funds.

That means that at some time in the future (based on past performance of the market as firecalc looks at) there is a chance that my funds are cut in half even though I have a 100% chance of survival for 50 to 75 years. So even in the worst market conditions I can survive 100% of the time unless the worst condition is worse than the worst in the past (great depression). However, it may take time to build what I lost in those worst times. That difference in portfolio value could be nerve wrecking to some people.

 

[Blue Collar Guy]

I was near faint a few times during the 2008 crash, nerve wrecking was an understatement. I stopped looking , it was much better.

 

[youbet]

I understand that firecalc is not a projection or a crystal ball that can foresee the future.

The questions was about how at 20 years the funds can be so much lower (at its lowest) and yet at 50 years stay exactly the same as the original funds.

That means that at some time in the future (based on past performance of the market as firecalc looks at) there is a chance that my funds are cut in half even though I have a 100% chance of survival for 50 to 75 years. So even in the worst market conditions I can survive 100% of the time unless the worst condition is worse than the worst in the past (great depression). However, it may take time to build what I lost in those worst times. That difference in portfolio value could be nerve wrecking to some people.

Yep!

IMHO, generally folks like to think they'll have more control over the progress of their FIRE portfolio than they actually will. When I FIRE'd 11 years ago, it was with the assumption that it would be a wild, roller-coaster ride the outcome of which I would only have partial control over. At the end, I could have just a few dollars left, or I could have a multiple of what I started with.

Since I FIRE'd in mid-2006, pretty much right into the face of the Great Recession, my feelings were correct. Within 2 years, my FIRE portfolio was down by almost a fourth! Wow! Many posters, including me, on this forum were shell-shocked. But then the recovery began, most portfolios recovered, and now most of us are all smiles about how the last decade has gone.

 

[ERD50]

Good replies. I'll just add that it isn't obvious, but when you go past 49 (plus/minus a year or two?) years for the time frame, you will have one of the worst periods drop off (1966). FIRECalc won't run the data on years that it can't do a complete run on. 1966+50 = 2016, and I understand there is data for 2016, so that's as far as you can go before dropping off bad years (maybe only 49 years for 1966? Not sure where the '0' year starts in the calculations).

But the numbers converge at that point anyhow, getting to a 40+ year time period also seems to be getting to support a 'forever' portfolio. And it's all a crap-shoot anyway!

I tend to think of FIRECalc results in more of relative terms - is this situation better/worse than another? Rather than an absolute, is this safe?

-ERD50

 

[latexman]

I understand that firecalc is not a projection or a crystal ball that can foresee the future.

The questions was about how at 20 years the funds can be so much lower (at its lowest) and yet at 50 years stay exactly the same as the original funds.

That means that at some time in the future (based on past performance of the market as firecalc looks at) there is a chance that my funds are cut in half even though I have a 100% chance of survival for 50 to 75 years. So even in the worst market conditions I can survive 100% of the time unless the worst condition is worse than the worst in the past (great depression). However, it may take time to build what I lost in those worst times. That difference in portfolio value could be nerve wrecking to some people.

This is somewhat OT, but I wonder if the OP is also getting confused by a known bug in the FireCalc report. See http://www.early-retirement.org/forums/f36/lowest-portfolio-balance-100-success-82540.html

 

[slv1]

Yep!

IMHO, generally folks like to think they'll have more control over the progress of their FIRE portfolio than they actually will. When I FIRE'd 11 years ago, it was with the assumption that it would be a wild, roller-coaster ride the outcome of which I would only have partial control over. At the end, I could have just a few dollars left, or I could have a multiple of what I started with.

Since I FIRE'd in mid-2006, pretty much right into the face of the Great Recession, my feelings were correct. Within 2 years, my FIRE portfolio was down by almost a fourth! Wow! Many posters, including me, on this forum were shell-shocked. But then the recovery began, most portfolios recovered, and now most of us are all smiles about how the last decade has gone.

So then if someone has a potential 50 years, it's really about taking a shot in the dark with some light based on the past. Or just keep working till 65 and let the nest egg grow to give a bigger cushion.

With that said, I understand that at a 3 or 4% withdraw rate chances are I end up with more money than I started.

 

[REWahoo]

I think your wording is a bit pessimistic. I prefer this:

"So then if someone has a potential 50 years, it's really about taking a [-]shot in the dark[/-] reasoned, conservative withdrawal amount with some light based on the past. [-]Or just keep working till 65 and let the nest egg grow to give a bigger cushion[/-] And have the flexibility of reducing expenses should the SHTF. "

 

[slv1]

This is somewhat OT, but I wonder if the OP is also getting confused by a known bug in the FireCalc report. See http://www.early-retirement.org/forums/f36/lowest-portfolio-balance-100-success-82540.html

I did notice that on several attempts. I figured it just meant that I'm good and I won't be going below the original amount and may go above it.

But my concern was somewhere along the way not at the end.

 

[slv1]

I think your wording is a bit pessimistic. I prefer this:

"So then if someone has a potential 50 years, it's really about taking a [-]shot in the dark[/-] reasoned, conservative withdrawal amount with some light based on the past. [-]Or just keep working till 65 and let the nest egg grow to give a bigger cushion[/-] And have the flexibility of reducing expenses should the SHTF. "

Yes, it is pessimistic. Perhaps fear of losing it all makes the glass half full thing not work well.

I know many people are good with an 80 to 90 % success rate. I also know that a 100% success rate is actually not realistic since whole countries don't have a 100% success rate of not ever going into a recession, depression or going broke all together. Argentina comes to mind as one example or Greece.

I understand that the markets would have to make less than 1% real returns in order for the 4 or 3 % rule to fail. Odds of that happening are real low.

As far as flexibility goes. If SHTF and I'm still working I would still need to reduce expenses.