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firecalc vs vanguard analysis
Old 03-28-2011, 04:02 PM   #1
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firecalc vs vanguard analysis

Hello,

I have run my analysis through firecalc and have the results of my Vanguard analysis. Although I realize that firecalc does not include taxes I still can not get good agreement between the two even accounting for the taxes. I know vanguard is rather conservative in their analysis. I'm still $10K/year delta between the two. I've tried putting my vanguard numbers into firecalc and account for taxes but still way off. My portfolio is 750K for 35 years. Plan to retire in two years(at 60 yo)at a spending level of $80K (taxes included). Vanguard gives me a 75% probability of making it. Firecalc has my spending level at $103K (w/o taxes) at 100% success rate. Even if I take off $20k for taxes I'm comparing 100% success vs. 75% success.

Anyone have any suggestions on what I may be overlooking (using constant spending acct for inflation)? Thanks.
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Old 03-28-2011, 04:52 PM   #2
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80k/750k= 10.7% SWR?

Something is wrong here.
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Old 03-28-2011, 05:27 PM   #3
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I left out some info. I'm almost 58 yo, wife is 56. Plan to retire at 60.My V/G numbers were: Total assets=633.5K, 60 stock/40 bonds,spouse retired with retirement disability= 27K. My base = 111.8K, 14% contribution to 401K with 4% match.Roth contribution = 6K. My Soc Security = 14.8K,spouse = 14.4K. My pension=28.5K.Annual expenses = 80K. Vanguard calculates 80K@75% success, 72K@87%, and 64K@100%. taxes are calculated and added to annual expenses. does anyone come close to these success rates in firecalc or higher/lower?
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Old 03-28-2011, 07:55 PM   #4
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80k/750k= 10.7% SWR?

Something is wrong here.
Maybe SS and pension is included to reach that 80k. Engr -- if this is correct, what is the actual draw from the portfolio alone?
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Old 03-29-2011, 02:38 AM   #5
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If the VG calculator you are referring to is Financial Engines, then it used to assume that once you reached your target date you would use the entire nestegg to purchase an annuity and I always found the withdrawal rate to be much higher than either Firecalc or Fidelity Income Planner so I stopped using it a few years back when I was close ER.
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Old 03-29-2011, 05:54 AM   #6
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If the VG calculator you are referring to is Financial Engines, then it used to assume that once you reached your target date you would use the entire nestegg to purchase an annuity and I always found the withdrawal rate to be much higher than either Firecalc or Fidelity Income Planner so I stopped using it a few years back when I was close ER.
I concur. Additional problems with F.E. is that you can't specify an end date (age) to your plan. It takes your expected lifespan from imbedded tables.

It also cannot be used by a retiree, unless you change your current age and "lie" to make the software work.

Even with the life annuity option, it's not a technique that is considered/used in reality, especially since most would suggest only a portion of your retirement portfolio be put into a life annuity.

Like Alan, I use/recommend FIDO's RIP, assuming you have an account with Fidelity and use the tool as designed.
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vanguard financial engines
Old 03-29-2011, 11:22 AM   #7
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vanguard financial engines

To all responders,
Thanks for sharing your insights.
For FE I thought I read in the fine print that the analysis is meant for individuals up to age 95. Could be wrong. That's why I was surprised when someone remarked about the Vanguard's use of embedded tables for age. I understand the "conversion" of the nestegg to a life annuity. I know these annuity values are tied in with interest rates/age somehow. That being said I don't understand how VG can give out the spending levels it claims with interest rates in the mud nowdays.

I presently do not have a Fidelity account. Is that the only way to use their calculator or is there a "free" one somewhere? Does anyone prefer Firecalc to Fidelity's calculator? If Fidelity is considered better it might be worth opening an account (any minimum dollar value required)?

I am attempting to find two calculators that give approximately the same answers before I decide when I can pull the trigger. I may need to go to a Fee only planner to feel more comfortable although I like doing as much as I can myself.
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Old 03-29-2011, 11:47 AM   #8
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We're in the accumulation phase, so take this for what it is worth.

Even after I felt like I knew what I wanted to do, I hired a fee only planner. I made my wife go with to every appointment, and I made sure she understood what actions were being taken with the money.

If things go wrong, I've got an unbiased 3rd party we can blame. It's good for marital harmony. It also gives her someone to turn to if something unexpected happens to me.

Our total cost was $600, and I think the peace of mind was well worth it.
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Old 03-29-2011, 12:21 PM   #9
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I've got an unbiased 3rd party we can blame.
Fixing blame dosen't account for your own analysis (via any tools and "gut reaction") in the end. Regardless of the ability to assign blame, in the end, you are responsible for the results.

There is only one indivudial that is responsible for their retirement plan. Guess who that is?
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Old 03-29-2011, 12:32 PM   #10
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I presently do not have a Fidelity account. Is that the only way to use their calculator or is there a "free" one somewhere?
No, you have to be a FIDO customer (either 401(k) or a commercial customer; DW/me meet both requirements) to use the full product - not the "quick look" as others provide.

IMHO, I would not open an account with FIDO just to get access to the calculator. If you want to pay a "fee for use" there are others that are available, for a price. There are also free calculators, but I'll leave it up to you as far as measurement of their value to your personal "quandary".

FIDO's product (e.g. Retirement Income Planner), when used with the full input of detail retirement budget, broken down by years of expense, is superior in its detail, IMHO.

You get a report (20+ pages) which will give you a breakdown of anticipated expenses, taxes, RMD's, and withdrawal %, year by year. You can't equate it to any "quick calculator" on the web. Heck, it even treats medical expenses in retirement at 7% increase vs. 2.3% for general inflation, currently.

As for DW/me? I used the RIP calculator for five years before retirement, and for almost four years after. I have the report from the day I retired, along with subsequent reports struck on Jan 1 of each year since retirement.

Even with the variance in the market, it's interesting on how close my original report (May 1, 2007) to today's actual results.

Maybe it will not work for everybody, but it seems to be working for DW/me. That's all that counts.
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Old 03-29-2011, 01:09 PM   #11
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To all responders,
Thanks for sharing your insights.
For FE I thought I read in the fine print that the analysis is meant for individuals up to age 95. Could be wrong. That's why I was surprised when someone remarked about the Vanguard's use of embedded tables for age. I understand the "conversion" of the nestegg to a life annuity. I know these annuity values are tied in with interest rates/age somehow. That being said I don't understand how VG can give out the spending levels it claims with interest rates in the mud nowdays.

I presently do not have a Fidelity account. Is that the only way to use their calculator or is there a "free" one somewhere? Does anyone prefer Firecalc to Fidelity's calculator? If Fidelity is considered better it might be worth opening an account (any minimum dollar value required)?

I am attempting to find two calculators that give approximately the same answers before I decide when I can pull the trigger. I may need to go to a Fee only planner to feel more comfortable although I like doing as much as I can myself.
It is the company, Financial Engines, that determines how much of an annuity you can get, not Vanguard.

DW has her IRA with Fidelity (not 401(k) ) but I'm fairly sure just being a customer gets you access to RIP.

I think you will be lucky to find any 2 calculators that will give the same answers. I found FIDO's RIP to be the most conservative of the several I used to use, and figured I was good to go when they all gave me 90% success rate or higher.

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When you become a Fidelity member, you gain many of the benefits our customers have, like free access to many of Fidelity's tools and features. As soon as you complete the membership form, you can start using the tool.
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Old 03-29-2011, 01:38 PM   #12
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..figured I was good to go when they all gave me 90% success rate or higher.
Alan, you know you can change the default to 95% (and make your analysis "more secure") ..

If not, PM me. I'll tell you what to change...
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Old 03-29-2011, 01:52 PM   #13
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Alan, you know you can change the default to 95% (and make your analysis "more secure") ..

If not, PM me. I'll tell you what to change...
In the end I hung on for about 4 years to get retiree health insurance (and start receiving my pension at 55 instead of 62) so all the calculators were maxed out at 100% when I did RE.
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Old 03-29-2011, 04:26 PM   #14
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Fixing blame dosen't account for your own analysis (via any tools and "gut reaction") in the end. Regardless of the ability to assign blame, in the end, you are responsible for the results.

There is only one indivudial that is responsible for their retirement plan. Guess who that is?
My financial advisor!
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Old 03-30-2011, 03:38 PM   #15
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Driving home this afternoon from w*rk I was thinking of the annunity figure that FE gives to the VG plan. Is it true that, for the same size nestegg ,you will get different annunity values depending on the prevailing interest rate at the time of the quotation? If so, this annunity value is considered a variable of sorts. I'm assuming that the older one is when the trigger is pulled the greater the potential value the annunity may be. However, the interest rate at the time of retirement will also play a part and is an "uncontrollable" factor. You have to be somewhat lucky to maximize the annunity value.
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Old 03-30-2011, 04:49 PM   #16
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I have just run FE within VG for my situation (I ER'ed last year). The detailed breakdown shows an income from my investments of 4.94% + my pensions + my estimated SS at 66. (that investment income would be an annuity, which is probably in line with today's rates).

It all looks reasonable to me. Historically, eg 5 years ago I don't know what it predicted I would get from my savings but my memory seems to recall something like 6%.
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Old 04-01-2011, 03:40 PM   #17
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Alan,

First of all congratulations on your retirement! You've achieved a major milestone.

Concerning your FE analysis - I thought that VG took in your pension and SS incomes along with investments and calculated taxes on the total of all three inputs. Whatever that number is, it is added to the allowable spending level. This way the final number is an after tax value.
To derive your 4.94% number did you enter zero for ss and pension inputs first so that you get a dollar figure (for investments only) and then divide that result by your initial net worth input? Your net pension and ss amounts would be added in later to calculate a total spending (after tax) value.
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Old 04-01-2011, 03:53 PM   #18
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Alan,

First of all congratulations on your retirement! You've achieved a major milestone.

Concerning your FE analysis - I thought that VG took in your pension and SS incomes along with investments and calculated taxes on the total of all three inputs. Whatever that number is, it is added to the allowable spending level. This way the final number is an after tax value.
To derive your 4.94% number did you enter zero for ss and pension inputs first so that you get a dollar figure (for investments only) and then divide that result by your initial net worth input? Your net pension and ss amounts would be added in later to calculate a total spending (after tax) value.
I have entered my actual pension plus my and DW's estimated SS at the ages we intend to take it. The calculator also knows my retirement savings and the summary report shows my total income and then breaks it down into its component parts. $x from pension, $y from SS and $z from savings. Retirement income = x+y+z

I simply divided z by savings to get 4.94%.
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