How much do you rely on FireCalc?

[audreyh1]

I've used it to model quite a few scenarios. I use it to model the % remaining portfolio method.

I had already retired when I found it, but I was already familiar with the basic portfolio survival studies, so I knew I was taking a conservative approach already.

Now I've just used it to model things like - historically, how much did the portfolio shrink using my current allocation compared to various withdrawal rates. This just lets me get an idea of how much variability in income one might expect, as well as the range of remaining portfolio values. It has helped me plan strategies for managing income variability.

 

[Hermit]

I, too, use FireCalc and Quicken Lifetime Planner the most, but I have used many other tools also. All the tools put me in the same approximate spending category.

When I first started to look at retirement tools in about 2003, T. Rowe Price had a very detailed and sophisticated Monte Carlo tool that I really liked. They have since dumbed down the input and simplified the output to make it more appealing to those who are not engineers or mathematicians.

 

[Jerry1]

I have used FireCalc and Fidelity RIP and a few others to give me confidence in making the decision.

I used FireCalc in the early stages of trying to decide if I was financially ready to retire. I viewed it as one step better than the 4% rule. Admittedly, I was not using all the functionality of the program.

I like the Fidelity RIP model better only because it is easier for me to handle. It was much easier for me to enter in all my expenses which I felt was very important to get a better handle on inflation. When you enter in all the expenses specifically (versus a general amount per month), it inflates them at different rates - i.e., food is not as likely to inflate as quickly or as high as healthcare.

I've only used the two, but I feel like they are enough as long as you know how they work and make sure you enter in all the fields. I learned a long time ago using tax software, once you override something or enter in some dummy data, either of which go around the logic built into the application/software, then you're on your own.

 

[rodi]

I use it as a periodic gut check for sequence of returns risk... As we are in a bull market - a bear could be waiting in the wings.
I make sure to input MY asset allocation, vs the defaults.
I run it with 30 years, 35 years, and 40 years... because 40 years probably excludes some bad historical years.

I also run Fidelity's calculator, financial engines, QLP, i-Orp....

I do this about 2 times a year - or more often if I'm thinking of making some changes.

FWIW - Firecalc has more than just the historical data to back test. You can also run it with random portfolio changes (with standard deviations settable)... this is pretty much a monte carlo.

I like firecalc because it's pretty easy and pretty comprehensive. As others mentioned - you have to guess at your taxes as a part of your spending... but so far my taxes have been far less than I predicted so my guesses were far too conservative... but like a lot of things... taxes could change in the future.

With Fidelity RIP - it's nice that you can set inflation rates on categories - I set the medical insurance inflation much higher... and so far haven't been wrong. I also set college spending higher (since that's still ahead of us)... again - that seems to be a good guess on my part.

 

[Birdie Num Nums]

For retirement planning I never guess how long I will actually live. I just guess an upper limit to that, which is easier. Here's how I attempt to logically determine what that upper limit could be:

The upper bracket: The oldest person alive right now is 117. My oldest ancestor died at 104 and I have several other centenarians in my family tree. My own mother lived to 98.

The lower bracket: I am not nearly as healthy she was, or as most in my family are, due to my continuing struggles with overweight and diabetes. I am going strong at 69 so far but do not feel much like a kid any more.

So, I usually guess the oldest I could possibly live, to be 95. I use 95 in FIRECalc. I used to use 100 until I got Type 2 diabetes when it seemed logical to reduce that age a bit.

As I draw closer to the end and have more information about my ultimate state of health, I can tweak my financial plan accordingly.

Me, too. I use age 96 for the Quicken Lifetime Planner, and hoping that if I live that long my mind will still be good. I've seen a few folks who were about that age, but whose minds were no longer "working"--and thinking what's the use being that old if you are essentially lying in bed all day with nary a thought.

 

[Car-Guy]

My oldest ancestor died at 104 and I have several other centenarians in my family tree. My own mother lived to 98.

As I draw closer to the end and have more information about my ultimate state of health, I can tweak my financial plan accordingly.

I've had one great grandparent that lived to over 100 and my parents, my grandparents and most aunts and uncles have all lived (or are still living) into their 90's.

My original planning basis before retiring was 100 for myself. However I now realize that "ain't" in the cards, so I've reduced that estimate to about 85 and that may be optimistic. As I've mentioned in other related threads, I've seen all my relatives in their 90's and I don't want any part of living (?) like that.

 

[Rianne]

I've looked at a hundred different ways sideways. They all come close enough for me and my DH and our DLabs.

 

[FREE866]

When I compare FireCalc to the Fidelity, Vanguard, ******* , or schwab calculators it definitely seems to be the most optimistic.
To be on the safe side I cut my current balance by 30% my success ratio % doesn't go down too much so I'm hopeful I don't run out of money!

 

[tmm99]

I remember Firecalc to be about the same as VG as for the spending level. I get the lowest spending result with FIDO (even after adding the taxes). I currently spend much less than the amount FIDO says I could, to be on the safe side. Firecalc, VG planner and FIDO are all good tools, but obviously, none of them will be 100% accurate.

 

[RunningBum]

I can't even remember how much or little I used FC before pulling the trigger. I know I wasn't obsessed with it. IMO the biggest risk in it is that it's only as good as the data you put into it, namely, your expenses. If you underestimate, that 95-100% success rate could drop a lot. You can have the best, most accurate tool in the world, but if you put garbage in, you'll get garbage out. I don't remember if I used any other planning tools, or if I just looked at the 4% "rule" and realized for my age it should probably be more like 3.5%.

I got pretty obsessed with studying my budget plan with a critical eye to make sure I wasn't forgetting anything somewhat likely, that my estimates were reasonable, and trying to figure out what kind of buffer I should have for a reasonable number of unlikely but possible events. Finally I looked at how many expenses could be trimmed without too much sacrifice if I had to, and how downsizing my house if needed could increase my funds.

 

[FREE866]

if I just looked at the 4% "rule" and realized for my age it should probably be more like 3.5%.

.

When you say "at my age" can I ask what age you retired at?

I understand the 4% "guideline" is for a 30 year retirement, but if someone is expected to start receiving SS in 15-20 years you can raise that withdrawal rate up to 5% as the withdrawal number you take out once SS kicks in will go down substantially...

thanks

 

[RobbieB]

I retired well before I first used FireCalc. Like all the others it said I was good to go.

So zero I guess.

 

[RunningBum]

When you say "at my age" can I ask what age you retired at?

I understand the 4% "guideline" is for a 30 year retirement, but if someone is expected to start receiving SS in 15-20 years you can raise that withdrawal rate up to 5% as the withdrawal number you take out once SS kicks in will go down substantially...

thanks

I retired at 49. I include NPV of 75% of SS + my smallish pension in my "net worth" (what I multiple my WR with) because it is conceptually easier for me than trying to figure out that I can spend x+y% until 65, and x+z until 62-70, whenever I start SS. The net effect is that I am spending, or at least budgeting to spend, a greater % of my investments now than I will when I start collecting SS and pension.

 

[FREE866]

I retired at 49. I include NPV of 75% of SS + my smallish pension in my "net worth" (what I multiple my WR with) because it is conceptually easier for me than trying to figure out that I can spend x+y% until 65, and x+z until 62-70, whenever I start SS. The net effect is that I am spending, or at least budgeting to spend, a greater % of my investments now than I will when I start collecting SS and pension.

I'm a little confused...so if i'm expected to get $35,000 pre tax per year at age 70 I take 75% of that ($26,000 pre tax) and deduct that from my "spending" on Firecalcs first page?

 

[gayl]

I don't use it at all. As long as I only use 60% of my pension & dividends I figure I'm good

 

[MarieIG]

Haven't run it in a while, but I'm backing into retirement. In other words, I'm going (max is at 60, job is just too much) and will have to make my spending fit.

P.S. I just tried it and it wouldn't allow me to submit my numbers.

 

[RunningBum]

I'm a little confused...so if i'm expected to get $35,000 pre tax per year at age 70 I take 75% of that ($26,000 pre tax) and deduct that from my "spending" on Firecalcs first page?

I don't remember how I modeled it in Firecalc, to tell you the truth. It was too long ago, and like I said, I didn't rely on it too much. I really doubt I subtracted from spending. I think I just entered 75% of my expected SS benefit (to account for a possible reduction in benefits in my lifetime) and let FC figure it out assuming it does. I don't remember exactly what FC does.

The way I use this, is, say I want to use a 3.5% WR. I would take the NPV of my SS and pension, add it to my investments, and withdraw 3.5% of that number. When I hit 65 and start taking pensions, I would reduce my withdrawal by the annual amount of the pension. Likewise with SS. It's likely when I start taking SS and my pension I'll revamp my system to do as you say, deduct from my expenses and make sure my WR on my investments (no longer including NPV of SS+pension) covers the remaining amount.

I'm not saying you should do it my way, especially if you have trouble understanding it. It may not be simpler for anyone other than me. But you asked what I do, so I've told you. Actually I didn't tell you everything, I use VPW, but that's kind of incidental to this discussion as it's still just some % applied to what I consider my "net worth" for that purpose.

 

[gcgang]

Retired in 2013. I preferred using Monte Carlo simulators. FC looks at one set of historical data, MCsims look at thousands of possibilities.

But I'm getting lazy with the good market, as I haven't run anything in a few years.

Is there anything out there that simulates future (30 year) returns based on today's valuation and yield levels?

 

[Chuckanut]

I ran calculators that were historically based back testers as well as those that used Monte Carlo generated scenarios of the various ups and downs of the stock market that might happen. I created my own spreadsheet to show what I might 'earn' in a year. And, I took a long hard look at variable withdrawal rates to smooth out the effects of the ups and downs of the market on my life style.

FWIW, I also ran tests using reduced amounts for SS and my [-]platinum plated solid gold [/-]pine and brass pension. I reduced my payment to SS to 75% of the expected, and my pension to 80% and eliminated the capped COLA.

They all said I could retire and life a reasonably good life style. So I did

 

[WestUniversity]

I've started using more of the features of FC lately (adding in pension, SS income, etc) and it is giving me 100% success rate.
Seems too good to be true, for my overly conservative way of thinking.

How much to rely on FC results?
What do folks do factor in more margin etc?

I use FIRECALC, the Monte Carlo analysis with my InvestCo, other Month Carlo tools on the web and my own Excel spreadsheet. That might make me a belt and suspenders guy but at the same time I feel like each of them have strengths and weaknesses and using them in tandem provides a more comprehensive understanding and a more reliable answer...

 

[brett]

We don't. Never used it, don't plan to.

 

[USGrant1962]

Is there anything out there that simulates future (30 year) returns based on today's valuation and yield levels?

With a small amount of work you can do that in the Your Portfolio tab of FIRECalc by using the random performance (Monte Carlo) feature.

You'll need to estimate your portfolio return, standard deviation, and inflation rate. You'll need to come up with valuations, but that is not too hard. Try 1/CAPE for stocks and the 10-year treasury yield for bonds. So for example, for a 60/40 portfolio:

Estimate inflation - say 2.20% based on long-term historical averages
Take 1/CAPE as the real return on stocks - about 3.22% + 2.20%= 5.42% total return
Take 10-yr treasury rate as total return on bonds - 2.34%

Your 60/40 portfolio return would be 60% x 5.42 + 40% x 2.34 = 4.19%

Standard deviation on a 60/40 portfolio is historically around 11-12%, a while ago I entered 11.3% into FIRECalc, but don't remember exactly where I got it.

So put 4.19% return, 11.3% SD, and 2.20% inflation into FIRECalc and hit submit. You might want to hit submit a few times, FIRECalc MC does not run thousands of cases so the results vary quite a bit.

You can use the same data in the consistent annual market growth feature as well where you would enter 5.42% market, 2.34% fixed income, and 2.20% inflation - but I have no idea what AA it is using. It is not using the total market split entered above, so I guess it is the default 75/25?

 

[mamadogmamacat]

up until ER used FC, I-orp, Fidelity Vanguard, and my own spreadsheets (the most conservative). All showed me at 100% for planned spending. Have not used any since ER (almost 2 yrs in). Spending about 10% less than planned. Will likely up spending a bit in a few years as i get more comfortable in being mostly past Sequence risks. Can always drop it back down whenever there is a market pullback (I've been waiting for one for about 7 yrs now, just know I'll be right eventually )