Is FIRECalc wrong?

[retiredinnyc]

so I put in a starting portfolio of 1,000,000 with a 80/20 mix. it says I can pull out 32,891 a year indexed to the cpi for 50 years, and I would have an ending balance of 1059. since this is a close shave at the end I wanted to see how much I would have at year 49 , it says I would have MINUs 357,526. so how can a withdrawal of 32,891 be 100 % safe for 50 years if its depleted by 350,000 by year 49? any answers are appreciated

 

[Animorph]

Not sure this is your problem, but FIRECalc doesn't really have enough history for a 50 year test period. With data through 2014 (if it's that up to date) would allow it to start its last 50 year scenario with January 1965, right where there are some critical years. If you just changed the period to 49 years, you get another start at 1966, which is a bad year to start if I remember correctly.

Stay to the standard 30 years for better results, sometimes even worse than 40 or 50 years. You can maybe stretch that to 35.

 

[braumeister]

If you want to look at a long time period and be very conservative, some use this method.

Run FIRECalc for a period like (for example) somewhere between 10 and 20 years. Note the lowest portfolio value.

Run it again with that as the starting portfolio for another shorter term.

Lather, rinse, repeat until you've run it for the long time frame you want to look at.

 

[Independent]

Not sure this is your problem, but FIRECalc doesn't really have enough history for a 50 year test period. With data through 2014 (if it's that up to date) would allow it to start its last 50 year scenario with January 1965, right where there are some critical years. If you just changed the period to 49 years, you get another start at 1966, which is a bad year to start if I remember correctly.

Stay to the standard 30 years for better results, sometimes even worse than 40 or 50 years. You can maybe stretch that to 35.

We have a winner.

I plugged the numbers into FireCalc with the 49 year horizon. In the "Investigate" tab I specified that I wanted to download the detailed Excel results.

Sure enough, the only ending negative was the very last start year - 1966.

Specifying the time periods longer than 45 forces FireCalc to drop the worst years (1966-1971).

 

[enginerd]

For 50 year input, FIRECalc says it looks at 95 possible 50 year periods.
For 49 year input, FIRECalc says it looks at 96 possible 49 year periods.

That one extra period spans the one of the worst time period possible. I think there's one or two other scenarios where FIRECalc shows better results for the longer time period.

FIRECalc should only be used to look at the big picture. It shouldn't be used as a definitive tool If you're planning to cut your budget that close over a 50 year period I don't think you're close to FIRE yet.

 

[MBSC]

Sequence of returns risk. The worst 50 year retirement starts with a +12% return in 1965 that allows it to survive the remaining years. The worst 42-49 year retirements start in 1966 with a series of poor returns that cannot survive a 3.28% WR at 80/20 AA.

Note that reducing withdrawals to $31,900 using a 60/40 AA survives the 49 year retirement in 1966 with $356 remaining.

 

[retiredinnyc]

thank you members for solving this question

some additional info, im retired now for 8 years, my goal is to withdraw the max every year for myself with the goal to let the nest egg keep paying out to my heirs in perpetuity, the actual starting portfolio was as of December 2014 $3,400,000. I have not had the courage to look at the balance since this recent roller-coaster started in the market. John Bogle the founder of vanguard (my idol) says find an asset allocation and run with it so I determined 80/20 was mine and its running. Id rather my children get the lions share of what's left when I croak, followed by my grandchildren and then their kids too. As I have a pension it covers more than my living expenses I haven't had the need to touch the nest egg but I live in the past and still cut out coffee coupons and wait for things to go on sale before I buy. the house is paid for and they say it is worth a ridiculous price that in 3 lifetimes I would never pay that much for. My only other asset is a 12 year old car that I bought new. it was my first new car ever it has 35000 miles (nyc I walk most places). that sums up my situation so thank you everyone for the answers. I love this site. P.S. I have no idea how the dryer sheets appeared under my name but it makes me laugh so it will stay

 

[Gumby]

. I have no idea how the dryer sheets appeared under my name but it makes me laugh so it will stay

http://www.early-retirement.org/forums/f47/whats-the-deal-with-the-dryer-sheets-44456.html

 

[hnzw_rui]

If you want to look at a long time period and be very conservative, some use this method.

Run FIRECalc for a period like (for example) somewhere between 10 and 20 years. Note the lowest portfolio value.

Run it again with that as the starting portfolio for another shorter term.

Lather, rinse, repeat until you've run it for the long time frame you want to look at.

Going by 10 year spans, even a 2% WR will have you running out of money by year 27. Seems like that worst-case period (at least so far) has an inflation-adjusted CAGR of -3.58%. Dunno if it's the same period but worst-case nominal CAGR is -0.14%. Ouch.

I think I'm just gonna go with VPW + flexibility when I start drawing.

 

[retiredinnyc]

im trying to figure out how much to dispense out every year after im gone. id like to control it somewhat from the grave so that the next generation gets a taste, I don't want the first in line to blow through it and make the next generation start from scratch like me and many of you guys had to do. and I don't want to spoil them too much and they become lazy and pick up leisure time vices.

 

[bmcgonig]

Going by 10 year spans, even a 2% WR will have you running out of money by year 27. Seems like that worst-case period (at least so far) has an inflation-adjusted CAGR of -3.58%. Dunno if it's the same period but worst-case nominal CAGR is -0.14%. Ouch.

I think I'm just gonna go with VPW + flexibility when I start drawing.

Won't running and rerunning 10 yr spans for 50 yrs just give you 1966 as worst case 5 times in a row? That's pretty brutally conservative.


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[hnzw_rui]

Won't running and rerunning 10 yr spans for 50 yrs just give you 1966 as worst case 5 times in a row? That's pretty brutally conservative.

Yup, pretty much. And yes, brutally conservative is a pretty apt description.

Still, past performance is not a guarantee of future returns and all that. I'm going by 3-4% SWR to figure out how much I need to accumulate for my desired spending level. However, I plan on adopting VPW and just being flexible in terms of spending during the withdrawal phase which is really the most reasonable thing we can do unless you've got an insanely large nest egg compared to your expenses.