FIRECalc - Retire Early Spread Sheet Comparison

[Merron]

I compared the 100% WR of both calculators using 57% stocks, both 30 and 40 year periods, 5 yr. US Treas.,Back end payout, CPI, .26%expenses.

FIRECalc gives a 3.9% WR, and version 1.61 of the spread sheet gives 3.15%.

There are similar differences when the withdrawals are taken at the beginning of the year.

Since I think FIRECalc is based on the spread sheet, can any one explain why there is such a difference?

merron

 

[dory36]

Re: FIRECalc - Retire Early Spread Sheet Compariso

3.15% is an awfully low figure -- I suspect something isn't quite right.

http://rehphome.tripod.com/re60.html discusses the spreadsheet findings -- and is pretty hard to find a SWR worse than 3.8 - 4% for 30 and 40 year payouts.

There are some minor differences in how we look at the data, but nothing that would make that much difference.

Dory36

 

[JWR1945]

Re: FIRECalc - Retire Early Spread Sheet Compariso

Type in 0.26% for your expenses. If you type in .26, the calculator converts your expenses to 26%. It shouldn't, but it does.

Have fun.

John R.

 

[intercst]

Re: FIRECalc - Retire Early Spread Sheet Compariso

merron asks,

I compared the 100% WR of both calculators using 57% stocks, both 30 and 40 year periods, 5 yr. US Treas.,Back end payout, CPI, .26%expenses.

FIRECalc gives a 3.9% WR, and version 1.61 of the spread sheet gives 3.15%.

There are similar differences when the withdrawals are taken at the beginning of the year.

Since I think FIRECalc is based on the spread sheet, can any one explain why there is such a difference?

--------------------------

For your input variables I get a 3.55% withdrawal for 30-years and 3.05% for 40 years.

The spreadsheet only contains 5-yr Treasury note data for 1953 to date, thus the results don't have the validity of the 3 month commercial paper data that spans the complete 1871-2003 time period.

intercst

 

[Merron]

Re: FIRECalc - Retire Early Spread Sheet Compariso

I should add that the results previously given were for the 40 year period.

Answer to JWR1945: I did input 0.26 for expense ratio and the spread sheet shows it as such.

Question for intercst: are your results from FIRECalc or the spread sheet?

Question for dory36: how do you explain that intercst got even lower figures than I did. If we are both using the same input, why should the results not be exactly the same?
There is still my original question of why there is any difference between FIRECalc and spread sheet results for the same inputs?

Looking forward to your reply's.

Merron

 

[JWR1945]

Re: FIRECalc - Retire Early Spread Sheet Compariso

I have modified this post to highlight an error that I had made when I first wrote it.

This first part turns out to be wrong. It was my error. I had inadvertently changed the copy of the calculator that I have on my desktop. My other copies were OK.

I have found another error.

The programming for cell DL1693 should be "=DK1709".  Instead, it is "1".

Thanks for finding this.  I have been wondering why portfolios starting in 1955 (or 1954 depending upon the details of how you analyze your data) have always lasted exactly 31 years.  This explains it.

To correct the calculator, highlight cell DL1693.  Then write =DK1709 up at the top in the formula bar, press enter and save your changes.

You might want to download the calculator once again, just in case. (I checked the 0.26 versus .26 problem. It is the same on all of my copies.)

In terms of what intercst said, the Retire Early Safe Withdrawal Calculator assigns an interest rate of 0% to the fixed income component (the 5-year Treasuries) until 1953.  I found that 1911 (or 1910 depending upon how you analyze your data) failed in year 40 at a withdrawal rate of 3.03% (but not at 3.02%).  All of the years in this sequence had a fixed income interest rate of 0%.

Have fun.

John R.

 

[dory36]

Re: FIRECalc - Retire Early Spread Sheet Compariso

Question for dory36: how do you explain that intercst got even lower figures than I did. If we are both using the same input, why should the results not be exactly the same?
There is still my original question of why there is any difference between FIRECalc and spread sheet results for the same inputs?
Merron

I can't answer for Intercst - but he is the author of the spreadsheet, so he certainly knows how it works.

Now, about why they differ:

They both used the same data when written, but they aren't the same program. In writing Firecalc, I worked from scratch in developing the algorithms, rather than trying to reverse-engineer Intercst's spreadsheet. There are probably a few differences in such things as when the expenses are deducted from the portfolio (before or after inflation is applied that year?), for example.

In addition, there were some deliberate differences, such as applying the first withdrawal immediately upon retirement rather than 364 days later. (I was looking at survival of a portfolio when SEPPs were being used, and planned an immediate withdrawal.) Also, I felt that the bad years of the late 60s were being left out of too many analyses for the 40 year runs many people were doing, so my analysis includes partial cycles, such as 1969-2001, when Intercst's spreadsheet stopped the analysis at 1961 for the 40 year runs. This lets me catch more failures for those years, but also changes the numbers used in the success rate equation.

When Firecalc was written, it was pretty thoroughly tested against the spreadsheet by lots of folks. Intercst researched the differences, determined they were insignificant, and posted his analysis at http://rehphome.tripod.com/captbill.html. (He posted this on May 1, 2001, the day I joined the ranks of the early retired! )

If you continue to get significant differences, I would certainly suggest you try to see why. At a minimum, see if you are getting the same results as Intercst shows on the page describing the spreadsheet, for example. You can also run the detailed results option on Firecalc, and then look year by year at the outcomes for each. (We did find a typo a couple of years ago this way, when one user saw a divergence in one particular run.)

If you are getting differences that aren't too big, ignore them. No sense measuring with a micrometer when you have to cut with a chainsaw!

Dory36

 

[John Galt]

Re: FIRECalc - Retire Early Spread Sheet Compariso

I do not understand who would care if one spreadsheet
yielded results which varied .01 from others. I use no
spreadsheets whatsoever and my results are just fine.
This discussion over why one projection differs from
another leaves me wondering why anyone cares.
Get out of the house and do something before you're
dead. The spreadsheets don't mean anything in the
end.

 

[Merron]

Re: FIRECalc - Retire Early Spread Sheet Compariso

As dory36 suggested I checked the spread sheet results published by Intercst and I am pleased to say I agree with them, so my copy of the spread sheet must be ok.

The reason our 40 year WR figures didn't agree, was that I had end of the year as retire date and Intercst had start of the year.

As to my original question of why don't the spread sheet and FIRECalc agree, it seems to be in the use of the 5yr. Treas. When I compared both programs using Commercial Paper Rates, the results were within 1% for both 30 and 40 year payout periods and are around the 4% figure.

Many thanks for your help and my apologise to John Galt for boring him. By the way John, I rode a stage of the Tour de France last year, so I do get out of the house on occasions!

 

[John Galt]

Re: FIRECalc - Retire Early Spread Sheet Compariso

Hello Merron! Apology accepted..................