FIRECalc Withdrawal Amount?

[mccl]

When Firecalc says I can withdraw a certain amount per year, does that mean the amount I can withdraw from retirement savings assets, or does it include pension and social security. 

For example if I told it I get $17,000 social security and -$8,000 pension and it says my 100% safe withdrawal rate is $34,000, does that mean I can withdraw $34,000 from savings, in addition to social security and pension?  That is, $59,000 total available for spending ($34,000 + $17,000 + $8,000).

Or does it mean I would have $34,000 total spending money available including SS and Pension (which would mean I can only withdraw $9,000 from retirement assets ($34,000 - $17,000 - $8,000)?

 

[SteveR]

For example if I told it I get $17,000 social security and -$8,000 pension and it says my 100% safe withdrawal rate is $34,000, does that mean I can withdraw $34,000 from savings, in addition to social security and pension? That is, $59,000 total available for spending ($34,000 + $17,000 + $8,000).

---Yes, you will have $59,000 to spend (before tax). The FIRECalc 100% withdrawl takes into account the SS and pension values you put into the calculation. The Safe withdrawl is from your "savings" only after it considers your other sources of income to meet your annual needs and inflation.

 

[mccl]

Thanks SteveR, that's what I hoped it meant. 

The thing that confused me is if I tell FIREcalc I don't have a pension or SS (i.e. leave those fields blank), it gives me a lower withdrawal amount - around $20K instead of $34K.  Seems like the safe withdrawal amount from savings would be the same regardless of other income. 

 

[Telly]

I think there is a semantics/problem definition problem here. 

The FIRECalc "Safe Withdrawal Rate" is calculated from the $ that you put into the kitty. If you put only your investments in, then the historical SWR DOLLAR AMOUNT will be from the investments only.
If you add SS and a Pension into the input data table, then they are in the kitty too, so the SWR Dollar Amount will be higher. It is the TOTAL of what you can spend in your first year, out of the kitty.

Simple example:  $40,000 withdrawal, $1 million kitty, leave all the program defaults as-is, solve for 100% safe rate. It equals $41,900 first year withdrawal.

Now add in SS at $17,000 starting in year 0. Safe rate $ are now $58,900.  (Which is 41,900 + 17,000).

Add in Pension of -$8000 in year 0 with inflation adjuster ON. Safe rate $ are now $66,900.  (Which is 41,900 + 17,000 + 8000).

Turn the inflation adjuster OFF for that Pension, and see the effect.

Anyway, the SWR is the initial % of the whole kitty. Each dollar can be spent only once 

 

[snowbird]

I believe Telly is correct and SteveR is not. If SS & Pension income was inputted into the formula, then the 100% SWR includes SS & Pension, meaning your max WD from your 'other' savings is $9,000. You provided little else for us to go on.

 

[SteveR]

I stand corrected.

The SWR as explained here, seems to be in conflict with other calculators that provide the amount you can withdrawl from your SAVINGS only. They consider pensions, SS and future income a deduction from the amount needed to be withdrawn from the savings pile.

I would suggest that anyone using FIRECalc understand exactly what the SWR figure really means in terms of true withdrawls from their retirement stash. Maybe I am the only one that sees this as confusing but I will be very careful about using this calculation in the future.

Sorry if I caused any confusion. I am confused enough without spreading it to others.

 

[dbr]

But the subject is very important because there is a consistent (in my opinion) bias in the SWR community that management of investments is the only issue while in practice providing income for retirement is actually the point in question. FIRECALC is an excellent tool in the sense that it allows for income sources and financial events that are something other than stock and bond investments and withdrawal strategies for same.

Note that the "withdrawal" is before tax and FIRECALC does not attempt to analyze the taxation of various income sources. It would also seem that FIRECALC does not attempt a risk analysis of the effect of non-predictability of future inflation.