Dumb "spending models" tab question

[gsmolin]

One more firecalc question:

Under "Spending Models", if I choose the "Constant Spending Power" button, my results are great: in 60 years I have an average of $4 million and 100% success rate

But, if I choose the "Percentage of Remaining Portfolio" button, in 60 years I have an average of -$42 million and a 0% success rate.

I think I understand the 95% rule, but shouldn't abiding by the 95% rule give a better chance of success than using "Constant Spending Power"?

I might be missing something here....

Thanks.

 

[MichaelB]

One more firecalc question:

Under "Spending Models", if I choose the "Constant Spending Power" button, my results are great: in 60 years I have an average of $4 million and 100% success rate

But, if I choose the "Percentage of Remaining Portfolio" button, in 60 years I have an average of -$42 million and a 0% success rate.

I think I understand the 95% rule, but shouldn't abiding by the 95% rule give a better chance of success than using "Constant Spending Power"?

I might be missing something here....

Thanks.

Not a dumb question because I would expect the same outcome you do. Has this happened multiple times?

 

[gsmolin]

yes, multiple times. FWIW, i have my retirement date set @ 2038 (i.e. 27 yrs from now), and on the year-by-year portfolio balance graph, all the portfolio lines plummet down into negative territory.
i am also inputting in my projected pension of $40,356/yr which starts in 2038, and the graph is still the same, plummeting @ 2038.

 

[MichaelB]

So you are inputting the value of your current portfolio, a retirement date, the current value of the future pension, the current value of your future spending? Which other fields?

 

[gsmolin]

Yes. Inputting the following:
Spending ($80K)
Portfolio ($105K)
Years (60)
Pension x 2 ($40356 in 2038, $1584 in 2021)
Retiring year (2038)
Amt contributed/yr until retirement ($16200)
CPI
Total Mkt Portfolio
No portfolio changes

 

[MichaelB]

I replicated your results. There is a mismatch somewhere because the withdrawal is too high.

Following the "95% Rule," from Work Less, Live More, each subsequent annual withdrawal will be the greater of 95% of your previous year's withdrawal, or 76.2% of your current portfolio, with no adjustment for inflation (unlike the normal FIRECalc behavior, which uses your starting portfolio, and makes adjustments for inflation). Although the calculations are based on unadjusted withdrawals, the charted withdrawals are shown using 2011 dollars.

We'll figure this out.

 

[REWahoo]

I replicated your results. There is a mismatch somewhere because the withdrawal is too high.

Same here.

I've played around with it a bit and have no idea what the problem might be. Something is funky with this particular option or combination of inputs.

 

[gsmolin]

many thanks! the thought of a portfolio worth -$42.5 million @ age 90 is a tough pill to swallow....

 

[MichaelB]

gsmolin, eyeballing both the constant dollar results are reasonable given the inputs. There is a flaw somewhere in the 95%.

many thanks! the thought of a portfolio worth -$42.5 million @ age 90 is a tough pill to swallow....

That's an understatement. I'd be gagging.