Senator
Thinks s/he gets paid by the post
I have been delving into many different retirement planners. My first iterations were to just plug in numbers, and hit ‘play’. All seems to be well. Now I am looking under the covers at many of them, to see what defaults are set, and how they actually work. All have their strengths and weaknesses.
I like FireCalc as it uses actual market performance. Others just use some sort of statistical value of what they consider ‘average’. Some use a standard deviation, some use Monte Carlo simulations.
If I use FireCalc, for 30 years, it starts using actual market conditions, beginning with 1871 and goes forward for 30 years. Then it tries again in 1872 and goes forward 30 years. Since I need 30 years, it cannot use market projections after 1984. If I use 40 years, it misses market returns after 1974.
That means the dot.com bubble in 2000 is missed. The market crash of 1987 is missed. The great recession of 2007 is missed, etc. It does hit the 1929 depression and the early 70s and 80s stock market crashes, etc.
Maybe the 114 (or 104) years are typical enough to project, but it is something I noticed. If the last 30 or 40 years are quite a bit different than the years between 1871 and 1985, it could be quite a different FIRE plan.
Any thoughts? Does it make any statistical difference if 1985 to current is excluded?
I like FireCalc as it uses actual market performance. Others just use some sort of statistical value of what they consider ‘average’. Some use a standard deviation, some use Monte Carlo simulations.
If I use FireCalc, for 30 years, it starts using actual market conditions, beginning with 1871 and goes forward for 30 years. Then it tries again in 1872 and goes forward 30 years. Since I need 30 years, it cannot use market projections after 1984. If I use 40 years, it misses market returns after 1974.
That means the dot.com bubble in 2000 is missed. The market crash of 1987 is missed. The great recession of 2007 is missed, etc. It does hit the 1929 depression and the early 70s and 80s stock market crashes, etc.
Maybe the 114 (or 104) years are typical enough to project, but it is something I noticed. If the last 30 or 40 years are quite a bit different than the years between 1871 and 1985, it could be quite a different FIRE plan.
Any thoughts? Does it make any statistical difference if 1985 to current is excluded?