FireCalc Success Rate?

[mountainsoft]

I've been playing around with FireCalc, plugging in different numbers to see what effect it has. However, I'm not sure what "success rate" I should be aiming for. Is it foolish to retire with anything less than a 100% success rate? What would you consider a comfortable success rate? 90%, 80%, 70%, etc.?

 

[REWahoo]

I consider anything 95% or above to be good to go, but it is all a matter of your own personal comfort level.

 

[Winemaker]

I think it would be up to the individual; check out the success rate that you would be alive at the beginning/middle/end of your Firecalc computation period.

Personally, I wanted a 100% success rate for several reasons. DW and I both have pensions, a nice nest egg, a few rental properties, and SS. I can ASSUME what my outcome is; but my control over our income flows is/are limited. Future tax laws, means testing, health issues ( I do all my rental maintenance), market conditions to mention a few control issues.

And I can always sell/barter my wine.

 

[Options]

I consider anything 95% or above to be good to go, but it is all a matter of your own personal comfort level.

+1
I personally do not have the risk comfort ability to consider anything less than 100%, with a great margin. In fact, I use FIDO instead of FC as I find FIDO to be more conservative than FC.

Reading all things Munger/Buffet decreased my risk tolerance substantially. Dirk Cotton also published a series of excellent 2016 blog posts on various forms of risk which affected me. As a result, I spent a great deal of time this last year minimizing/mitigating shallow and deep risk in the remainder of my projected PF and physical life. In retirement, "you only get one whack at the cat" so it's prudent to aim for a home run. Risk can't be eliminated, but it can be curtailed.

 

[rodi]

I wanted 100% using a couple different methods of firecalc (bernicke, specific spending (feature available for donors), with different asset allocations and different inflation indexes...) I also wanted success on Fidelity RIP and wanted success on financial engines. Plus the plan in Quicken Lifetime Planner.

for me - running the different calculations with different options tested my plan. Fidelity's calculator was the most conservative - so once I had success with that I gained confidence. And the options for life events in quicken (kids college in my case) was very helpful to make sure I was covering my bases.

2.5 years in - I'm still a bit nervous about sequence of events risk... but since my nest egg is greater than when I started - I'm getting less nervous.

 

[razztazz]

I would always shoot for 100% success rate. I figured with all the other things that can go wrong I did not want in effect bake-in-the-cake more opportunities for something to fail

 

[Options]

I wanted 100% using a couple different methods of firecalc (bernicke, specific spending (feature available for donors), with different asset allocations and different inflation indexes...) I also wanted success on Fidelity RIP and wanted success on financial engines. Plus the plan in Quicken Lifetime Planner.

for me - running the different calculations with different options tested my plan. Fidelity's calculator was the most conservative - so once I had success with that I gained confidence. And the options for life events in quicken (kids college in my case) was very helpful to make sure I was covering my bases.

2.5 years in - I'm still a bit nervous about sequence of events risk... but since my nest egg is greater than when I started - I'm getting less nervous.

That made me laugh. Isn't that what pre-retirement is all about? Running every calculator out there--that's what I did, you name it, I ran it.

I'm right behind you in retirement and decided this year the way to reduce my SOR anxiety was to use my own bastardized version of LMP. I also increased my IPS to eight pages (to include tax planning) forcing me to think through my entire investment/retirement philosophy (to include all assumptions, thinking of worst case scenarios, searching for overconfidence/confirmation bias, and any area where my thinking could be wrong or incomplete). The resulting risk mitigation plans now included in the IPS have gone a long way to reducing anxiety. I can't think of anything now that could go wrong that I haven't thought through and created provisions for. Well, except for the proverbial asteroid...

 

[LRDave]

Well if you don't like the success percentage predicted by FireCalc, just tweak the inputs until you get 100% - bam, there you go.....

 

[Onward]

Bill Bernstein's words are worth considering:

But history teaches us that depriving ourselves to boost our 40-year success probability much beyond 80% is a fool’s errand, since all you are doing is increasing the probability of failure for political, economic, and military reasons relative to the failure of banal financial planning.

The Retirement Calculator from Hell, Part III

 

[mountainsoft]

I must be doing something wrong. No matter what I enter in FireCalc, I can't get more than 10-15% success rates, often much less. When I calculate our income and expenses on my own I show we could live quite comfortably, at least equal to our current standard of living.

We are about 10 years from retirement.

On the first page, I've entered my current IRA value as the "portfolio" amount, and the amount I've estimated we'll need each year as the "spending" amount (about 70% of our current annual income).

On the second page, I entered both of our social security estimates (from MySS web site), and my wife's pension, with the planned years we would start receiving them.

On the third page, I entered the year we plan to retire and the $6500 we add to my IRA each year.

On the fourth page, I tried the constant spending power, as well as the Bernicke option.

No matter what I do, the success rates are ridiculously low. I don't understand why FireCalc say's we're doomed to fail, when my own calculations show a quite comfortable retirement to 90 years old and beyond. And yes, I accounted for cost of living increases in my own calculations.

I've had similar results with most other retirement calculators. The amount of money they say we need to retire is more money than we've earned in our entire lives.

What am I doing wrong?

 

[GalaxyBoy]

What's your estimated withdrawal rate? That can provide a "back-of-the-envelope" sanity check.

What are "your calculations?"

What portfolio model are you using? What inflation assumptions are you choosing?

If you feel OK in doing so, give us the numbers (or a link to the results) and we can provide better advice.

One thing to check is those SS estimates. Be sure to convert the monthly estimates from the SSA website to annual inputs for firecalc.

 

[golfnut]

Make sure when entering ss and pension, you put in annual amounts.

Also make sure to hit Pension Income, when entering pension income

 

[bclover]

make sure you are putting in ss and pension as Annual amounts. lol the first time I ran firecalc I put in 2k for my monthly ss amount and couldn't figure out why it didn't change anything.

 

[bclover]

So I guess I was Suzy sunshine because I was going at 90%. I loathe, hated and despised my job so I wasn't staying a nanosecond longer than necessary. My actual number was 94%

 

[Rosie]

SS starting year issue

I just found a quirk in firecalc -- I don't think it relates to the OP's situation, though.

I already knew that for my & DH's situation, we have a solid 100% success rate in firecalc; I was going to run different withdrawal and portfolio scenarios to see how they varied.

I first entered our numbers as I normally do, but today, instead of finding the usual success rate of 100%, it showed only about a 90% success rate. Huh?!?

Then I found the culprit.

My husband started SS last year, so under the Other Income/Spending tab I had entered DH's annual social security payment, and in the "starting in" box, I entered 2016.

I then remembered there were some firecalc problems in past years with pre-dating the starting year of SS, so I entered 2017 in that box, and we were back to a 100% success rate. Whew!

So if you're collecting SS, I guess you need to use the current year as your staring year even if you started SS in a prior year.

(FWIW, the Not Retired? tab already has 2017 filled-in as the default retirement year)

 

[REWahoo]

So if you're collecting SS, I guess you need to use the current year as your staring year even if you started SS in a prior year.

(FWIW, the Not Retired? tab already has 2017 filled-in as the default retirement year)

+1

Note the first thread in the FIRECalc Support forum: FIRECalc support - Early Retirement & Financial Independence Community

 

[mountainsoft]

make sure you are putting in ss and pension as Annual amounts.

Ahh! There we go. Getting 100% success now.

I was entering monthly amounts for the social security and pension fields. I completely missed the "Annual" word in the Social Security section.

Actually rereading that page, I still don't see anything that says to enter pensions in annual amounts?

A bit of a relief though, I was starting to think we would never be able to retire.

 

[MichaelB]

Ahh! There we go. Getting 100% success now.

I was entering monthly amounts for the social security and pension fields. I completely missed the "Annual" word in the Social Security section.

Actually rereading that page, I still don't see anything that says to enter pensions in annual amounts?

A bit of a relief though, I was starting to think we would never be able to retire.

From the FIRECalc page on pensions, my bold

If you expect a pension in the future, enter the information here. You can also use this section to enter "off chart" spending (or spending reductions). These entries are for changes to your yearly income or outflow that affect how much you will need to withdraw from your portfolio each year,

Glad you were able to resolve this.

 

[Rosie]

+1

Note the first thread in the FIRECalc Support forum: FIRECalc support - Early Retirement & Financial Independence Community

Ooops. Thanks.

 

[mountainsoft]

What are "your calculations?"

Calculations I did manually "on paper" with a handheld calculator. I calculated our income needs a couple of different ways with almost identical results.

I calculated the growth of my IRA using online calculators and a 5% estimated interest rate.

I used similar online calculators to determine how long the IRA would last, at various withdrawal rates and interest rates.

It seemed to work out fine on paper, but I was getting really low results in FireCalc.

My mistake was entering SS and pension payments in monthly amounts instead of annual amounts.

 

[mountainsoft]

These entries are for changes to your yearly income or outflow that affect how much you will need to withdraw from your portfolio each year

I guess I'm slow. That still doesn't sound like an annual figure to me.

Too bad the page doesn't word it clearer like "Annual Pension Income".

I know now, so it's all good.

 

[user5027]

You may want to try different scenarios; 1) with full pension and social security, 2) with a reduced pension and/or social security, 3) if married, the early death of you or your spouse. Some scenarios you may feel good with a 95% success rate, others you may want closer to 100%.

 

[Marc]

I am going for 80% success rate whether in FireCalc of Fidelity. Over two thirds of our spending is totally discretionary (travel) so I figure we will adapt as needed; no set withdrawal rate and inflation calculation.

Marc

 

[Whisper66]

I am going for 80% success rate whether in FireCalc of Fidelity. Over two thirds of our spending is totally discretionary (travel) so I figure we will adapt as needed; no set withdrawal rate and inflation calculation.



Marc

Like above, I was looking for 80 or better. We also. had a backup plan if things went south. We can cut our budget by a lot if needed with only little pain.

 

[Katsmeow]

The thing about success rate is that a big part of it depends on spending. How high a success rate percentage you want may depend upon how set you are on spending a specific amount of money.

I just ran Firecalc for 2017 (I run it at the start of every year). In our case, I enter yearly spending amounts as we still have a couple of years left in which I anticipate having higher spending amounts than what I anticipate long-term.

And, I got 100% success rate based upon our projected spending amounts. These include a reasonable amount of discretionary spending.

Then I kept moving up the long term spending number to see when I dipped below 100%. Given the amount of discretionary spending we have in there, I would probably be content with a 90% or so success rate although I actually have 100% right now.

However, I am mindful that things like SS can be cut in the future (or can grow at a different COLA than is present now) and some categories of spending may go up more than anticipated. By being closer to 100% I have more wiggle room in case those things happen.