I never have understood the point of FireCalc. Ok, I plug my numbers in and get a bunch of runs for data from the past. But, everything I see says future markets will probably have less returns than past markets. So, what is the point of knowing what would of happened if I had retired a bunch of years ago, using data that may not apply any more?
FIRE success rate
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CardsFan
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Be careful assuming today's prognosticators actually have data to back them up (or a crystal ball). Everyone is just guessing. Or worse, they have an agenda. In the early 1980's it was "conventional wisdom" that home mortgage rates would never fall below 10% again.
That being said, no one should take Firecalc results as gospel. It is not a prediction. It is a historical analysis. But I find it to be a pretty good test of your possibility of a successful FIRE.
flintnational
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Also, Firecalc is looking at historical survival rates for the worst historical periods not an average. Therefore, future returns could in fact be lower than historical average returns and Firecalc would still have value. The bet is that the future is no worse than the worst historical withdrawal periods.
USGrant1962
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By looking at the bottom lines on the FIRECalc graph you can see how your portfolio would have behaved, with your planned withdrawals, in the worst markets in U.S. history.
Do you think we are headed for returns worse than the Great Depression or 1965-1975? FYI, annualized real return for the S&P 500 in the decade from January 1965 to December 1974 was -4.27% with dividends reinvested. This case is included in FIRECalc. You can see the returns for yourself here https://dqydj.com/sp-500-return-calculator/
If you think we are headed for worse than these two cases you may want plan for worse than FIRCalc. I wouldn't recommend it though.
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I run Firecalc with three scenarios
1) Pensions and social security only, with no portfolio at all
2) Current portfolio only, with no social security or pensions
3) Pensions and social security get cut by 50% tomorrow and portfolio loses 50% tomorrow.
Every case gives 100% success.
I ignore the value of our house (which is about 20% of our net worth) and I assume no economizing (although we could probably reduce our spending by 20% fairly easily).
That's what it takes for me.
1) Pensions and social security only, with no portfolio at all
2) Current portfolio only, with no social security or pensions
3) Pensions and social security get cut by 50% tomorrow and portfolio loses 50% tomorrow.
Every case gives 100% success.
I ignore the value of our house (which is about 20% of our net worth) and I assume no economizing (although we could probably reduce our spending by 20% fairly easily).
That's what it takes for me.
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Most of the calculators I use show around 90% to 95%. But, if I lower my annual spend by just $5K - $10K, they all jump to 100%. I've probably have around $30K in expenses that I could cut. If you have expenses that can be cut if needed, I'd think anything above 80-90% would be fine.
harley
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Be careful assuming today's prognosticators actually have data to back them up (or a crystal ball). Everyone is just guessing. Or worse, they have an agenda. In the early 1980's it was "conventional wisdom" that home mortgage rates would never fall below 10% again.
Truly. I don't think most of those forecasters are taking into account the jump in productivity and economic well being that will occur with the invention of usable jet cars, warp drive, and teleportation.
From the site:
Now, if you think climate will change temperatures, factor it in your estimate. Simple as that.
Independent
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The question is "When do I cut expenses?". Remember the greater survival rates of the lower spending assumes that you cut expenses in your very first year.
I'm not saying this is a bad idea, just that you have to be ready to implement the cut very quickly.
After reading these posts, sort of begs some other questions (perhaps it should be a different thread?)?
So your success % hit whatever range you were comfortable with... how did your expenses move during the various market up/down cycles compared to your "carefully" planned ER budget? Did you nervously/cautiously adjust your budget down to ensure your success rate? Did you adjust your budget with the yearly swings of the market? After living in RE for a number of years, where did you land with your Goldilocks budget compared to your original plan (less than, right on, more than)? Did you let the "success calculators" run your budget?
OK, that's enough questions...
So your success % hit whatever range you were comfortable with... how did your expenses move during the various market up/down cycles compared to your "carefully" planned ER budget? Did you nervously/cautiously adjust your budget down to ensure your success rate? Did you adjust your budget with the yearly swings of the market? After living in RE for a number of years, where did you land with your Goldilocks budget compared to your original plan (less than, right on, more than)? Did you let the "success calculators" run your budget?
OK, that's enough questions...
Danmar
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Good questions. Seems to me that once you have been retired a few years, and get comfortable with your retirement and remain fairly flexible in your spending, Firecalc becomes much less relevant. As the actual sequence of return results play out, I see much less reason to try to model the future based on previous history. After all, if you stay flexible and started with a reasonable plan pretty hard to run out, no?
audreyh1
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FireCalc includes some very dire market scenarios. Most of them from 100 years ago or more when the US markets were much less stable. So I am reasonably comfortable with FireCalc's historic arsenal. I don't now how you go about finding a better data set.
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GravitySucks
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Only data set that bothers me is the 65 66 years. Inflation is my Boogieman, and I don't see a threat there at this time.
I think looking at the 19th century data is pretty useless now. Laws and general rules of 1929 are so different than those we're operating under.
Ronstar
Moderator Emeritus
I ran Firecalc once about 10 years ago. I can’t remember the projected success rate, but it seemed ok at the time. I wasn’t going to retire at a certain success rate number anyway. I was going to retire by a certain age and live within a decent WR after that.
audreyh1
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But people worry that things could get worse in the future compared to the relative smooth sailing post 1920 for the US. 1905-1906 and 1912-1916 were rough as well as 19th century periods. So I’m glad there are some earlier “wild times” added in the data.
daylatedollarshort
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I call total BS on the claims of FIRECalc outputting success rates like 110%, 200% etc.
Why are people saying this BS? And why would anyone believe it? Maybe they don't know what it means.
I don't use Firecalc myself for planning, but I'm curious why you think it is BS? What if someone was still saving half or more of their retirement income? Wouldn't that give them a very high success rate?
daylatedollarshort
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I still don't really get your point. What if a retiree household has $80K in retirement income and spends $40K? Or $300K income and spends $100K? Wouldn't that have pretty high success rates?
Major Tom
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I call total BS on the claims of FIRECalc outputting success rates like 110%, 200% etc.
Why are people saying this BS? And why would anyone believe it? Maybe they don't know what it means.
I think what you're saying is that if historically, a certain WR led to success 100% of the time, there is no way that WR could have been successful any more times. I get that, but to use the language you used, and "call BS on it" is a bit harsh, in my opinion. As daylatedollarshort is saying, if someone has 80K income, but only spends 40K, saying that they have a 200% success rate is merely a way of expressing that. We understand what they are saying, and that's what matters, surely?
This forum has long been characterized by civil discourse, and I for one prefer the spirit of understanding my fellow forum members, than "calling BS on them" - unless they are purposely peddling untruths, in which case it is warranted. Such scoundrels deserve to be sent packing
A little understanding goes a long way.
daylatedollarshort
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Sorry, I guess I'm too dense. I don't really get your point but that's okay. Carry on.
Added - Major Tom posted at the same time as my post but made the same point more eloquently than I did.
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I remember reading years ago that equity returns will be much lower, like 4-6% and yet here we are in an ongoing bull market. "They" really have no clue.
Major Tom
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Aaah yes, right now we are in a heated market, but who knows what will happen in the future? A sharp correction, followed by a long period of stagnant returns, would pull the average down a fair bit. Maybe equity returns indeed will be lower over the next 10 - 20 years. On the other hand, maybe they won't.
I hope this post helped
