100% success and how complicated can it be?

[MI-Roger]

Double & Triple check your inputs

I too was getting 100% success with FireCalc regardless of whatever scenario I requested to be run. No matter how much money I input as a desired income amount, the result stayed at 100%. So I went through all my inputs looking for errors and found a big one!

My wife will be receiving a modest pension of $7200 annually. I input this pension amount as $7200. During my deep-dive looking for something wrong I found a clue, less than a full description, that pension amounts are to be entered as a monthly value.

I reduced her pension input to $600, ran FireCalc again, and received results that logically varied. I still obtain 100% for our intended spend path, but inserting stupidly high withdrawal amounts now decrease the success rate accordingly.

 

[donheff]

The worst is the site from my financial planner, which shows a whopping 25% success rate, but I do realize he wants to manage our money, so I don't take his tools too seriously.

My question is if I know how much our income is, how much our expenses will be, and what % I want to draw, does it really matter if I don't need to draw any more than 3.5%? Isn't that the number you need to stay at or under and you will "never" run out of money?

As others said, if your portfolio matches the default portfolios of the calculators then history shows that you are likely to succeed. The major caveat I would add is that expenses include your investment expenses. If your FA is tacking on an additional 1% and/or if your funds are racking up exorbitant fees you need to account for those figures in your plans. And taxes, of course.

 

[Camas Lilly]

You’re not at 25%, but you’re not at 100% either. With budget #3, you’re probably close to 100%, but with budget #1, you’re not in a good place. Probably something like 75%. So, hard to tell what happened with your financial planner model but my guess is a very conservative market assumption (no growth) and using budget #1.

You said the pensions are COLA’d. Do your expenses include taxes? According to your first post, your budgets do include healthcare. Assuming the healthcare is a large number, modeling how that changes as you go onto Medicare will help a lot.

Is this with retiring in 2020 or 2021? Also assuming you are using the full draw of $11,274?

I am wondering if this isn't a classic case for drawing a little more the first 3 years and then back down as we get settled, expenses firmed up and Medicare kicks in. I can't imagine expenses are going to be more and there is also a possibility of leftover from sale of home. Wasn't really counting money left over, as there will be, because there is a possibility we will get a smaller farmhouse needing some repair or room addition, also most likely will be putting up a pole barn. Backup plan is to go modular on a piece of property, but really looking for mature landscape (wind break) with <3 acres.

I have three expense buckets:
1) Taxes and Insurance (fixed)
2) Other Expenses (varied) that includes tires, auto repairs, major dental, vets, mower, etc. of about $12,000 per year that could carry over to a Third Bucket.
3) Major Expenses (varied). From all my tracking over the last 3 years, the most we have ever needed in any one given year was about $8,500 in addition to the $12,000 and that included repairs to home, etc. All of which I have carried at 0% for term. As I have read, some just draw for a major event, but I typically have enough squirreled away to handle a good portion of that so that is why I say I have about half of this one covered.

Autos are not in the picture. We have 7. Just bought a new truck (F-450) to pull the 5th wheel but are selling two trucks to pay for that one. That leaves 2 out of state and 2 here along with the new truck. One is a driver (I commute a fair piece). Not making any plans on buying a new car unless we sell 2 or 3 more, but there's nothing wrong with any of the ones we have. Will consider that at a later time. That being said, we also have the option of downsizing and reducing expenses and insurance costs or just consolidating as we did with the trucks.

Budget #1 Has all three savings buckets
Budget #2 Has savings buckets 1 and 2, with a couple other minor discretionary things cut that are typically not in our expenses.
Budget #3 Same as above, but cut out a couple more discretionary things we typically do not have in current budget.

My normal budget has never included bucket #3, so #2 wouldn't be much of a change from what I have done for years. Right now we live somewhere around Budget #2. Budget #3 is doable and probably preferred for the first three years until Medicare kicks in. Then we would move up one rung (or two). Just not wanting to short myself anywhere.

 

[COcheesehead]

Agree with the above.
Minor point - many folks state that inflation is our greatest worry as retirees, but is it a major worry if one's personal inflation rate is much lower?
In this case, wouldn't one receive the advantages of higher rates on the Fixed side, but not the negative inflation concerns?

Agree. I’ve tracked my expenses for years and though we have inflation, my costs have gone down. Housing expense being the biggest since I no longer have a mortgage, but others like cell phone costs, taxes (more efficient investing), etc. Personal inflation you can control. Real inflation is something you can take advantage of.

 

[Camas Lilly]

Agree. I’ve tracked my expenses for years and though we have inflation, my costs have gone down. Housing expense being the biggest since I no longer have a mortgage, but others like cell phone costs, taxes (more efficient investing), etc. Personal inflation you can control. Real inflation is something you can take advantage of.

The one thing that has helped me is by having my husband retire before me I now have a handle on those expenses that have increased or decreased. He has more time to spend outside with tractors, mowers and toys and also in the hardware stores, Walmart, etc. We really are pretty conservative in our lifestyle, so we have the luxury, for the most part, of whatever pleases us, because it is usually simple things.

I have to add, and this is really sad, that we went shopping last Saturday and stopped in Hardees for lunch. That burger and fries was absolutely delicious! OMG! When you don't live frivolously, one can appreciate the simple things. (Mostly we/I don't have time for it anyway.)

 

[dirtbiker]

Outliving my wife, or my health are my worst nightmare. I can always spend less.

You're right. I guess that was said with some hyperbole. There are far worse things that could happen... But outliving my money would still be a nightmare.

 

[ERD50]

I too was getting 100% success with FireCalc regardless of whatever scenario I requested to be run. No matter how much money I input as a desired income amount, the result stayed at 100%. So I went through all my inputs looking for errors and found a big one!

My wife will be receiving a modest pension of $7200 annually. I input this pension amount as $7200. During my deep-dive looking for something wrong I found a clue, less than a full description, that pension amounts are to be entered as a monthly value.

I reduced her pension input to $600, ran FireCalc again, and received results that logically varied. I still obtain 100% for our intended spend path, but inserting stupidly high withdrawal amounts now decrease the success rate accordingly.

That is not correct! Pension/SS are entered as ANNUAL AMOUNTS!

Just to test, use the defaults, and note the results.

Now increase the spending from $30,000 to $60,000. Offset that by entering $30,000 pension, inflation adjusted, starting in 2019.

With that ANNUAL amount entered, the results are identical.

Something else is wrong, what is your spending versus SS/pension? Actually, what you said makes no sense:

I too was getting 100% success with FireCalc regardless of whatever scenario I requested to be run. No matter how much money I input as a desired income amount, the result stayed at 100%.​

Clearly, "no matter what income" will have a failure point. That is, assuming by "income" you mean income to you, what FIRECalc calls "spending". Are you entering "spending" on tab 1, or are you entering spending as income on another tab. You have something wrong, in addition to pension as monthly.

Can you (or a mod) still edit your post, I hate to see false statements made, for someone else to come across later, and maybe not see the follow up?

-ERD50

 

[Dtail]

That is not correct! Pension/SS are entered as ANNUAL AMOUNTS!

Just to test, use the defaults, and note the results.

Now increase the spending from $30,000 to $60,000. Offset that by entering $30,000 pension, inflation adjusted, starting in 2019.

With that ANNUAL amount entered, the results are identical.

Something else is wrong, what is your spending versus SS/pension? Actually, what you said makes no sense:

I too was getting 100% success with FireCalc regardless of whatever scenario I requested to be run. No matter how much money I input as a desired income amount, the result stayed at 100%.​

Clearly, "no matter what income" will have a failure point. That is, assuming by "income" you mean income to you, what FIRECalc calls "spending". Are you entering "spending" on tab 1, or are you entering spending as income on another tab. You have something wrong, in addition to pension as monthly.

Can you (or a mod) still edit your post, I hate to see false statements made, for someone else to come across later, and maybe not see the follow up?

-ERD50

Agree. There must be another error in the input. Alternatively, the "Investigate" tab can be used to figure out the maximum spending allowed and backtrack to the "Spending" tab to input to test the 100% success rate.

 

[Camas Lilly]

As others said, if your portfolio matches the default portfolios of the calculators then history shows that you are likely to succeed. The major caveat I would add is that expenses include your investment expenses. If your FA is tacking on an additional 1% and/or if your funds are racking up exorbitant fees you need to account for those figures in your plans. And taxes, of course.

Well I hadn't thought of that. A couple of things: 1) He says I am overweight in Large Cap Value, Morningstar shows otherwise, but he also said he couldn't find the ticker for all of my investments, agreed, my Work 401k has some you cannot look up, so I substituted similar. I would question what he substituted. 2) Forgot about the 1.5% fee he wants to charge that is factored in. He still can't beat my investments, close but not quite, after deduction of fees.

 

[Jerry1]

You sound like you have a really good handle on your spending and investing. Just keep working the numbers and before long you’ll be quite comfortable with your situation. I was doing the same thing you’re doing for a few years before I retired. The exercise helped a lot. Each time you go through a different scenario or try a different tool, you learn something. Spend time here asking some further questions and that will help too. You’re definitely on the right track to understanding your finances in full retirement.

 

[Camas Lilly]

You sound like you have a really good handle on your spending and investing. Just keep working the numbers and before long you’ll be quite comfortable with your situation. I was doing the same thing you’re doing for a few years before I retired. The exercise helped a lot. Each time you go through a different scenario or try a different tool, you learn something. Spend time here asking some further questions and that will help too. You’re definitely on the right track to understanding your finances in full retirement.

Thanks Jerry1. I think I just need to spend more time on it. I am usually trying to squeeze it in and am probably rushing through, making some mistakes. I spent more time on NewRetirement this morning trying to work through it again. Corrected some figures, discovered some are annual and some are monthly. Got that straightened out. I like that I can see what it is using on the graph as far as income, expenses, events and timeline and I can see if something is not quite right I can go back and check. The only thing is it has some things separated out that I already have built into budget and expenses. One site at a time, I'll just work through it.

 

[donheff]

Well I hadn't thought of that. A couple of things: 1) He says I am overweight in Large Cap Value, Morningstar shows otherwise, but he also said he couldn't find the ticker for all of my investments, agreed, my Work 401k has some you cannot look up, so I substituted similar. I would question what he substituted. 2) Forgot about the 1.5% fee he wants to charge that is factored in. He still can't beat my investments, close but not quite, after deduction of fees.

1.5% is factored into what, the projections he gives on how great he will do? If you need an FA I would run to a robo-advisor. 1.5% is a killer.

 

[ERD50]

Well I hadn't thought of that. A couple of things: 1) He says I am overweight in Large Cap Value, Morningstar shows otherwise, but he also said he couldn't find the ticker for all of my investments, agreed, my Work 401k has some you cannot look up, so I substituted similar. I would question what he substituted. 2) Forgot about the 1.5% fee he wants to charge that is factored in. He still can't beat my investments, close but not quite, after deduction of fees.

Not sure what you mean by "factored in", but in FIRECalc there is an entry for fees, the default is 0.18% (note the zero-dot before the numerals!), and even that is high for many of us, since common broad-based index ETFs are 0.03% (note the zero-dot-zero before the numeral!) expense ratio.

A 1.5% fee is a huge, huge drag on your investments. Are you paying this now? What do get in return?


A conservative investor might plan on drawing 3.5% annually. Your FA will be making almost half as much from your retirement as you will! If you have a spouse, look at that 3.5% as being split between the two of you, and that 1.5% to the FA is almost like funding a 3rd persons retirement! Is that what you worked, saved, and invested for?

Another way to look at that is, you will need to save about 40% more to pay his fee. If $1,000,000 was enough for you, you need ~ $1,400,000 to pay the FA fees. That would take most people many, many more years of working, saving, investing. Do you like this FA that much? Is there anything else you might want to do with $400,000?

And there is no evidence that you can count on an FA to outperform a simple, almost zero effort, DIY approach. One or two posters here claim their FA is beating the market recently, but you would need to be lucky enough to find these seemingly rare gems, and can count on that performance not disappearing in the next market cycle.

-ERD50

 

[Camas Lilly]

Not sure what you mean by "factored in", but in FIRECalc there is an entry for fees, the default is 0.18% (note the zero-dot before the numerals!), and even that is high for many of us, since common broad-based index ETFs are 0.03% (note the zero-dot-zero before the numeral!) expense ratio.

A 1.5% fee is a huge, huge drag on your investments. Are you paying this now? What do get in return?


A conservative investor might plan on drawing 3.5% annually. Your FA will be making almost half as much from your retirement as you will! If you have a spouse, look at that 3.5% as being split between the two of you, and that 1.5% to the FA is almost like funding a 3rd persons retirement! Is that what you worked, saved, and invested for?

Another way to look at that is, you will need to save about 40% more to pay his fee. If $1,000,000 was enough for you, you need ~ $1,400,000 to pay the FA fees. That would take most people many, many more years of working, saving, investing. Do you like this FA that much? Is there anything else you might want to do with $400,000?

And there is no evidence that you can count on an FA to outperform a simple, almost zero effort, DIY approach. One or two posters here claim their FA is beating the market recently, but you would need to be lucky enough to find these seemingly rare gems, and can count on that performance not disappearing in the next market cycle.

-ERD50

No I do not use FA to manage my money. I only consulted him just to make fully sure I wasn't making any major mis-calculations or oversights. Right before DH retired and just a couple of months ago as I am now getting close.

I like to have my hands on our investments and have done it for so long now, I am OK with where I am at. I am not an expert, but believe I am certainly more educated than the average person. I had thought about it once, but that would require me to move all my funds from Vanguard to their funds and I don't think I would sleep well at night, so I passed. On top of that I was a cheapskate. Why would I pay someone to do the same thing I am already doing. I enjoy investing anyway so usually just play around with some stocks on the side.

 

[Dtail]

No I do not use FA to manage my money. I only consulted him just to make fully sure I wasn't making any major mis-calculations or oversights. Right before DH retired and just a couple of months ago as I am now getting close.

I like to have my hands on our investments and have done it for so long now, I am OK with where I am at. I am not an expert, but believe I am certainly more educated than the average person. I had thought about it once, but that would require me to move all my funds from Vanguard to their funds and I don't think I would sleep well at night, so I passed. On top of that I was a cheapskate. Why would I pay someone to do the same thing I am already doing. I enjoy investing anyway so usually just play around with some stocks on the side.

Alright then.

 

[donheff]

No I do not use FA to manage my money. I only consulted him just to make fully sure I wasn't making any major mis-calculations or oversights. Right before DH retired and just a couple of months ago as I am now getting close.

I like to have my hands on our investments and have done it for so long now, I am OK with where I am at. I am not an expert, but believe I am certainly more educated than the average person. I had thought about it once, but that would require me to move all my funds from Vanguard to their funds and I don't think I would sleep well at night, so I passed. On top of that I was a cheapskate. Why would I pay someone to do the same thing I am already doing. I enjoy investing anyway so usually just play around with some stocks on the side.

in this case maybe the FA’s calculator is correct. If you add on his 1.5% fee you will have a 25% chance of success.

 

[Camas Lilly]

Alright then.

LOL, I'm just sayin'

 

[ERD50]

in this case maybe the FA’s calculator is correct. If you add on his 1.5% fee you will have a 25% chance of success.

Astute observation!

-ERD50

 

[Major Tom]

This would depend on AA though. WR at 100% Firecalc success rate would look far different between 100% cash and 100% equities, for example.

True, but there is a broad swathe of AA's in the mid-range - say, between about 35/65 and 75/25, where the survivability of a portfolio at a given WR doesn't vary a great deal. At the higher equity allocations though, the volatility might be a little hard for some to stomach!

 

[Retired Expat]

If I can get 100% success in Firecalc using several different scenarios, how many others do you think I need? I can get there on another site, Marketwatch I think, but then there are others that just are way off, I am not real clear if I am entering the correct information and doesn't display details about how it is calculating the results or how much draw it is taking. The worst is the site from my financial planner, which shows a whopping 25% success rate, but I do realize he wants to manage our money, so I don't take his tools too seriously.

I have tracked our expenses for a few years, have always run a tight monthly budget and set aside money for those annual and unexpected expenses. I have figured multiple ways of paying for health care (61/DH67) and have three different budgets. One we would get by on, the next-ideally, the third-everything we would ever need and more. I can comfortably hit budget no 2 and I am fine with that. There's wiggle room either way.

My question is if I know how much our income is, how much our expenses will be, and what % I want to draw, does it really matter if I don't need to draw any more than 3.5%? Isn't that the number you need to stay at or under and you will "never" run out of money?

We will have two SS incomes and a pension. We would maybe want to draw up to 5% the first couple of years as we will be moving halfway across the US and then back to 3-3.5% from then on.

Although I would like to use another site that is easy to use, I was wondering if I am making this too hard for myself? There's not really any other variables but income, expenses and draw $/% to hit budget is there?

I rather like https://financialmentor.com/calculator/best-retirement-calculator as it gives me the greatest freedom to consider “special events”. Inheritance, sale of a vacation home or rental property or possible income streams but that are limited in time or when they may start and stop. Such as the aforementioned rental property which changes from an income stream to part of investment portfolio at some point when you sell.

Sadly most retirement calculators don’t deal with Real Estate very much.

 

[Doc0]

I would suggest Personal Capital. PC analyzes your actual accounts and allocations. You can include SS pensions and years you plan to start taking those. PC is an account aggegator so you plug in every account from brokerages to banks to credit cards to mortgages. It will use Monte Carlo and give you an average estimate. the most likely scenario and a low ball estimate in case the economy does poorly. It will suggest how much you can safely withdraw and you can plug in our actual budget numbers to see what the program predicts. You can set up 3 scenarios for each of your three withdrawal conditions.

It's the most comprehensive calculator I've seen. It takes some work to set up, but once set up your financial picture is updated automatically every time you log on. They will bug you to try and get you to let them manage your money but they are not too aggressive about it, so just ignore them if you're not interested.

 

[watchman3135]

I also see 3.5% as the ground floor for 100% success. I'm planning on moving about $600k out of my Vanguard Total Stock Market index into the Vanguard Balanced index which is 60/40. I will then initiate a SEPP 72t at calculations that equal 3.5%. Any one have any better recommendations for any other Vanguard funds to do a SEPP 72t other than the Vanguard Balanced Index (VBIAX)? I also have $600k elsewhere in a CD ladder that i'm pulling and average of 3.25%. I'm 54 and with my wife working, I need need about $36k per year until 60.

 

[HI Bill]

I rather like https://financialmentor.com/calculator/best-retirement-calculator as it gives me the greatest freedom to consider “special events”. Inheritance, sale of a vacation home or rental property or possible income streams but that are limited in time or when they may start and stop. Such as the aforementioned rental property which changes from an income stream to part of investment portfolio at some point when you sell.

This calculator seems to use fixed linear rates of return and inflation based on the assumptions you input. It does not appear to consider sequence of return risks (SORR). Assuming linear gains and constant inflation is not realistic if invested in either equities or real estate, IMHO. I consider this model very dangerous, as if you choose to use it, you will most likely run out of $. If I'm missing something, please let me know.

 

[trumpeting_angel]

Perhaps this veers off topic, but I'm interested that nobody mentions part-time w*rk after retirement, particularly if a big drop in the market early in retirement increases the SORR significantly. I just retired, although I continue some consulting on the side. I had imagined picking up something p/t at a ski area for a free pass, or at a garden center for a discount on the many plants I so desperately need. ;-)

While I also worked through innumerable calculators, tinkering with variables, I am comfortable with the idea that I am still healthy and could easily pick up some extra income if things were too tight. So much of future spending scenarios seemed too difficult to predict. (I'm one of those that needed FIRECalc to be at 100% in many varied scenarios, and used perhaps a dozen other calculators in the last few years. And yes, non-Fidelity investors can use Fidelity's calculator.)

I don't want to go back to full-time at all, but I could happily earn enough for those new appliances we want, DH's dream to add (yet) another garage, or take a ski trip out West.

 

[Camas Lilly]

Perhaps this veers off topic, but I'm interested that nobody mentions part-time w*rk after retirement, particularly if a big drop in the market early in retirement increases the SORR significantly. I just retired, although I continue some consulting on the side. I had imagined picking up something p/t at a ski area for a free pass, or at a garden center for a discount on the many plants I so desperately need. ;-)

While I also worked through innumerable calculators, tinkering with variables, I am comfortable with the idea that I am still healthy and could easily pick up some extra income if things were too tight. So much of future spending scenarios seemed too difficult to predict. (I'm one of those that needed FIRECalc to be at 100% in many varied scenarios, and used perhaps a dozen other calculators in the last few years. And yes, non-Fidelity investors can use Fidelity's calculator.)

I don't want to go back to full-time at all, but I could happily earn enough for those new appliances we want, DH's dream to add (yet) another garage, or take a ski trip out West.

I would always consider working part time if I had to. That wouldn't keep me from retiring now but my situation may be different than yours. There is 7 years difference between us and he is already retired, so time is short.