A question about FireCalc.

[Dtail]

I tried this and it gives me a spending level. What I do not understand is whether it is Total or ADDED to the spending I put on page 1.

It should be the total spending, not additive. If you ran the original success ratios and you were at 100%, then by default your "spending number" should be higher than your input number on the first page.

 

[Perryinva]

It should be a pretty high number since your SS covers most of your expenses. Well over $100k/yr I would think. And to be clear, I don’t think 2% personal inflation is a bad number tonuse at all for planning. I use the same. The difference is I am not as risk adverse as you, so I do expect a better than 1% differential from investments. I too believe it is smart to PLAN conservatively, and then adjust based on portfolio growth. Obviously you have done extremely well if after 10years of retirement your portfolio is 3.3. Even with going with 2.5% inflation, using Fidelity Planner, and choosing Much Below Average return, with more than generous discretionary (over $5k/m) I still come out with +$650k remaining in todays dollars after 30 years/age 92. But we have good sized pensions and SS. I could even leave a year earlier with reduced pension, and that only drops to $350k. Still considering when.

 

[ShokWaveRider]

It is a replacement for the spending you put on page 1.... not added to it.

No matter what I put in on page 1 for spending. It gave me $47k and change as the spending level. Whether it be $50k or $100k, unless it got stuck some place because I did it so many times with different page 1 numbers.

This calculator seems more consistent. Why and whether it is accurate or not? Well your guess is as good as mine.

 

[joeea]

This is based on the last 10 years of our expenses in retirement.

It would be a huge mistake to think that the last 10 years are typical and will be repeated going forward for the next 30 years.

 

[joeea]

I would like to see a calculator that takes the Portfolio, SS, Pensions etc. and tells the user how much they can comfortably spend for 30 years without running out.

Try https://www.esplanner.com/

 

[bmcgonig]

It would be a huge mistake to think that the last 10 years are typical and will be repeated going forward for the next 30 years.

He's got to pick some number. What would you pick and why?

 

[ShokWaveRider]

It would be a huge mistake to think that the last 10 years are typical and will be repeated going forward for the next 30 years.

Yes for 30 years it would! But any sensible person would re-evaluate every year or 2. Based on some things I read recently HC will need to be closely watched. That will be where our personal inflation will fluctuate.

I have to start somewhere though.

 

[Dtail]

No matter what I put in on page 1 for spending. It gave me $47k and change as the spending level. Whether it be $50k or $100k, unless it got stuck some place because I did it so many times with different page 1 numbers.

This calculator seems more consistent. Why and whether it is accurate or not? Well your guess is as good as mine.

Just a guess here, but are you using 0% for your stock allocation and thus your results are being skewed towards a lower number because Firecalc is not recognizing any stock portfolio growth to keep up with inflation.
Again, just a guess here.

 

[ShokWaveRider]

Just a guess here, but are you using 0% for your stock allocation and thus your results are being skewed towards a lower number because Firecalc is not recognizing any stock portfolio growth to keep up with inflation.
Again, just a guess here.

Yes, 0 stock. US treasury 10year as only investment return. Someone told me that was a better method than a fixed 3% return.

 

[joeea]

He's got to pick some number. What would you pick and why?

I would pick 3-3.5% as that is the range of consensus average long-term inflation rate.

It has nothing to do with the last 10 years.

 

[joeea]

Yes for 30 years it would! But any sensible person would re-evaluate every year or 2.

Perhaps, but that's not what Firecalc does.

Based on some things I read recently HC will need to be closely watched. That will be where our personal inflation will fluctuate.

If you are running a tool like Firecalc to look at the next 30 years, you'll need to provide a number that is your best guess for annual inflation rate for the next 30 years.

 

[Katsmeow]

He's got to pick some number. What would you pick and why?

No, he doesn't. He can use the historical record rather than pick a number.

Yes, 0 stock. US treasury 10year as only investment return. Someone told me that was a better method than a fixed 3% return.

For the classic FIRECalc choose total market. Put in 0% equities. For fixed income, you have 4 choices: Commercial Paper, Long Interest Rate, 30 Year Treasury or 5 Year Treasury.

Here is a link to how to choose among them:

https://www.firecalc.com/intro.php#fixedchoice


What I would do if it was me would be to choose what was closest to my actual investments. FWIW, the page above indicates the default of long interest rate is probably closer to typical fixed income investments.

Now - assuming you are using that choice - Total market, 0% equities and long interest rate and it is saying that to have $1,000,000 left you can only spend $47k per year then that is what the historical record would say was needed to guarantee that outcome (given the success rate you specify). You might put in different endings (say, $500,000) for example. Remember, that in general FIRECalc will show success so long as you don't run out of money before the end. But you can go right down to having none. That said, you will most likely end up with more. If you do the above and don't put in you have to have $1,000,000 at the end and you get 100% you will likely have most situations where you end up with a lot of money at the end.

Note that on the investigate tab if you put in having $1,000,000 this is requiring that you always have at least that much including at the end. So it fails if you have dip down to $900,000 even if you end up with more than $1,000,000;.

FWIW - I put in $3 million portfolio, 3859 SS and 50% equities (total Market) and get 100%. If I put in 0% equities (use long interest rate for fixed income), I get 85.5%. To end up with $1,000,000 the spending level at 100% and 0% equities would be about $50k.

 

[TNBigfoot]

I agree with what has been said here. You need the historic returns on your investments, not a guess. I also think your inflation assumption is way low.

Agree on the inflation assumption. I use 3.5 in any scenario
I use just to factor in inflation risk. For almost all inputs, I tend to the pessimistic side just to account for risk levels.

 

[pb4uski]

.... As I mentioned in a recent post. I would like to see a calculator that takes the Portfolio, SS, Pensions etc. and tells the user how much they can comfortably spend for 30 years without running out. In my case I would like to have $1m at the end of the 30y period as a buffer.

Doesn't FIRECalc's investigate tab allow you to do that? It also allows you t0 determine max spending assuming an input estate value.

 

[Dtail]

So it appears that due to wanting to have 1mm at the end of life is the culprit here.
With no stock exposure and pseudo bond exposure and the 1mm left, having a maximum of ~50k spending makes sense.