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A question about FireCalc.
Old 07-07-2018, 11:07 AM   #1
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A question about FireCalc.

I run FireCalc quite often, when I do I enter a Fixed return portfolio for 3% with a personal Inflation rate of 2%. (I am a Total fixed Income investor) I use $100k as desired income and use $27k and $14k respectively for SS. for 25 years (There is no way that we will live beyond that based on Family histories and current medical conditions)

Every time I run it tells me 100% OK and a what I consider large capital left over (50% of current Portfolio Value).

Does this sound correct? Or am I missing something.
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Old 07-07-2018, 11:15 AM   #2
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What are you putting in for portfolio? Sometimes I use just investments over 30 years with 30K SS (at 62) and 12K pension (at 65). I use 1.5M as portfolio, but we have outside cash and bonds that I don't count because I consider it backup in case of huge recession.That amount would last 5 years. Our spending is @ $65K at most right now, but you never know. This gives me 100%.
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Old 07-07-2018, 11:20 AM   #3
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What are you putting in for portfolio? Sometimes I use just investments over 30 years with 30K SS (at 62) and 12K pension (at 65). I use 1.5M as portfolio, but we have outside cash and bonds that I don't count because I consider it backup in case of huge recession.That amount would last 5 years. Our spending is @ $65K at most right now, but you never know. This gives me 100%.
Just Cash available. Not any assets. Basically everything that is invested in CDs, Bonds and MM.
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Old 07-07-2018, 11:22 AM   #4
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Originally Posted by ShokWaveRider View Post
I run FireCalc quite often, when I do I enter a Fixed return portfolio for 3% with a personal Inflation rate of 2%.
So, you are not using any of the historical return data in FIRECalc (e.g. how stocks, bonds, etc have performed in real life). Your assumption is that you'll always be able to find a fixed income investment that yields 3%, and that your personal inflation rate will always be 2%, every single year, without fail. Your FIRECalc runs aren't really runs, you could get the same info from a spreadsheet, and by varying your expected returns, inflation rate, and time period it would always yield either a 100% success rate or a 0% success rate, since there's zero year-to-year variability.
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Old 07-07-2018, 11:27 AM   #5
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So, you are not using any of the historical return data in FIRECalc (e.g. how stocks, bonds, etc have performed in real life). Your assumption is that you'll always be able to find a fixed income investment that yields 3%, and that your personal inflation rate will always be 2%, every single year, without fail. Your FIRECalc runs aren't really runs, you could get the same info from a spreadsheet, and by varying your expected returns, inflation rate, and time period it would always yield either a 100% success rate or a 0% success rate, since there's zero year-to-year variability.
True, however with 5 year average durations it is pretty consistent for 5 years at least.
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Old 07-07-2018, 11:37 AM   #6
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Then, back to your OP: Yes, the answer you are getting is mathematically correct. But if you want to know if your plan would have worked historically, then remove the "fixed 3%" interest rate and the fixed 2% inflation rate. Instead, use the real return similar bonds would have gotten (though FIRECalc's bond options aren't very broad, IIRC), and run it a few times using the actual historical inflation rate without forcing that 2% personal rate to be used. You may think you can maintain a 2% personal inflation rate, but I'm sure very few folks would have been able to do that in the late 1970s/early 1980s. You may disagree with the likelihood of these assumptions, but doing the runs will at least give you some idea of the importance of these factors.
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Old 07-07-2018, 06:45 PM   #7
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Or am I missing something.
Yes, the portfolio amount. We can't possibly answer w/o that. Annual spend of $59,000 will certainly last 25 years if the portfolio starts at $100 million. But not if it starts at $59,000.

Post the link to the FIRECalc inputs. That way people see everything, including the possibility of an entry error.

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Old 07-07-2018, 07:01 PM   #8
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On the results page right click on "Link To This Set of Data", then click on "Copy Link Address", then post the link here.
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Old 07-07-2018, 07:59 PM   #9
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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.
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Old 07-07-2018, 10:20 PM   #10
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If you want to model a Fixed return portfolio just go to the Portfolio section and say that the percentage of your portfolio that is in equities is 0. Then select Total Market to search on instead of putting in your return and an inflation rate. At least at that you will get an idea of how your portfolio would have done in past historic periods.

The problem with your method is that you are forcing Firecalc to assume you get the identical return each year with the identical inflation rate this year. But, in real life, that doesn't actually happen.
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Old 07-08-2018, 05:04 AM   #11
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Originally Posted by ShokWaveRider View Post
a personal Inflation rate of 2%.
That seems like an unusual assumption to make.

How would you expect to hold inflation effects at 2% over the long run?
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Old 07-08-2018, 06:35 AM   #12
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That seems like an unusual assumption to make.

How would you expect to hold inflation effects at 2% over the long run?

This is based on the last 10 years of our expenses in retirement. It is actually lower in practice. But I put 2% to be safe. We have averaged about 1.5% cumulatively over the last 10 years, not annually. Yes it has gone up a little in the last 2 years though.
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Old 07-08-2018, 06:41 AM   #13
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If you want to model a Fixed return portfolio just go to the Portfolio section and say that the percentage of your portfolio that is in equities is 0. Then select Total Market to search on instead of putting in your return and an inflation rate.
Thanks I tried that and still got 100%.
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Old 07-08-2018, 07:34 AM   #14
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It sounds like you don't wish to reveal your investment assets by providing the Firecalc input. That is fine of course, but you have had multiple requests to provide the portfolio amount so you can receive better responses.
I know you mentioned on the CD forum that one must/should have 2mm to have a comfortable lifestyle etc.
2mm at 3% return plus 41k SS is 101k (close to your 100k number).....
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Old 07-08-2018, 07:40 AM   #15
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It sounds like you don't wish to reveal your investment assets by providing the Firecalc input. That is fine of course, but you have had multiple requests to provide the portfolio amount so you can receive better responses.
I know you mentioned on the CD forum that one must/should have 2mm to have a comfortable lifestyle etc.
2mm at 3% return plus 41k SS is 101k (close to your 100k number).....
You are correct, I feel it is not appropriate to submit actual numbers. When I post I use estimations not actuals. I was more curious why all scenarios I chose were 100% passes.

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.
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Old 07-08-2018, 07:53 AM   #16
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Originally Posted by ShokWaveRider View Post
You are correct, I feel it is not appropriate to submit actual numbers. When I post I use estimations not actuals. I was more curious why all scenarios I chose were 100% passes.

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.
Sure understood.
I believe someone mentioned in the the other thread that you should use the Firecalc Investigate tab. The last choice on that page you input 1mm which will indicate that at all times during your retirement plus at the end you will have at least 1mm.
The rest of Firecalc you provide the normal inputs.
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Old 07-08-2018, 07:54 AM   #17
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You are correct, I feel it is not appropriate to submit actual numbers. When I post I use estimations not actuals. I was more curious why all scenarios I chose were 100% passes.

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.
Try the Fidelity calculator. It shows end values and annual spending.
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Old 07-08-2018, 08:09 AM   #18
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Basing personal inflation on the last 10 years is like basing personal investment performance on 2017. But in general, as inflation rises, so do fixed returns. The issue is can you always keep a 1% positive differential between the two.
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Old 07-08-2018, 08:16 AM   #19
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Basing personal inflation on the last 10 years is like basing personal investment performance on 2017. But in general, as inflation rises, so do fixed returns. The issue is can you always keep a 1% positive differential between the two.
I re-evaluate this number every year based on the previous years expenses. I think relying on general data for personal inflation is OK for general estimations for some but does not truly reflect one's own real inflation rate.

A prime example of this is Gas prices, we fill up our car once a month. People who have to go further for groceries etc. may fill up once a week. Food, House Taxes, maintenance and Insurance are our main inflation calculators.
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Old 07-08-2018, 08:41 AM   #20
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For those who wish to run some proper numbers, here is an example that closely resembles ours. Adjust as a percentage of actual.

Total Portfolio invested at 3% currently. Hopefully this will change next year = $3.3m

Total Social Security (this is a real number) = $3859 pm ($46,308)

Personal Inflation Rate 2%.

What I am trying to establish is what is the MAX I can draw down on the $3.3m so we have $1m or $500k at the least left after 30 years as a buffer, which should cover DW and I. We do own our own home have no debt and no heirs. I am trying to establish this "Safe" number so we can "Blow That Dough" without any undue stress.

Our current annual expenses have averaged between $47 and $55k for the last 10 years of retirement. This includes discretionary spending, HC, car leases, new AC, Travel and that kind of thing. This expenditure is managed so I am comfortable with it, but I honestly feel we could spend a lot more if we wanted to without any undue stress or worry.
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