Compare i-orp to firecalc

[Rianne]

I got these results entering similar information in both calculators.
It's my understanding i-orp takes into consideration taxes and planning is extended to 92, zero savings at the end of the plan, gives you disposable income in after tax dollars.
Here's what I entered in both calculators and results:
Firecalc:
30 years
1,500,000 Portfolio

$58K spending/Constant spending power

No SS, No pension
60/40 allocation
96.6% with a low of -$242,010 and high of $7,016,950

i-orp
Age: 61 and 61
Tax deferred: $600,000
Regular savings: $900,000
Zero for home/value
No SS, No pension
No contributions
$55 K Disposable Income


That seems unusual as i-orp is giving me an optimal spending amount (safe spending until 92 yrs. old) including taxes, no home value, 4% rate of spending with inflation etc. I'm thinking i-orp is optimistic? And that's a question.

[Dtail]

If you set Firecalc at 100% for the Spending Level under the "Investigate" section, the results are $55,093 which is similar to I-ORP, which sets the maximum spending levels effectively at 100% success.

[Rianne]

Ah! I've not used the investigate tab. Silly me.

[capjak]

Also if using i-orp extended version.... I believe it gives the "after tax" income where firecalc does not.

[Dtail]

Quote:

Originally Posted by capjak Also if using i-orp extended version.... I believe it gives the "after tax" income where firecalc does not.

True, but Firecalc assumes one includes taxes as part of their spending (58k in example), while I-ORP calculates the taxes as part of the maximum spending.
Conceptually it is the same thing in the end, if one includes taxes in Firecalc.

[GenXguy]

Quote:

Originally Posted by Rianne i-orp Age: 61 and 61 Tax deferred: $600,000 Regular savings: $900,000 Zero for home/value No SS, No pension No contributions $55 K Disposable Income

Those numbers are in the ballpark of my numbers, but reviewing my spreadsheet, my planned figures prior to SS are:

$50,0000/yr drawdown/spending (including income tax)

$23,0000/yr disposable income

So the disposable income figure above looks very high compared to my calculations.

[Dtail]

Quote:

Originally Posted by GenXguy Those numbers are in the ballpark of my numbers, but reviewing my spreadsheet, my planned figures prior to SS are: $50,0000/yr drawdown/spending (including income tax) $23,0000/yr disposable income So the disposable income figure above looks very high compared to my calculations.

In I-ORP, the Disposable income figure is effectively the maximum total spending figure. It is not a disposable/discretionary type number.

Not sure that is your reference.

[GenXguy]

Quote:

Originally Posted by Dtail In I-ORP, the Disposable income figure is effectively the maximum total spending figure.

I see. About half of my spending is from savings, principal, and Roth rather than income, which is why my spending is much higher than my disposable income. When I'm 65, more of my spending will actually come from income due to SS and higher retirement plan distributions.

[Rianne]

To illustrate the effect of taxes (firecalc assumes inflation), I entered in firecalc
$250K portfolio to start
0 spending
20 years retirement
"Other Income" 23K SS starting in 2019
and 50K Pension income starting in 2019

Total Market Portfolio 60/40
Constant Spending Power

Investigate
100% Spending Level
Result
$39,999 success rate for spending
Something seems wrong.
"(Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)"

[Dtail]

Quote:

Originally Posted by Rianne To illustrate the effect of taxes (firecalc assumes inflation), I entered in firecalc $250K portfolio to start 0 spending 20 years retirement "Other Income" 23K SS starting in 2019 and 50K Pension income starting in 2019 Total Market Portfolio 60/40 Constant Spending Power Investigate 100% Spending Level Result $39,999 success rate for spending Something seems wrong.

I got the same result. I agree it appears to be incorrect, unless missing something.
One should be able to spend around 9k from a 250k portfolio for a 100% success plus the 73k income generated should produce a max spending of ~ 82k.

Any thoughts out there?

[tb001]

I think i-orp assumes a SS cut as a default. Then the 39k is less taxes.

[Rianne]

Quote:

Originally Posted by tb001 I think i-orp assumes a SS cut as a default. Then the 39k is less taxes.

The above example was entered in firecalc. I don't think there's an assumption of a SS cut.

[tb001]

Quote:

Originally Posted by Rianne The above example was entered in firecalc. I don't think there's an assumption of a SS cut.

I would double check in the advanced entry tab. I was surprised to see that a SS cut was the default assumption. I think 25% IIRC. I’m pretty sure you had to uncheck it. Don’t know if the non advanced analysis works the same way.

This thread has been helpful. I didn’t realize the max spending values were the 100% numbers.

[Rianne]

Not sure where "advanced entry tab" is in firecalc.

[tb001]

Quote:

Originally Posted by Rianne Not sure where "advanced entry tab" is in firecalc.

Ignore me, I haven’t finished my coffee yet! Somehow, despite you saying it several times, I missed the firecalc piece!

[tb001]

Quote:

Originally Posted by Dtail In I-ORP, the Disposable income figure is effectively the maximum total spending figure. It is not a disposable/discretionary type number. Not sure that is your reference.

Does the disposable income figure assume taxes are a part of this number? I assumed, since they were broken out in the analysis, that disposable income was max amount to spend, and taxes were an additional $ on top of this.

[Rianne]

Take taxes, SS cut etc out of the picture. Firecalc cannot calculate without a portfolio balance entered on starting page. Cannot enter only pension and SS as income and get a result b/c the results are based on a portfolio input.
BUT it should take into account pension and SS.
"(Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)"
If your portfolio is $100K and SS + pension = $80K, the result is $16 spending? This example starts SS and pension in 2020 and retirement is 30 years.

[tb001]

Quote:

Originally Posted by Rianne Take taxes, SS cut etc out of the picture. Firecalc cannot calculate without a portfolio balance entered on starting page. Cannot enter only pension and SS as income and get a result b/c the results are based on a portfolio input. BUT it should take into account pension and SS. "(Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)" If your portfolio is $100K and SS + pension = $80K, the result is $16 spending? This example starts SS and pension in 2020 and retirement is 30 years.

Hmmm. I'm seeing similar results. I've had issues with the 'investigate' tab when trying to solve for a portfolio value, but just assumed it was because of the variability of outcomes. This is odd.

[Dtail]

Quote:

Originally Posted by tb001 Ignore me, I haven’t finished my coffee yet! Somehow, despite you saying it several times, I missed the firecalc piece!

Yes I-ORP assumes an SS cut unless you uncheck it.

[Dtail]

Quote:

Originally Posted by tb001 Does the disposable income figure assume taxes are a part of this number? I assumed, since they were broken out in the analysis, that disposable income was max amount to spend, and taxes were an additional $ on top of this.

The disposable income in I-ORP is the maximum spending amount which translates to the after tax income (thus includes taxes already).