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Dipping under 100% on Firecalc?
Old 05-23-2022, 03:05 PM   #1
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Dipping under 100% on Firecalc?

Anyone else out there who thought they were very comfortably in the Firecalc 100% zone just a few months ago now in the mid 90's? How worried should I be?
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Old 05-23-2022, 03:18 PM   #2
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You know this, of course, but FIRECalc is not predictive. It just tells you how you would have done in the past. Last time you looked at it, you undoubtedly saw some scenarios where you would have been wildly successful, but perhaps now not as many of those. Try not to worry about it.
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Old 05-23-2022, 03:28 PM   #3
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That's to be expected. Not uncommon at all.

Think about it, if you were at 100%, any drop at all in the portfolio reduces that calculation. A 75/25 portfolio has ups and downs. Drops from 100% are part of the game. If you want to stay above 100%, you might need to start at ~ 200% (look at some of those fast dropping lines on the graph, that ended up succeeding).

The 100% means that historically, you would survive those dips that later take you below 100%. One approach is called "retire again and again", and on the flip side of that, anytime you go above 100%, you could increase your WR to 100%, and (historically) still be solvent in year 30.

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Old 05-23-2022, 03:32 PM   #4
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On the flip side, did you change the duration to shorten the time left, or stay at 30 years?
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Old 05-23-2022, 03:40 PM   #5
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On the flip side, did you change the duration to shorten the time left, or stay at 30 years?
Well, since I've only been retired for 1 1/3 year I've kept it at 40 years. I guess I'm a little worried about SORR at this point.
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Old 05-23-2022, 04:01 PM   #6
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On the flip side, did you change the duration to shorten the time left, or stay at 30 years?
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Originally Posted by cat4ever View Post
Well, since I've only been retired for 1 1/3 year I've kept it at 40 years. I guess I'm a little worried about SORR at this point.
I knew getting older had some advantages. I don't need to run any of the calculators anymore... I can just look at my age and then look at my stash and call it good enough... Unless modern medicine comes up with a way to really extend lifespans "significantly" in the next decade, I'm good. I don't even worry about double digit inflation "too much". Best of luck to all of you young guys and gals.
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Old 05-23-2022, 04:39 PM   #7
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I wouldn't panic. Mid 90s now means that from this point, not the start of the downturn, you would have failed in about 1 in 20 historical runs. So we would have to be in the worst run ever (from however far back Firecalc goes) from the start of this downturn for your plan to fail.*

Still, I built up enough buffer so I wouldn't lose sleep if I started ER with a downturn like this. I don't remember what the buffer was, but it wasn't anywhere near 200%. And there wasn't a downturn, so now I'm more than fine and not running any calculators anymore.

* This also assumes your budget is correct. If you spend more than you used for Firecalc input, you may fail even with a 100% Firecalc score. My concern was never really about getting beyond the mid-90s to a 100% success score, it was trying to make sure my budget covered everything reasonable.
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Old 05-23-2022, 04:59 PM   #8
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The reality is most of us won’t live 30 years in retirement so for a 30 year retirement when you combine a success rate in the 90% range with life expectancy it works out a lot higher
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Old 05-23-2022, 05:23 PM   #9
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Made me look. I'm still good. (Was pretty sure I was.) My stash has grown since I retired, and that more than makes up for my increased spending since I retired.

Plus... I'm older.
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Old 05-23-2022, 05:52 PM   #10
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Does Firecalc account for inflation?

For example, say inflation averages 15%+ and cost of living doubles in the next five years. How does it deal with that?
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Old 05-23-2022, 05:58 PM   #11
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Does Firecalc account for inflation?

For example, say inflation averages 15%+ and cost of living doubles in the next five years. How does it deal with that?
It accounts for historical inflation in sequential periods.
You can also use your own inflation number if you wish.
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Old 05-23-2022, 06:36 PM   #12
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A few things jump out at me:
FireCalc is from this moment in time, so from here you are under 100%.
To drop from over 100 to mid 90’ s must mean a healthy equity allocation, make sure you are OK with that.
Run the “what ifs” and see what portfolio size you need to hit your 100%
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Old 05-23-2022, 06:38 PM   #13
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It's sounds like a trivial difference, but if you worried, check to see what amount of spending reduction it would take to get back yo where you would be comfortable. It's probably just a few percent spending reduction. Most folks around here have some things they could cut back on or at least defer. I know when we reviewed our spending, we found several places we could get better deals. So take a look and decide if you want to adjust anything.

Aside from the obvious fact that nothing predicts the future, a technical note about taxes; the program doesn't calculate those, you had to include an estimate of them in your expenses. Most likely you entered some kind of average or expected case. But if future returns actually end up low, your taxes would be lower too, so you may still actually be at 100%.
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Old 05-23-2022, 06:57 PM   #14
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Originally Posted by braumeister View Post
You know this, of course, but FIRECalc is not predictive. It just tells you how you would have done in the past. Last time you looked at it, you undoubtedly saw some scenarios where you would have been wildly successful, but perhaps now not as many of those. Try not to worry about it.
It's really easy to forget this point, that Firecalc is not predictive. I think retiring early does require a leap of faith for anyone who does it...with more money the leap is smaller...
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Old 05-23-2022, 07:49 PM   #15
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As Bernstein notes anything over 80% is meaningless given the vagaries of real world conditions:

The Retirement Calculator from Hell, Part III
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Old 05-24-2022, 01:55 AM   #16
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* This also assumes your budget is correct. If you spend more than you used for Firecalc input, you may fail even with a 100% Firecalc score. My concern was never really about getting beyond the mid-90s to a 100% success score, it was trying to make sure my budget covered everything reasonable.
Spending so far is good. A couple categories are slightly over, but a number are under. The big one is I've allocated $1900/month saving for a new car. Reducing that to $700 gets me back to 100%. I'll have to do without a car for another year or two, but I feel better now. It's a somewhat arbitrary way to set a budget I guess, but aren't they all.
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Old 05-24-2022, 04:22 AM   #17
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I planned conservatively to avoid this, building a buffer so that what Firecalc said was my 100% level was about 33% more than our planned spending. It is not necessarily the optimal thing to do, but what has worked for us.
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Old 05-24-2022, 04:34 AM   #18
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For the 3 calculators that I use, the combined average is only 7% above the current budget. Yeah I think about it a bit.
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Old 05-24-2022, 04:35 AM   #19
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I haven't run it lately, but we are retired for eight years now. Our portfolio has grown tremendously since we retired, but our spending has also grown these last couple of years. If we bit the bullet and cut back, we could do without our withdrawals and just live off SSDI and DH's pension. I'm not too concerned with our spending, though, as our original plan had us withdrawing more from our portfolio than we currently do.


Maybe I should go run it again just for grins.
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Old 05-24-2022, 05:36 AM   #20
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I knew getting older had some advantages. I don't need to run any of the calculators anymore... I can just look at my age and then look at my stash and call it good enough... Unless modern medicine comes up with a way to really extend lifespans "significantly" in the next decade, I'm good. I don't even worry about double digit inflation "too much". Best of luck to all of you young guys and gals.
+1


Cheers!
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