Fidelity 5 question FIRE calculator - # of yrs left to retirement

[ILikeStarTrek]

I subtracted our pensions and SS’s from our expenses, and it seemed to work fine. Very similar to other calculators.

That's fine if you are already collecting pensions and SS, or if you will start collecting them exactly at your retirement date, but if some income sources are a few years off and you want to retire now, how do you determine a present value for the future income sources? A good retirement calculator shouldn't make you figure that out but it should do that work. Firecalc lets you put in starting years for various retiremnt income sources, indicate whether they are indexed to inflation or not, etc. But this Fidelity calculator doesn't. I agree with those who say it is largely junk.

 

[PatrickA5]

I subtracted our pensions and SS’s from our expenses, and it seemed to work fine. Very similar to other calculators.

I don't see anywhere that it says to subtract pension and SS from expenses. Even the detailed expense calculator doesn't mention it. Pretty worthless. And, I'm not going back to work.

 

[street]

Mine said, 0 year to FI.

 

[GravitySucks]

If you want a nice Fido retirement tool try this one.
https://www.fidelity.com/calculators-tools/planning-guidance-center

 

[Audie Murphy]

Mine said, 0 year to FI.

Me too

 

[ShokWaveRider]

Told me I was already there same for DW. Oh! we are already there, who needs a damn calculator.

 

[thepalmersinking]

So, I put my portfolio in the back test application and start in 2007-YTD at 7% withdrawal rate on a 70-30 stock/bond portfolio and it shows I still have just over a 1% cagr after the annual deduction and adjusted for inflation. This takes 2008 into full account and earlier this year as well.

Do I listen to Firecalc that gives me 40% chance or Fidelity that says I need 15 more years of working, or simply look at actual results.

 

[ILikeStarTrek]

So, I put my portfolio in the back test application and start in 2007-YTD at 7% withdrawal rate on a 70-30 stock/bond portfolio and it shows I still have just over a 1% cagr after the annual deduction and adjusted for inflation. This takes 2008 into full account and earlier this year as well.

Do I listen to Firecalc that gives me 40% chance or Fidelity that says I need 15 more years of working, or simply look at actual results.

In your first paragraph, I'm not sure what the "back test application" is. There have been 2 different Fidelity calculators as well as Firecalc mentioned in this thread. But from your second paragraph, it seems like you have run at least 1 of the Fidelity ones plus Firecalc.

As to your question in the second paragraph - if I am understanding you correctly, you are saying that you actually retired in 2007. From 2007 to present, obviously it is the actual result that is important. But going forward, past success does not guarantee future success, and that is what these calculators are for.

Since you have been a member of this forum since 2015 and posted 113 times (per your profile), you probably realize that 7% is considered well above the safe withdrawal rate which is generally considered to be in the 3% to 4% range. That's why Firecalc only gives you a 40% chance of success. From 2007 to present, you have been in that 40% and haven't gone broke since the stock market has been on a great run for the past 11 years. But that's no guarantee that the market will continue like that, and if you continue a 7% withdrawal rate you could still go broke in the future. Hopefully you have a contingency plan (e.g. lowering your withdrawal rate or relying on income you didn't tell Firecalc about) if the stock market goes through some bad years.

 

[thepalmersinking]

I used portfoliovisualizer.com. A popular tool used by many folks on this site. I have not retired yet but will within the next year or so. The test is to see how my model retirement would operate within the real world using the 2008 downturn as a test of sequence return risk in 2nd year of test retirement. The test retirement is $2.15mm with $150K withdrawal yearly, yearly rebalancing and inflation adjusted. The portfolio consists of SPY 30%, VBK 30%, BND 30% AAPL 5% and MSFT 5%.

From 2007 to YTD the ending balance was $2.5mm or CAGR 1.1% annual growth.

This timeframe, while short, provides two major downturns 2008 and 2020, it also includes a significant downturn in interest rates on bonds. We could go back to a no growth environment quiet possibly but interest rates may go up but that would result in rebalancing of stocks and bonds.

I don’t need $150K per year but 3% seems awfully low over the long haul.

Throwing my thoughts out there for feedback on what i am missing.

 

[ILikeStarTrek]

I used portfoliovisualizer.com. A popular tool used by many folks on this site. I have not retired yet but will within the next year or so. The test is to see how my model retirement would operate within the real world using the 2008 downturn as a test of sequence return risk in 2nd year of test retirement. The test retirement is $2.15mm with $150K withdrawal yearly, yearly rebalancing and inflation adjusted. The portfolio consists of SPY 30%, VBK 30%, BND 30% AAPL 5% and MSFT 5%.

From 2007 to YTD the ending balance was $2.5mm or CAGR 1.1% annual growth.

This timeframe, while short, provides two major downturns 2008 and 2020, it also includes a significant downturn in interest rates on bonds. We could go back to a no growth environment quiet possibly but interest rates may go up but that would result in rebalancing of stocks and bonds.

I don’t need $150K per year but 3% seems awfully low over the long haul.

Throwing my thoughts out there for feedback on what i am missing.

If you want more people to comment on your scenario, you should start a new thread. You posted in a thread that was started about a specific Fidelity calculator, and you're not even using that calculator but something else to analyze your situation. I'll give you this reply but I do consider this off-topic for this thread.

Here are a few things to consider:

You said that you have captured 2 major downturns in 13 years, but I don't know about that. The 2020 downturn only lasted about 4 months. My own portfolio is heavy in stocks, and as of today my portfolio is slightly higher than it was at even the height of the market in February. (That could change, but it can always change in the future. You are currently asking about the past 13 years up to today.)

Even the 2008 downturn may not be the best example since it was followed by a general bull market lasting at least through the end of 2019. E.g., using moneychimp's CAGR calculator, Jan 1 2008 to Dec 31 2019 (12 years) gave a "True CAGR" of 9.8%. But from Jan 1 2000 to Dec 31 2011 (also 12 years) gave a "True CAGR" of 0.50%. That was really 2 major downturns, in 2001 & 2008. That may be more likely to be a failure scenario over a long haul.

As you said, you're testing on a short time frame. For a 7% withdrawal rate, Firecalc gives only a 40% success rate for 30 years - but it gives a 90% success rate for 13 years! So a lot of the failure scenarios take longer than 13 years to develop.

As for "3% seems awfully low over the long haul", there are different withdrawal strategies, but overall 3% to 4% is generally what is considered SWR (Safe Withdrawal Rate). There are lots of threads on this forum that have discussed this in the past.

Here's a discussion on Investopedia about the 4% rule:
https://www.investopedia.com/terms/f/four-percent-rule.asp

And here is a pretty decent discussion of SWR on this forum:
https://www.early-retirement.org/forums/f28/am-i-understanding-swr-correctly-76608.html

Read the above article & thread, and if you still don't get why 7% is considered too high to be a SWR, feel free to start a new thread and ask.

 

[thepalmersinking]

Actually I did use that calculator and it told me that I needed $3.7m to take out $150K. But using moneychimp and using 30yrs 1989-2019 the cagr was over 8%.

 

[ILikeStarTrek]

Actually I did use that calculator and it told me that I needed $3.7m to take out $150K. But using moneychimp and using 30yrs 1989-2019 the cagr was over 8%.

Well, the calculator which told you that you need $3.7m to take out 150k seems to be using the 4% rule (since 3.7m * 0.04% ~= 150k).

Firecalc is considering 120 different year ranges to determine a 40% success rate over 30 years for a 7% withdrawal rate.

So you've got the 4% rule itself, the Fidelity calculator, and Firecalc all telling you that 7% is not a Safe Withdrawal Rate.

But because Moneychimp (which is not a retirement calculator) gives you a good cagr for one specific range of years (1989-2019), you seem to think this means that 7% withdrawal rate is safe in general (despite the fact that Firecalc is considering 120 different year ranges and shows that 7% fails more often than it succeeds).

I think you just need to do more reading about the 4% rule, the concept of Safe Withdrawal Rate, etc. If you didn't understand it from the articles I linked in my last post, then like I said before, you will get more visibility if you start a your own thread and ask why 7% is not considered safe as a withdrawal rate. I'm sure there are people on this forum who can explain it better than I can.

 

[thepalmersinking]

I think I need to start a new thread titled “who knows someone who died with more than they started with following 4% rule”. Your moneychimp was based only on S&P. My original post had a %age of growth. Stock appreciation acts inverse to interest rates over the long term. The mechanics of buying and selling stocks and bonds now is totally different than 90% of the time Firecalc measures.

So, that said. Who in their right mind following the 4% rule would be in stocks for the periods where bond and CD’s were 2x 4%? You would think folks rebalancing annually or watch TV would notice that.

My point is 4% is turning into 3% by some sites and I question their motives. Which is why i think some people posted here.

 

[Jerseytunahunter]

Ha I got a "0"! That's without DW pension or SS.