FireCalc: Anyone UNDER 100% ??

[MichealKnight]

Hello All....

I"m 43. Been somewhat successful so far, but market changes have caused me to start planning for an early retirement, perhaps within 1-2 years tops.

If I forecast generous expenses.... taxes.....inflation.....and a 5% yearly investment returns on calculators....it seems that I can have money until i'm 92. (I doubt i'll reach that but I'd like to have DW live peacefully if need be.

But then on FireCalc….. I'm ending up at 75% upto 82% for a 50 year plan.

So I'm curious, any successful early retirees..... who have not hit 100% on FireCalc?

Thanks

 

[pjigar]

Linear math does not work for retirement. Read up on sequence of return risk. I go for 100% success on firecalc.

 

[StuckinCT]

IMHO anything over 95% if there is flex in the budget is extremely safe. But if there is nothing to cut like country clubs, vacation home, huge house, then 100% is probably where you want to be.

I'm at 98% and not retired at 47, but if I were in my 50s and by BS bucket was full, I'd have no problem calling in quits. Sub 90% is too risky...

 

[Perryinva]

Do you feel lucky, punk? Well, do ya?

That’s all it means. The longer the FIRE period the more likely you will hit multiple setbacks, and the more likely you can will have an early detrimental SOR. Doesn’t mean you will, but the risk has to metered against cut acks as mentioned and skillset should a j*b be required.

 

[Golden sunsets]

What SWR are you using in the 75% to 82% success rate?

 

[pj.mask]

Also consider current environment. My feeling is higher risk retiring near market all time highs vs after a crash.

I’d want a more solid plan retiring today than in 2010

 

[catman2020]

I would be leery of putting too much faith in online retirement calculators. Typically retirement calculators have you make so many assumptions that the output is really just a reflection of what you want to it to say. For example, we don't know with certainty for the next fifty years: stock/bond returns, sequence of returns, longevity, change in spending over time, inflation rate, tax rates, health care costs. One advantage of Firecalc is that it at leasts put a stake in the ground regarding market returns and inflation by using historic benchmarks.

Looking at Withdrawal rates, however, can be helpful. You've probably heard about the 4% rule that roughly states: you should be safe to withdrawal an inflation adjusted 4% from you balanced portfolio over a 30 year retirement period.

Let me add to that my 3%/5% rule of thumb: If you have a withdrawal rate around 5% or more, you probably need to be willing to take on more risk of portfolio failure including ability to cut back on spending and return to work if necessary. If you have a withdrawal rate around 3% or less, you are almost certainly going to die with a good deal of money. Actually, Firecalc and other sources peg the 'failsafe' withdrawal rate somewhere around 3.5% - the rate the survives any set of historical returns/inflation etc.

So, If I were you I'd start by looking at your withdrawal rate. If you around 4% or below, then can start fine tuning your plan. If you are over 4%, approaching 5%, you need to have a serious look at what your retirement options are such as reducing expenses, working part-time, moving to a low cost area - or even a low cost country etc.

 

[karen1972]

Well if you plug into firecalc it will match that data, look at the "average" of what you will have left. I quit at 95% at the age of 43 but I'm only 47 so who knows if it will work... but seeing that average of $8M leftover I just couldn't justify working longer.

As mentioned the data is only as good as the inputs and well the inputs are just a wild guess unless you have some magic 8 ball.. especially at our age, who knows what things like social security will look like much less health care, tax law, etc.

85% would be too risky for me and given the fact that anything in the recent market moves made you nervous makes me think your risk tolerance isn't that high... as this is all just a blip. Using the Investigate tab on Firecalc (Success rate) you will be able to figure out just how much more you need to get to that 95%, it may not be as much as you think as if I remember correctly my 80-95% success was only about $120k and for me that was easy enough to do... but after that it wasn't worth the BS.

 

[Dtail]

Lots of range of opinions of proper success rate, but not too many folks (of those who believe in the calculators) would be comfortable with a 75-82% success rate especially over 50 years.
Personally I saw I could retire when I saw 100% on Firecalc and many other calculators.
Many others are comfortable with 95%+.

 

[mountainsoft]

I"m 43. Been somewhat successful so far, but market changes have caused me to start planning for an early retirement, perhaps within 1-2 years tops.

If I forecast generous expenses.... taxes.....inflation.....and a 5% yearly investment returns on calculators....it seems that I can have money until i'm 92. (I doubt i'll reach that but I'd like to have DW live peacefully if need be. But then on FireCalc….. I'm ending up at 75% up to 82% for a 50 year plan. So I'm curious, any successful early retirees..... who have not hit 100% on FireCalc?

I'm 55 and planning to retire at 60. We'll have my wife's generous pension, our small savings, and both social security incomes. I personally would not feel comfortable retiring at anything less than 95%. Actually anything below 100% makes me nervous.

At 43 I would absolutely not accept anything less than 100% success rate. There's a lot of guessing in these calculators and a lot can change in 50 years. What if the market drops 30%, 40%, 50% or more right after you retire? What if your health goes downhill? What if inflation soars? What if taxes increase? Unless I had a guaranteed income for life (i.e. a pension), I would want to make sure I had a very large nest egg before I pulled the trigger.

I also don't rely on any one calculator. I prefer the "Flexible Retirement Planner" for figuring out my initial values, but like to run the numbers in other calculators too for second and third opinions.

Finally, I wouldn't even consider retiring until I had ALL debts paid off.

 

[footenote]

Using the Investigate tab on Firecalc (Success rate) you will be able to figure out just how much more you need to get to that 95%, it may not be as much as you think as if I remember correctly my 80-95% success was only about $120k and for me that was easy enough to do... but after that it wasn't worth the BS.

+1 This is what I would do if I were in the 70-80% success range and wanted to see the gap to close to get to 100% (or 95%).

 

[tb001]

The long time horizons can be difficult because it limits the periods firecalc has to work with. We’re at 92% with a decent number of extras if we never downsize, 100% if we do. While I can’t imagine not wanting to downsize at some point, I’d prefer to at least hit the 95% number before we pull the trigger.

I would be uncomfortable with numbers below 90%, especially given current market conditions. If you have a LOT of discretionary in your budget and don’t mind making cuts that’s an option. You can look at a VPW method to get a feel for how much you could end up having to cut.

I think it was mentioned before, but you might think about what might be a safe perpetual withdrawal rate and making sure your base spend comes within that. Those numbers are ~3.5% IIRC.

One of my big concerns when you have yound kids is that you can end up compounding SORR with front end loaded spending. I would assume anyone retiring has this to some extent, but for many it’s more discretionary.

One other thing to play around with is what happens with an additional $X of income for a given period of time. That can move the needle by a LOT and really drives home how important those ongoing costs are.

If you haven’t already done this, upgrade firecalc to manual spend mode and budget out many yrs into the future. Instead of setting aside $ now for specific things for the kids, put them in the future budget at estimated time points and see how you fare. If you have a mortgage, also make sure you’re taking into account that it’s not an inflation adjusted expense.

 

[ncbill]

I would be leery of putting too much faith in online retirement calculators. Typically retirement calculators have you make so many assumptions that the output is really just a reflection of what you want to it to say. For example, we don't know with certainty for the next fifty years: stock/bond returns, sequence of returns, longevity, change in spending over time, inflation rate, tax rates, health care costs. One advantage of Firecalc is that it at leasts put a stake in the ground regarding market returns and inflation by using historic benchmarks.

Yep, there's at least one popular online guru who notes that "success" over 80% is meaningless...there are simply too many uncontrollable variables in our lives.

 

[flyingaway]

One way to get 100% is to lower your estimated annual expenses, you can always do that.

 

[ShadowBloom]

I decided not to return to my office job after being laid off a few years ago. Firecalc gave me high 80s/low 90s success, depending on my assumptions. In most of my life I'm very cautious but for various reasons I decided to jump anyway. Here's a few random observations from my past few years:


1- I was planning to supplement with some part-time freelance writing. That's turned out to be more successful than I expected, which adds to my financial comfort without adding much stress or taking away much free time.


2- I have a very big expense I can easily cut if necessary; I rent in a HCOL city. Moving to another neighborhood or a suburb can cut my expenses significantly. I could also move to a LCOL location if it really became necessary. I also have a large annual travel budget.



3- I had a very good sense of what my expenses were; I've had my checkbook online since MacMoney and tracked even small cash outlays. However, my expenses never matched my plan. There were a few reasons for this: my medical insurance was free for a few years and then the company stopped paying, I had some minor medical issues where the $$ added up, and my rent increased more than expected. On the positive spending side, I want and buy fewer clothes than I used to. I also find that I don't enjoy travel as much as I used to, and after I've been to a few more priority destinations, I'll probably cut back.



4- I had been planning for early retirement before I got laid off but expected to do it a few years later. I would have liked additional cushion, especially when the market dropped last year. I've always held on through downturns before and did this time too, but it was more stressful than when I had real income coming in. My feelings were a surprise to me, because I had done the math before retiring and knew what I could expect to "lose" in a downturn.



5- When I worked, I never budgeted, because my desired lifestyle fit within my income. I haven't quite figured out yet whether I need to be on a budget now or not. There are some days when I feel I should be cautious about even small outlays and I really wish I could spend without even thinking about it like I used to, but there are also days when I trust the numbers.


6- Besides Firecalc and other online calculators, I have my own spreadsheet. It won't accurately tell me things are going well, but it will accurately tell me things are going badly. I've got highlighted/hardcoded a commitment that if there are 3 red, danger, danger years in a row I will take action to correct it, i.e. move to the burbs and/or cut travel. I also plan serious reassessments after every 5th birthday. I think being willing to make changes rather than desperately hang on if there are bad trends will be a key to success.



Right now because of my part-time work and income I consider myself semi-retired, not FIREd. I am glad I've had the opportunity to enjoy travel and the museums and theater in my town now, before I'm too old or sick. I do occasionally worry about things going very wrong, and that I may regret I made this choice when I'm 65 or 75. But then there are days where I eat a leisurely lunch on a bench in the park and am glad I don't have to rush back to my desk from the company cafeteria.


So: am I a successful early retiree on < 100%? It's still too early to tell.

 

[wmc1000]

It really depends on your sources of income. If you have a pension plus investments and future SS you may feel comfortable enough that a less than 100% firecalc score is sufficient if the investments portion play a relatively insignificant portion of your source income. In our case with no pensions and only investments and savings plus future SS we did not feel comfortable until our Firecalc score along with our own spreadsheets and other online calculators were > 100

 

[GalaxyBoy]

IMO worrying about the difference between 95% and 100% is like measuring with a micrometer and cutting with a hatchet. It ain't that exact.

 

[FreeBear]

Hello All....

I"m 43. Been somewhat successful so far, but market changes have caused me to start planning for an early retirement, perhaps within 1-2 years tops.

If I forecast generous expenses.... taxes.....inflation.....and a 5% yearly investment returns on calculators....it seems that I can have money until i'm 92. (I doubt i'll reach that but I'd like to have DW live peacefully if need be.

But then on FireCalc….. I'm ending up at 75% upto 82% for a 50 year plan.

So I'm curious, any successful early retirees..... who have not hit 100% on FireCalc?

Thanks

How do you define success?? If you define success as dead before broke, then not too many posters will be able to tell you for sure

I think it's important to remember that these simulations, Monte Carlo, Firecalc/historic, personal spreadsheets are just simplified models of reality. As % success goes up in these simulations or historical models, we are essentially improving the odds of success, that is dying before going broke. As such these tools are useful for planning, but there are no guarantees.

That being said, I looked for simulation success above 90% to around age 90ish. If you factor in the odds of dying (from Vanguard actuarial tables), this becomes 95% ish. Many others prefer 100% and beyond on simulations, but remember these are just guess-timates.

The bottom line is that you need to have plenty of margin. How much? Only you can say, depending on your personal situation. Married/planning marriage? Kids/planning kids? Comfortable cutting expenses? Paid off house? SS or pension? It may be helpful to run several scenarios like survival, middle-of-the-road, fat cat, etc.

Also consider if you can maintain or increase your living standard in retirement. Most would find it difficult to cut back drastically in retirement and would rather w*rk a few more years at high income in their 40's.

 

[ERD50]

...
So I'm curious, any successful early retirees..... who have not hit 100% on FireCalc?

Thanks

Well, if the future is roughly like the past, we could expect about half of the people who retired with a 50% success rate will be successful early retirees. See how that works?

And not too many retirees here have been retired 50 years, so most don't know yet.

-ERD50

 

[COcheesehead]

IMO worrying about the difference between 95% and 100% is like measuring with a micrometer and cutting with a hatchet. It ain't that exact.

But the OP is at 75% - 82%. That is a bit more in the danger zone.

 

[OldShooter]

IMO worrying about the difference between 95% and 100% is like measuring with a micrometer and cutting with a hatchet. It ain't that exact.

+1


We know that the future will not repeat the past exactly. What we do not know is how different it will be over our specific period of interest. I would say that 80% and 100% are probably similar results.


I learned a great word here a couple of months ago: measurbating

 

[Andre1969]

I'm still w*rking, so for the time being, I'm on the inside looking in. My goal is to have at least a 95% success rate. However, I have a "contingency zone", I guess you could call it, of 80-95%, where I figure if the BS buckets fill up too much at work, I might be willing to pull the plug. Just depends on how bad the BS is. And, sometimes a projected scenario might come in at 93.9% or something else just on the cusp. Those would be good enough for government work, as far as I'm concerned.


However, I don't think I'd be willing to take a chance of going below 80%. Unless it was a scenario where I had a lot of padding built in, and could scale back in the lean years, if needed.


Right now, FireCalc says I could go out at age 51 in two years, and I'd have a 93.9% chance of making it on $80K per year, and a 96.9% chance of making it on $75K. But, I don't know what I'll ultimately do. I've noticed, as time goes by, I've been bumping up the amount I want to live off of. I kind of have to now, because I recently took on a fairly hefty mortgage. At one time, I thought I could make it on $40K! If I didn't have the mortgage, I probably could. I'm also falling into a bit of "one more year" syndrome, and the BS bucket at work is, for the time being, fairly low.

 

[HI Bill]

But the OP is at 75% - 82%. That is a bit more in the danger zone.

But under what assumptions? What % of the budget is discretionary? In my budget, 54% is discretionary. I still worked to get to 100% because I don't want to have to cut my discretionary income in retirement, no matter the sequence of returns. The reality is, though, I'd likely cut the discretionary spending by 20-50% if the markets hit a really bad SOR.

Also, all of the assumptions and inputs matter. If one's willing/able to cut their level of spending, then 82% is not too bad. If their budget is barebones, and there's no contingency, then keep wo$rk@ng.

 

[SecondCor521]

Changing the time period to 50 years and leaving everything else default results in a SWR of 78.8%.

Going to the Investigate tab and putting in 95% results in annual spending of $25,719. $25,719 is about 86% of $30,000.

Meaning that reducing one's spending by 14% gets one from 78.8% success rate to 95% success rate.

If I were OP and were wanting to leave work but didn't have 100% in FIREcalc, I'd aim to reduce expenses by 14% or so.

...

In my case, I got to 100% in FIREcalc about two years before retiring, but the job was still OK. Then my BS bucket filled up two years later and I left. So I got lucky. I don't know what I would have done had the timing been reversed.

 

[FreeBear]

OP,


It might be useful to use tools like Firecalc to estimate how many years of w*rk are needed to get from sub 80% success to 90%-100%. A few years vs decades can have a huge impact on your perspective.



I wish I had/was aware of such planning tooling closer to the beginning. I'd have saved more sooner and perhaps have exited sooner!