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Firecalc Crystal Ball Experiment
05-03-2022, 03:40 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Location: Champaign
Posts: 4,576
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Firecalc Crystal Ball Experiment
I experimented with Firecalc under the "Your Portfolio" tab.
Instead of putting "Total Market" or "Mixed Portfolio" I used the "Portfolio of consistent growth of 3% and inflation rate 7%. My success rate was 100%. My spending was $100K/year-Constant Spending Power and starting Portfolio of $1.5M
These are hypothetical numbers and I included pension and SS. I was surprised. At only 3% growth for 30 years and inflation at 7% for 30 years, 100% success. How can this be?
Edit! I just put in 1% growth and 7% inflation, still 100% success.
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"Do not go where the path may lead, go instead where there is no path and leave a trail."
Ralph Waldo Emerson
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05-03-2022, 03:50 PM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2002
Location: Texas: No Country for Old Men
Posts: 49,830
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A nice pension and SS can make a huge difference in portfolio survivability.
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Numbers is hard
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05-03-2022, 03:51 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Dec 2014
Location: St. Charles
Posts: 3,756
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Well, you made me look. I just tried your scenario with our SS of $55,000/year. Can't make it past 20 years.
I then put in our actual portfolio value, and lasted 30, but just barely.
Is your pension inflation adjusted? If not, note the default has the inflation adjusted turned on.
Otherwise, you must have a REALLY good pension (We have none)
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If your not living on the edge, you're taking up too much space.
Never slow down, never grow old!
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05-03-2022, 03:56 PM
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#4
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Location: Champaign
Posts: 4,576
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 Quote:
Originally Posted by REWahoo
A nice pension and SS can make a huge difference in portfolio survivability.
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Well, 2% growth isn't looking so bad. Maybe for our beneficiaries.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."
Ralph Waldo Emerson
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05-03-2022, 04:04 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Location: Champaign
Posts: 4,576
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Quote:
Originally Posted by CardsFan
Well, you made me look. I just tried your scenario with our SS of $55,000/year. Can't make it past 20 years.
I then put in our actual portfolio value, and lasted 30, but just barely.
Is your pension inflation adjusted? If not, note the default has the inflation adjusted turned on.
Otherwise, you must have a REALLY good pension (We have none)
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Good catch. I unmarked the inflation-adjusted pension ($31,500yr) and got a -$293,000. Unchecking the inflation adjustment and putting in 6% consistent growth and 7% inflation is 100%
0 growth and 0 inflation left me with $830K at the lower end.
__________________
"Do not go where the path may lead, go instead where there is no path and leave a trail."
Ralph Waldo Emerson
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05-03-2022, 04:43 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jan 2020
Location: Milwaukee
Posts: 3,540
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Quote:
Originally Posted by Rianne
How can this be?
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Note that you (artificially) eliminated the sequence of returns risk (SORR) that is the bane of withdrawing from volatile portfolios.
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The closing years of life are like the end of a masquerade party, when the masks are dropped. -Arthur Schopenhauer, philosopher (1788-1860)
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05-03-2022, 05:47 PM
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#7
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jan 2018
Location: Tampa
Posts: 10,909
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Quote:
Originally Posted by Out-to-Lunch
Note that you (artificially) eliminated the sequence of returns risk (SORR) that is the bane of withdrawing from volatile portfolios.
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Big point and one of the main concepts of the reasoning of using a 4% WR instead of a median withdrawal rate of 6.5%.
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TGIM
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05-04-2022, 08:16 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Dec 2017
Posts: 2,463
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+1. If we knew the SORR, and inflation, FIRE would be easy at a much earlier date (along with knowing your expiration date)!
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Balance in everything.
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05-04-2022, 08:19 PM
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#9
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Jun 2016
Location: Colorado
Posts: 8,897
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As others have said, straight line returns do not exist in the real world. SORR is the boogie man under the bed.
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05-04-2022, 08:23 PM
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#10
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Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,043
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Quote:
Originally Posted by REWahoo
A nice pension and SS can make a huge difference in portfolio survivability.
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Not frequently awarded and then only to the most deserving, this statement wins the youbet "Understatement of the Day" award.
Congratulations REWahoo, nicely done.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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