Firecalc--is my math right?

[tb001]

I'm trying to figure out SWR rate % that gives you 100% in Firecalc over a 45 yr time horizon, assuming you have a 30-yr mortgage, so non-inflation adjusted spend, that accounts for 11% of your withdrawal.

Note that I'm using 65% equity and 0.12 rate on index funds, though looking at firecalc would suggest I need to double check that. I thought we were lower than 0.12 for most of our accounts.

I *think* when you bundle the mortgage into overall spend, a 3.28% withdrawal rate gets you to 100%.

But if you breakout the mortgage, and account for the fact that it's spend not subject to inflation, you end up with a 3.5% initial withdrawal rate.

(and I know practically these differences are probably meaningless, but I think we just hit 100%, so I want the milestone!)

 

[Dtail]

For starters, the 0.18% expense fee rate on Firecalc is just a suggestion and hasn't changed in awhile and was probably more in line years ago. Meanwhile most folks who use index funds have a fee rate much lower than 0.18.
So use your actual calculated rate for your index funds. Ours is less than 0.04%.

 

[pb4uski]

I'm trying to figure out SWR rate % that gives you 100% in Firecalc over a 45 yr time horizon, assuming you have a 30-yr mortgage, so non-inflation adjusted spend, that accounts for 11% of your withdrawal.

Note that I'm using 65% equity and 0.12 rate on index funds, though looking at firecalc would suggest I need to double check that. I thought we were lower than 0.12 for most of our accounts.

I *think* when you bundle the mortgage into overall spend, a 3.28% withdrawal rate gets you to 100%.

But if you breakout the mortgage, and account for the fact that it's spend not subject to inflation, you end up with a 3.5% initial withdrawal rate.

(and I know practically these differences are probably meaningless, but I think we just hit 100%, so I want the milestone!)

I would exclude the mortgage payments from the spending on the Start Here tab because FIRECalc ends up inflating your mortgage payments and never ending them if you do it that way.

If your mortgage balance isn't significant or you don't have many years left an easy way to adjust for it is to reduce your portfolio by the amount of the mortgage and exclude your mortgage payments from your spending... it is as if you paid off your mortgage just before retiring.

Alternatively, exclude your mortgage payments from your spending and go to the Other Income/Spending tab... enter your annual mortgage payments in the Offchart Spending starting in 2021 and uncheck the Inflation Adj box. Then enter a Pension for the same amount starting in the year that your mortgage ends and uncheck the Inflation Adj... if it ends in early 2035 then enter 2034 but if it ends in late 3035 then enter 3035. What FIRECalc then does is include fixed amount withdrawals for your mortgage payments until they end as part of its calculations.

 

[DenverGuy42]

assuming you have a 30-yr mortgage, so non-inflation adjusted spend

don't forget about property taxes and insurance, typically part of your mortgage payment in escrow that gets adjusted at least once a year.

In the last five years, my property taxes have increased a total of 17% in downtown denver (and likely will get a significant bump this year again...)

Also, insurance costs have definitely gone up on our properties...

so part of your mortgage will need be inflation adjusted

 

[pb4uski]

To be clear, where I suggested excluding "mortgage payments" and the like above, I mean principal and interest payments only. I have had escrow for insurance or taxes since 1986 so I forget. Include property taxes and insurance in spending.

 

[tb001]

Yes, I assume that’s location dependent. For us, it’s only the mortgage. Our property taxes and insurance are all broken out separately. Thankfully CA limits the inflation rate on property taxes to 2%, though local propositions can make that jump higher.

And thanks for the tip on expense ratios. I thought maybe I was off by a decimal place or something, as most of our funds I’m pretty sure are invested at .08. I went down midway to be conservative.