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Firecalc spending analysis
Old 07-27-2018, 11:27 AM   #1
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Firecalc spending analysis

I am stumped by a scenario I ran today. DH and I have COLA'd pensions. Our budget is our pensions plus about 20,000 discretionary. Our total budget will be less than pensions and ss when we collect, so (in theory) we would only be taking from investments until we file for SS.
So I ran Firecalc today, with a 35 year timeline, assuming SS at 62 (next year), just for info.
Firecalc is 100%, however, when I ran it for a spending level at 95% success rate, it was less than our pensions and ss combined.

"A spending level of $XXX, provided a success rate of 100%. this spending level is 16% of your starting portfolio. Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio"

This doesn't make sense to me! With investment income added, I would expect a spending amount higher than pensions and ss?
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Old 07-27-2018, 02:18 PM   #2
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I believe you found a bug.

I made a model assuming 60K spend, 45K pension, and 20K SS next year (i.e., spend is less than pension+SS so no portfolio draws required after year 1). Assumed a 200K portfolio. Of course it gives me 100% success, but when investigating 95% success it says I can spend 32K instead of 65K.

Then when I change the portfolio to 500K it says I can spend 80K.

But in both cases and yours, it "is 16.00% of your starting portfolio."

FIRECalc is not really intended for the case where no portfolio draw is necessary, so I suspect this is hitting an edge case related to the suspicious 16.00% that is breaking the investigate part of the model. The regular results output looks OK.

While in this extreme case the Spending Level back-calculation seems unmoored from pensions/SS, I hope that is not the case in more normal scenarios

Model here: https://www.firecalc.com/index.php?w...lcVersion=3.0&
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Old 07-27-2018, 05:01 PM   #3
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"FIRECalc is not really intended for the case where no portfolio draw is necessary,"
Thank you for that clarification. We are early in our retirement, so I am being far more conservative right now. I would imagine we will be drawing from our portfolio and nudging our budget a bit higher sooner than I think.
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Old 07-27-2018, 05:30 PM   #4
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Quote:
Originally Posted by USGrant1962 View Post
I believe you found a bug...

... But in both cases and yours, it "is 16.00% of your starting portfolio."

FIRECalc is not really intended for the case where no portfolio draw is necessary, so I suspect this is hitting an edge case related to the suspicious 16.00% that is breaking the investigate part of the model. The regular results output looks OK.
I've come across this exact issue. My pre-62 pension exceeds my budget, so I'm only making discretionary withdrawals (then at 62 start with a 2.7% WR). I still got the 16% FIRECalc message and the results didn't look right.

I was able to shift some money so the error message went away (and the results were very close to what I expected).
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Old 07-28-2018, 06:17 AM   #5
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Another calculator recommended on this site is i-orp.

https://www.i-orp.com/Dividend/index.html

This comes in two flavors, basic and extended. I strongly recommend using the basic version initially as it has a 'cheat sheet' explaining the various input fields. The extended version has significantly more bells & whistles for customization but very few instructions. Learn with the training wheels on.

The Fidelity calculator is also recommended and I don't think you need to be a customer to use it, but being a customer may give you access to an even better model.

Both i-orp and FIREcalc gave me similar results. I guess my wife and I are in much better shape that I expected.
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