When firecalc results are calculated using the 100% success rate and the results are successful, how confident are members in believing that they have achieved ER success? Everything has a certain tolerance level to account for. Do members throw in an additional "pad" to feel confident or do they consider the 100% success factor good enough (without adding a extra pad factor?
firecalc success factor ,confidence in..
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I always set "expense ratio" at .5 instead of the default .18 to accommodate for the fact that you can't really measure this stuff with excessive precision. I also have money off to the side that I do not count in the "retirement assets" that I draw on
Louis2
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I think your question will serve as a type of personality test!
I do NOT add a pad, but I am conservative in my inputs, rounding down on assets and up on current expenses. Ass Razztazz mentioned, I also round up on expense ratio.
I do NOT add a pad, but I am conservative in my inputs, rounding down on assets and up on current expenses. Ass Razztazz mentioned, I also round up on expense ratio.
I don't put 100% faith in 100% success. As some have pointed out, FIRECalc's data set concentrates primarily on the securities of the most successful economy in the world over this time period: a "Japan FIRECalc", "Soviet FIRECalc"> French FIRECalc or any other country would yield quite different withdrawal rates than the US-centric one. I just don't know if we can count on the same "exceptionalism" over the next 4 decades.
More important than starting with 100% FIRECALC success is monitoring the health of the account and make in-stride adjustments over the course of retirement. I plan to withdraw a "% of remaining balance" amount each year, and keep tabs on whether my portfolio is losing against inflation. If so--I'll take less.
More important than starting with 100% FIRECALC success is monitoring the health of the account and make in-stride adjustments over the course of retirement. I plan to withdraw a "% of remaining balance" amount each year, and keep tabs on whether my portfolio is losing against inflation. If so--I'll take less.
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Notmuchlonger
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We use firecalc as a guideline. Frankly I don't buy into any percent rule. I think things are going to change quite a bit in the future. Look at how my country decided to puke on military benefits. You know the guys and girls who get squat a year for a pension in the long run. Yeah so use things as a guideline.
brewer12345
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I use firecalc as a guideline as well. I try to build in lots of alternative plans, but I am also cognizant of the fact that the clock is ticking and I will drop dead at some point.
Another technique I use is how I calculate social security. I used to totally not even consider it. Now that I am turning 57 this year I have started incorporating it into my FireCalc projections but I usually input the value as a non-inflation adjusted pension.
I did the same thing... no SS.
But now at age 58... I'm counting on SS to supplement our income.
Katsmeow
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Firecalc is one piece of information. I don't rely on it by itself. I don't pad it but I do run it with various spending scenarios so I can get a feel for sensitivity to changes.
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
This is very realistic. But I still look at investing as a quasi-perpetual endeavor. Someday I will get shot out of the saddle, but nevertheless I will not deliberately plan on running down my assets over even a generous assumption of my lifespan. To me this is just not an attractive thought.
Who knows, maybe money is useful in heaven, as it is in prison.
Ha
Major Tom
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No, I don't consider 100% to be good enough, mainly for the reasons mentioned by samclem. My WR of ~2.5% of starting portfolio value allows for a little"pad factor". I don't include SS in my Firecalc runs and being just 50 years old, haven't yet decided at what point I will begin drawing it. If the portfolio is holding up well by the time I get into my 60's, I may hold off from claiming early and use the knowledge of future SS payments as a confidence booster to increase the WR from my portfolio. In this sense, I suppose I'd be using SS as longevity insurance.
Or I may just claim SS early and party
This is very realistic. But I still look at investing as a quasi-perpetual endeavor. Someday I will get shot out of the saddle, but nevertheless I will not deliberately plan on running down my assets over even a generous assumption of my lifespan. To me this is just not an attractive thought.
Who knows, maybe money is useful in heaven, as it is in prison.
Ha
I truly enjoy your replies Ha.
robnplunder
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I don't think one would need money in heaven by definition. It is probably needed it in hell.
You only mention one of the risks. Our government can and will change the rules as they see fit. It is dangerous to blindly assume that SS or any other expected cash in the future is totally safe. We all see the budget stress to cover pensions and other "entitlements." Something will definitely happen. We can only hope we don't get slammed too hard.
That being said. I use all the calculators only as guidance. I'm not padding or skewing the results but then I don't plan on blindly following them. I have a pathetic collection of pensions and expect SS to be there in the near term for me and DW. I plan on a fixed percentage withdrawal from my portfolio after setting aside enough to bridge expected SS benefits. If things change, I'll adapt.
traineeinvestor
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I don't believe there is such a thing as 100% certainty when planning for a retirement period of reasonable length. Like my own spreadsheets and other tools, FIRECalc is a useful sanity check but not a guarantee.
Midpack
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FIRECALC is a valuable tool, but it's still only a long rear view mirror. Fortunately we have 163% of the $ portfolio FIRECALC says we need for a 100% success rate. But that's of no use to anyone else, so much more goes into each of us arriving at what we can live with in retirement.
brewer12345
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This is very realistic. But I still look at investing as a quasi-perpetual endeavor. Someday I will get shot out of the saddle, but nevertheless I will not deliberately plan on running down my assets over even a generous assumption of my lifespan. To me this is just not an attractive thought.
Who knows, maybe money is useful in heaven, as it is in prison.
Ha
That was not a reference to spending down assets. At 40 I am far too young for that. It was instead an indication that I am willing to take the leap and make it work instead of staying in the cube and ending up dying with my boots on or instructing my acolytes in the rules of Fight Club.
And that is the dilemma. You can continue saving for many extra years to create the illusion of safety in retirement or you can retire years earlier with "risk." It definitely becomes a personality test as someone mentioned earlier.
My opinion is that "failure" of most reasonable plans will be something that wasn't considered and probably couldn't have been predicted. The US dollar could collapse, the US loses a major war, plague, pestilence and famine. Think Germany after WWI and II...Japan after WWII....Venezuela after Chavez (the fun continues
) or any of the other disasters to a national currency and infrastructure. Having a 100% safe FireCalc or 163% of the 100% safe asset level won't spare you from the collapse.
Ready
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I used Firecalc to give me the confidence to semi retire last year. So I guess seeing the 100% did convince me to make the decision.
However, I would not blindly spend a fixed amount each year, adjusted for inflation, while paying no attention to what's going on in my portfolio over time. Realistically, one has to monitor the changes in portfolio value and make appropriate decisions periodically. I suspect very few people would do this anyway, so it's more or less just an exercise to see if you're ready to retire.
I recognize that there are no guarantees in life (other than death and taxes). At some point one has to make the decision to just take some risk and enjoy your life, and not worry about WWIII, plague, asteroids, or other worldly devastations.
However, I would not blindly spend a fixed amount each year, adjusted for inflation, while paying no attention to what's going on in my portfolio over time. Realistically, one has to monitor the changes in portfolio value and make appropriate decisions periodically. I suspect very few people would do this anyway, so it's more or less just an exercise to see if you're ready to retire.
I recognize that there are no guarantees in life (other than death and taxes). At some point one has to make the decision to just take some risk and enjoy your life, and not worry about WWIII, plague, asteroids, or other worldly devastations.
Brooks Saddle
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I like firecalc and find it to be useful but like most I see it as a guide but even guides can be useful.
For those who increase the expense ratio to .50 or higher. I don't. My current portfolio expense ratio at Vanguard is .12 and I will soon be making some adjustments that will drive it down to .10 I reasonably assume. As for SS, I multiply the benefits the gov't says I will get by .85 to adjust for the possiblity that payouts will be less in the future. I also increase the inflation factor from 3.0% to 3.5%.
As for the US economy over the last century being what it was and the future may not be as good, that's a distinct possibility but also firecalc includes two world wars, the cold war, a depression, the great recession and numerous market downturns for both stocks and bonds. My retirement could have started at the beginning of any of those events and if firecalc says 100% for a 30 year period, I take some comfort in that.
I use firecalc but I couple it's use with fido. I've looked at other calculator programs but these are the two I am most comfortable with. YMMV.
For those who increase the expense ratio to .50 or higher. I don't. My current portfolio expense ratio at Vanguard is .12 and I will soon be making some adjustments that will drive it down to .10 I reasonably assume. As for SS, I multiply the benefits the gov't says I will get by .85 to adjust for the possiblity that payouts will be less in the future. I also increase the inflation factor from 3.0% to 3.5%.
As for the US economy over the last century being what it was and the future may not be as good, that's a distinct possibility but also firecalc includes two world wars, the cold war, a depression, the great recession and numerous market downturns for both stocks and bonds. My retirement could have started at the beginning of any of those events and if firecalc says 100% for a 30 year period, I take some comfort in that.
I use firecalc but I couple it's use with fido. I've looked at other calculator programs but these are the two I am most comfortable with. YMMV.
robnplunder
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Even a 95% gives me confidence to live as I do now. It's the unknowns which are not baked into calculation that worries me - prolonged LTC, e.g.. Then, the question becomes how much to pad my RE fund for life's uncertainties. It comes down to 2 years more at megacorp or take the risk and RE sooner.
Major Tom
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Me too. Both my parents had dementia, so this is a particular concern for me. I am not married and have no kids, so don't know who I could rely on to get me into care if my mind starts to fall apart.
My plan for LTC is - I have no plan. Still not sure what to do about this.
Live And Learn
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+1
I don't "pad" per-se but I do include a worst case scenario of paying the full OOP max for healthcare (12.6k for a couple, as it stands today). I also hold aside $100k for LTC (I don't have insurance), $70k for "bucket list vacations" that would otherwise not fit into the travel budget, and another $100k as a starting balance for "accrual type" expenses (major home repairs such as a new roof, replacement autos, etc).
I also only include 67% of expected SS benefits for both DH and I as I suspect I will have some portion which is taxable. My tax budget also assumes that 70% of my spending comes from pre-tax sources.
Ok - so maybe I do pad
I have 120% of what I need per FIRECalc and FIDO gives me a 90% chance of my portfolio lasting to age 93. This is a marked improvement from 1 year ago, where I was at 95% in FIRECalc and 88 years old in FIDO so I'm glad I did the extra year. I "think" that if I stay at the confidence levels that I see today then I will finally ER in March. OMY syndrome is a tough disease !
Agreed. Naturally risk-adverse and conservative, despite planning every last detail over the course of my life I have been hit every kind of adversity. Older, I've learned that I always get back up no matter what, so bring it on. Life is for the living, not the fearful.
Over the course of my financial life, I've been flexible as my work/spending/personal situation ebbed and flowed, and this will remain true in ER. Darwin: "It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change."
No LTC plan here and no intention for it either. Alzheimers runs in the family. Plan is to throw food tantrums in some run down nursing home til they overmedicate me and carry me out on a stretcher...
I should add that for my PF, although I'm at well over 100% success for FC, I use about 5 others as well. Next month, I'll add ESPlanner to the mix and be done with it.
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W2R
Moderator Emeritus
I am somewhat (OK, very!) cautious and conservative when it comes to retirement planning. I have spent too much time poor already in life, and don't want to take much risk of ever being there again.
I regard FIRECalc to be another data point among many, a good one albeit one that is a bit on the optimistic side for me. I would likely suggest not retiring if a forum member could not obtain at least a 95% successful outcome using FIRECalc.
As for my OWN retirement, well, er.... right now I am spending 55% of what FIRECalc says I can afford to spend until age 100 with a 100% success rate.
I am planning to increase my spending up to at least 75%, maybe more (woo hoo? ). But honestly, I don't expect anybody else to forge ahead quite that gingerly when determining their own budget. I have my own fears and demons to deal with.
I regard FIRECalc to be another data point among many, a good one albeit one that is a bit on the optimistic side for me. I would likely suggest not retiring if a forum member could not obtain at least a 95% successful outcome using FIRECalc.
As for my OWN retirement, well, er.... right now I am spending 55% of what FIRECalc says I can afford to spend until age 100 with a 100% success rate.
I am planning to increase my spending up to at least 75%, maybe more (woo hoo? ). But honestly, I don't expect anybody else to forge ahead quite that gingerly when determining their own budget. I have my own fears and demons to deal with.
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