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So you get 100% in Firecalc .. but are you comfy with your lowest minimum balance ?
Old 02-09-2020, 10:41 PM   #1
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So you get 100% in Firecalc .. but are you comfy with your lowest minimum balance ?

Just wondering, you run Firecalc, and you get 100% say over 40 years.
What minimum balance are you comfortable with ? $300K left, $500K left ? $1 Million left ?
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Old 02-09-2020, 11:11 PM   #2
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Zero left, because I don't include equity in my house or other non-financial assets in my FIRECalc portfolio.
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Old 02-09-2020, 11:31 PM   #3
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I normally use Flexible Retirement Planner instead of Firecalc, but have often wondered the same thing. While my estimates show a 100% success rate, our portfolio balance drops to around 110K at it's lowest point (down to 60K in the worst case bottom 10%). Then it will start climbing again after that.

In our case we will have my wife's pension and both of our Social Security that will pay 100% of our expenses. Our portfolio really only needs to last about ten years or so until we both claim SS, but the low portfolio balance midway in still makes me a bit nervous. In theory, we won't need it after ten years, but there are always unexpected expenses. So I will feel more comfortable with some savings to fall back on.

It would be nice to leave our daughter some money once we're both gone, but I am not planning to leave an inheritance. Great if it happens, but don't expect it.
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Old 02-09-2020, 11:42 PM   #4
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I just go with zero remaining (or whatever the lowest amount above zero it gives me. $531, 1201, $6.00...) That's the ultimate stress test. I can always implement belt tightening procedures along the way if I feel I'm getting too light just like I'd do if I were working and hadn't gotten any raises lately. That would buy me an extra year.. two... whatever... then I'd be dead as planned.
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Old 02-10-2020, 06:00 AM   #5
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Sorry I don’t have a number for the OP, there are too many variables to suggest a meaningful answer anyway.

We don’t have a number, because no one spends blinding following X% and inflation adjusted thereafter - SWR was never intended that way. Calculators aren’t intended to be one and done. You reevaluate every 5 years or so, and adjust spending up or down accordingly, considering minimum balance each time. You may also adjust AA, longevity projections, heirs, Soc Sec may change, etc. And there are other ways hedge other than ending balance:
  • Assume more years than you really expect.
  • Assume more spending than you really intend. Many here break their spending plan down to essential and discretionary, so they know they can quickly ratchet back spending and how much. Our spending is about 2/3rds essential and 1/3rd discretionary- so we could plan on zero minimum balance and easily adjust to preserve remaining portfolio if needed.
And what someone else chooses wouldn’t inform our decision anyway, we’re mostly anonymous strangers here.

Like all retirement spending calculators, FIRECALC is an axe, not a scalpel.
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Old 02-10-2020, 06:26 AM   #6
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Some of those low ending numbers come from bad sequence of returns and the ability to do something about it may be too late.
You’re also guessing on the year of your death. What happens if you live longer?
What if you are self funding your LTC? Do you only want a few bucks left at the end?

Things to ponder.
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Old 02-10-2020, 06:27 AM   #7
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I still run Firecalc frequently even though retired 2.5 years.
I still want the number to be 100%, but the lowest number remaining can be any balance.
Since we and most of other retirees don't spend in a linear inflation adjusted fashion, one can always adjust along the way, especially if there are large enough discretionary expenses.
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Old 02-10-2020, 06:36 AM   #8
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Quote:
Originally Posted by USGrant1962 View Post
Zero left, because I don't include equity in my house or other non-financial assets in my FIRECalc portfolio.
+1, I forgot about the house equity...
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Old 02-10-2020, 07:25 AM   #9
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Warm Fuzzies, that is what. I see these calculators provide a good feeling, not a slam dunk your are good to go.


What if you were counting on a non-spousal inherited IRA and now with the secure act you end up loosing much of it to taxes?

If you have a high % of success, then you are likely way over funded. The last time I ran RIP was when I RE... but run our spending using mental accounting... at least for now. This may not work for others as DW had my shopping gene removed.


FireCalc is not the gospel, but an indicator.
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Old 02-10-2020, 07:28 AM   #10
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I use the Fidelity retirement income planner. At the 90% confidence level, if assets are greater than zero at the expected end date, then the plan is considered successful with a Monte Carlo estimation.

That was good enough for our retirement planning. We don't plan on spending the house equity except for possible long term care. Our combined SS plus non-cola pension provide floor on essential expense, including death of a spouse. Anything leftover is a windfall for the kids.
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Old 02-10-2020, 07:39 AM   #11
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FIREcalc shows our portfolio low balance as never going below 50% of what it was on the day we retired and always ending with more than we started. As Midpack notes, people will adjust rather than blindly continuing to spend. In our case, over 1/3 of spending is entirely discretionary (vacation, restaurants, booze) which we easily could cut back or eliminate if necessary. And all of our fixed spending is covered by social security and pensions.

Like USGrant1962, I also don't include the value of our house in our portfolio. It is approximately 20% of our net worth, and the property tax, insurance, utilities and maintenance/repairs on it constitute about 35% of our base spending. So, if times get rough, we could sell the house, rent a decent apartment just from the savings on the current expenses and add a giant wad of cash to our portfolio. As it is, I see the value of the house as our eventual buy-in to a CCRC.

And, finally, we have no heirs. So, in short, I don't worry about the ultimate success of our plan, and I especially don't worry about the minimum balance projected by FIRECalc.
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Old 02-10-2020, 07:43 AM   #12
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Everyone should also run it with uneven returns since returns are never lineal. Those results provide “interesting” ending balances sometimes, as in negative.
I listen to a pretty good podcast and the host says this about any of the Monte Carlo simulators. He said the results are based on hundreds of paths, but we only have a chance at one.
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Old 02-10-2020, 07:55 AM   #13
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Yes, returns are uneven, not linear. But history has shown that each year's return is not entirely independent of the one preceding it. Importantly, FIRECalc is not a Monte Carlo simulator. It takes as many separate planning periods as can be derived from available market data since 1871 and uses them, as they reflect the somewhat interdependent nature of returns year to year. i.e. - if you choose 30 years, there are 119 historical return paths, starting with a person retiring in 1871 and ending with one retiring in 1989. The key assumption is that if your portfolio survives the worst that has occurred in the past, it will survive the future.
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Old 02-10-2020, 08:15 AM   #14
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I ran alot of simulations before I retired. The Monte Carlo results ranged from $0 left to over $1 billion left ( think 40 years of nearly record returns EVERY year with no change in the annual spend)! When I ran Firecalc, I knew I could leave when the results showed no failures.
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Old 02-10-2020, 08:27 AM   #15
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Originally Posted by Gumby View Post
Yes, returns are uneven, not linear. But history has shown that each year's return is not entirely independent of the one preceding it. Importantly, FIRECalc is not a Monte Carlo simulator. It takes as many separate planning periods as can be derived from available market data since 1871 and uses them, as they reflect the somewhat interdependent nature of returns year to year. i.e. - if you choose 30 years, there are 119 historical return paths, starting with a person retiring in 1871 and ending with one retiring in 1989. The key assumption is that if your portfolio survives the worst that has occurred in the past, it will survive the future.
All good points. Thanks for clarifying.
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Old 02-10-2020, 08:58 AM   #16
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I have thought about this a lot I have no heirs so I guess close to 0 is alright.
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Old 02-10-2020, 09:03 AM   #17
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I am a fan of this estimator. You have to make some assumptions but it does give one an idea as to how much one can withdraw. Our recommended rate turns out to be exactly 4 x what we really need to maintain a good standard of living.

https://www.money-zine.com/calculato...al-calculator/
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Old 02-10-2020, 09:42 AM   #18
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FIREcalc shows our portfolio low balance as never going below 50% of what it was on the day we retired and always ending with more than we started. As Midpack notes, people will adjust rather than blindly continuing to spend. In our case, over 1/3 of spending is entirely discretionary (vacation, restaurants, booze) which we easily could cut back or eliminate if necessary. And all of our fixed spending is covered by social security and pensions.

Like USGrant1962, I also don't include the value of our house in our portfolio. It is approximately 20% of our net worth, and the property tax, insurance, utilities and maintenance/repairs on it constitute about 35% of our base spending. So, if times get rough, we could sell the house, rent a decent apartment just from the savings on the current expenses and add a giant wad of cash to our portfolio. As it is, I see the value of the house as our eventual buy-in to a CCRC.

And, finally, we have no heirs. So, in short, I don't worry about the ultimate success of our plan, and I especially don't worry about the minimum balance projected by FIRECalc.

We’re in a similar situation, with our home value at ~30% of our net worth and requiring significant annual spend for upkeep and maintenance. I assume no downsizing in our plan, but if we need to, just the lower carrying costs of a different home should put us in a good place. Our firecalc result is ~94%. DH is still consulting but the income is inconsistent and we can’t plan for it covering expenses 100%. Still, we felt comfortable at 94% because we know we have flexibility there. On a bad path, we would exercise that flexibility instead of running the balance down!
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Old 02-10-2020, 10:02 AM   #19
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I considered the issue looking at the FireCalc output curves, since 3 seemed dangerously low. FireCalc has a setting, however, for an estate, so even though we aren't planning to leave a lot of money to the DSs, I ran FireCalc at 500000 left over; while it reduced the "safe" amount somewhat, it didn't have as much of an effect as I thought. Fidelity's Lifetime Planner also had us as fine.
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Old 02-10-2020, 10:09 AM   #20
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So I plugged my numbers into FireCalc:

Spending: $25,000
Portfolio: $750,000
Years: 60

I got 100%! But I'm trying to read this correctly. Does this mean if I have $750k in my portfolio and I continue to spend $25k or less each year, then I will be 100% financially independent for the next 60 years?
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