What's your FIREcalc success rate?

[cute fuzzy bunny]

When I first started, the success rate was perhaps around 90-95% for a 50 year period.

Be awfully careful about those super long runs. Firecalc runs dont "wrap around" or substitute extra data for runs that dont have 50 years of data, so anything that ends "short" and didnt fail is considered to be a success.

So for your 50 year run, all of the tests for years 1956/1957-today are shortened by 1-49 years and are therefore successful, whether they actually might have been or not.

So the last "full" test run that succeeded for you is the one starting in 1955/1956.

Its tough to work this problem out for long term retirees. You could do multiple 10 or 20 year concatenated runs with average terminal portfolio sizes, but that screws up year to year correlative returns and thats a bad thing. You're basically mixing the 'true results' approach firecalc takes with monte carlo, in chunks.

Or you could just do 20 year runs and if you succeeded and had an average terminal portfolio growing or holding its ground from your start point, inflation included...decide that making it through all approaches to the great depression and the 64-75 side-slide are satisfactory to assure that you've got enough momentum to make it through anything.

 

[Nords]

Be awfully careful about those super long runs. Firecalc runs dont "wrap around" or substitute extra data for runs that dont have 50 years of data, so anything that ends "short" and didnt fail is considered to be a success.

I thought this was fixed in FIRECalc's latest version?

Paging Dory!

 

[cute fuzzy bunny]

Paging Dory!

I believe he's currently at sea. Hopefully not a three hour tour...

Hmm...how would it be fixed?

By claiming that incomplete runs dont count? Pretty much the same problem...you're collection of 50 year runs would go from 1871-1956...not much modern data there.

By wrapping it around? Not sure that going from steady inflation periods of today to deflationary periods following the civil war works for me as good data.

Filling in funny extrapolations? Fooey.

 

[cute fuzzy bunny]

And funny bug...go to firecalc support and click on "threads from the beginning". You get no threads other than the one 'sticky'.

So we're currently unable to look at firecalc threads older than one year, the next highest granular option.

 

[HobbyDave]

I'd suggest in the advanced firecalc, you could probably setup options for how to treat those long time periods:

1. Ignore any time periods where there aren't enough years of data.

2. Wrap around the years

3. Start the wrap around at a certain year (IE, after 2006, make it go to 1972 and continue from there).

4. Inflation growth after that point. So after 2006, you'd just increase by your inflation rate each year.

 

[Webzter]

I believe he's currently at sea. Hopefully not a three hour tour...

Hmm...how would it be fixed?

If you ask for a 50 year, it stops 50 years ago for it's last starting year.

 

[Nords]

I believe he's currently at sea. Hopefully not a three hour tour...

That scene is shot from the Ala Wai boat harbor, and every time I see that it takes a couple days to get that $%&^ing jingle out of my head. Which will no doubt follow me long after I'm in geriatric care.

Hmm...how would it be fixed?

I thought it was fixed by throwing out the incomplete runs, which pretty much eliminates the false optimism of partial runs by replacing it with the false optimism of avoiding all the bad stuff which happened in the last century. It's not as if we could glue together a bunch of 25-year runs, double their failure rate, and proclaim victory.

Just about every other solution for long-term runs defaults to Monte Carlo. Which perhaps isn't such a horrible idea for runs over 40 years, given that we don't have better historical data to use. I know MC has an entire book of its own flaws but... what's better?

Oh, wait, I remember-- living off dividends without touching the principal. Of course by the time most "E"Rs get to a portfolio big enough to support that goal, no one would have to worry about 40-year projections.

So we're currently unable to look at firecalc threads older than one year, the next highest granular option.

IIRC those have been archived off the public boards. Paging Dory again!

 

[cute fuzzy bunny]

Ah so you dont get false positives, but you dont get any 'modern' runs either.

Perhaps a better result than telling you 30-40 incomplete runs succeeded when they might not have, but still not a very good tool for determining successful investing in the modern era.

But I'll go back to something thats been said a hundred times, perhaps 85 of them by me...the whole firecalc thing is nice but basically if you made it through the depression and stagflation periods I dont think anything will nick you up any worse than that. Doing runs of 15-20 years seems to thoroughly cover those two bad scenes.

Oh...and...

http://www.webweaverdesign.ca/portfolio/gilligan/other/GilligansIsland2ndtv.wav

 

[hellbender]

100%.

Since my pension is inflation adjusted and I can live on a percentage of it, the model says that I need never make a withdrawal from my portfolio. In fact, if I tell the model that I have only saved $1 in my entire life and never invest a cent in equities, it tells me that my retirement is sound for 40 years and that I will die a millionaire. DB pensions. . . . gotta love 'em.

 

[lazygood4nothinbum]

i thought i read on an earlier thread that the greatest amount of years for an accurate firecalc run is 38 years. is that not correct?

 

[Lsbcal]

I voted the 100% success rate -- nothing new there. However, when looking at the FIRECalc results I generally key on the maximum drawdown. Recently when running the numbers the drawdown amounted to a worst case of 36% of the portfolio start value. This turned out to be for retirement in 1966 with the low point at 1982.

So running this tool is all fine and dandy but can you live with the worst case scenario? And that probably is not the worst case for a Monte Carlo simulation. If my portfolio declined to 36% of it's present value I'd be plenty worried. I would also loose a lot of sleep and drive my DW crazy. Would I have the guts to stay the course (investment wise) ? Hopefully I won't be tested on that one .

I have to add this. For years I've felt that our generation (dubbed the boomers by someone) will be tested in a way like our parents were with the great depression and WWII. We can all speculate on how that might come about. What I'm trying to get at is that people should really look at the results of these FIRECalc simulations and look at specifically the worst case drawdown spreadsheet numbers. Try to internalize this so as to prepare yourself psychologically. Does your current portfolio risk characteristics mesh with your ability, willingness, and need to take risks? Only you can answer that one.

Les

 

[audreyh1]

Be awfully careful about those super long runs.

I thought I already explained why I don't "sweat it" on those super long runs (or strive for 100% success either)! I don't adjust withdrawals for inflation.

Audrey

 

[cute fuzzy bunny]

Oh, that'll do nicely...

Mostly just waving the checkered flag for newer members who havent been part of the firecalc/long runs discussions.

 

[audreyh1]

Fair enough!

Audrey

 

[Lusitan]

Well I'm planning for a 60 year run, so the long run limitations of FIREcalc are of interest to me. I'll have to factor in some additional uncertainty when I'm playing with these calculators.

One other thing I noticed about FIREcalc is that it doesn't allow for an asset allocation that changes over time. In particular, it doesn't allow for a change between one's asset allocation during the saving/investing years and the asset allocation during the FIRE/withdrawal years. Most of us (relatively) "young dreamers" are heavily invested in equities right now but may not be when we hit FIRE. Just more food for thought when thinking about these results.

 

[Lusitan]

To second may others on this forum "If I'd known how good it was going to be, I'd have left a LOT sooner."

Actually I haven't noticed too many posters singing this tune. I asked those who were already FIREd about this in a post a while back, whether looking back anyone would have done anything differently (and if so what). Very few people said they would have retired sooner if they knew then what they know now.

I point this out only because I have always suspected that it's in our nature to over-save and to be very conservative when it comes to saving for FIRE and actually taking that leap from the daily grind of the workforce. It's easy to understand how the focus always drifts towards saving more.

I suspect I will do the same, and that down the road I'll look back and wish that I would have FIREd sooner and been able to enjoy more of the finite days of my life, and that I saved more money (sacrificed more years of my life) than I needed to.

 

[Lsbcal]

Lusitan, I'd say that it's in our nature to enjoy being in the herd. For the average worker that means getting up each weekday and knowing there is some group that needs us plus there is that pay check and other little perks. It can be a lot more scary to take charge of your life day to day.

But being really independent in retirement has its rewards for many of us. This Monday I was enjoying my lunch near a beautiful small pond at a winery watching dragonflies move over the water lillies after having done an oil painting -- it was just great and sure beats the old corporate cubicle. Still I will admit there was some angst in my decision to stay out of the work world after being busted in the tech bust.

Les

 

[me_no_boss]

Maybe work is not be such a bad thing for some people?
My work environment went downhill since the dot-bomb era.
If I had a decent boss and didn not lose trust with the company, I may have put ER on backburner for 5 more years.
At one time, it was a two way street where I bust my buns like work wknds and call-in on vacations. My employer suck it in during slow quarters and walked the walk, not just talked.
Then it became, lets crank up the speed, cut bennies/pension and management spin out of control - hear bad news first on CNBC. But, don't forget to be good teamplayers to dutifully train your replacement from India/China.
If not for family, I would probably pull the pin before I even heard of SWR/firecalc.
Follow the herd is ok, except the view was tiring.
I do worry about losing my edge in ER. Full time recreation is never a goal for me. So something tells me I will be itchy once decompressed.

 

[SecondCor521]

I thought a 4% withdrawal rate at my projected retirement age (53) would be 100% safe. However, if I use the Vanguard life expectancy calculator and use the 95th percentile life expectancy for a 53 year old male to enter into Firecalc, I only get a 95.3% success rate.

However, as I have pointed out to intercst before, you can calculate your probability of failure more accurately by taking the probability you will live to a certain age (in my example, 5% because I am using the 95th percential life expectancy) and multiply it by the probability of a portfolio failure during that period of time (in my example, 4.7% because Firecalc says I am 95.3% safe). This is true because the two events can be modeled as independent random variables, and a true failure occurs only if you run out of money and are still alive. So my probability of failure is actually 5%*4.7% or 0.235%, or a 99.765% success rate. Close enough for me.

I think intercst took my idea, extended it, and posted an article on his website somewhere.

2Cor521

 

[Texas Proud]

Dang.... made me go and actually do the calc....

Got 100% (plus) on a withdrawal higher than what I needed... and then asked how much can I take... and it was higher still...

But, there are potential changes that might bring it down to a real 100%... I had said when I was 16 or 17 that I would retire when I was 55... I don't want to make a liar out of myself . Right now, I have a cush job with good pay and some 'silver' handcuffs (wish they were gold...)... and as long as they don't piss me off I will continue with the paycheck...

 

[Alan]

This Monday I was enjoying my lunch near a beautiful small pond at a winery watching dragonflies move over the water lillies after having done an oil painting

I need to retire now !! I had no idea that dragonflies could paint, I'm obviously missing all sorts of things stuck in my office

 

[Lsbcal]

I need to retire now !! I had no idea that dragonflies could paint, I'm obviously missing all sorts of things stuck in my office

Hey, after 30+ years working in corporate cubicles you'll see dragonflies painting too .

Les

 

[Alan]

Hey, after 30+ years working in corporate cubicles you'll see dragonflies painting too

I'm sure you're right. A week ago our MegaCorp was bought by another Megacorp (again) and we all went through all the communication meetings, no layoffs, (yet) blah blah blah.

On Monday we come into work to find that a higher bid has been tabled and we are in a bidding war. We haven't finished the lay-offs from the last sell off yet - several colleagues including my boss are finished at the end of the month. sigh, come on dragonflies, let me see you paint.

 

[Lsbcal]

Alan, it's tough out there. I was lucky to work for a good company for many years that was well known for not laying people off -- mostly because they never expanded too fast. But the founders died, the new guard came in, and the tech mania took over.

Oh well, nothing is forever. Not even me . I keep reminding myself of that one everytime I see another famous person kick the dust in his 60's or whatever. Still I'm aware some of us have to keep on slogging until we can ER, but in the scheme of things that's not really so bad, just read a little history to remind yourself of how good we all have it .

Les

 

[joesxm3]

That would be the "Calculator From Hell" reference in the post immediately prior to yours...

Here, maybe it's been too long since I linked these. A couple of them summarize earlier articles but the context is better when they're read sequentially:
The Retirement Calculator From Hell - Part I
The Retirement Calculator From Hell - Part II
The Retirement Calculator from Hell, Part III, including the quote "Thus, any estimate of long-term financial success greater than about 80% is meaningless."
Retirement Calculator from Hell, Part IV
The Retirement Calculator from Hell, Part V

nords - thanks for taking the time to post the links. I really enjoed reading the articles.