FIRECalc - Any Arguments Against It?

[Swetch]

I've been using FIRECalc for a long time and recently introduced it to a friend who is probably no smarter (or dumber) than me. He refuses to believe that it's a good tool for retirement forecasting and it's driving me nuts.


Is there really an opinion out there that FIRECalc is not all its cracked up to be?


Don't want to start a riot here. I like it lot. Just wanted to know if there are downsides to using it.

 

[USGrant1962]

What FIRECalc tells you is "could I have survived the Great Depression and Stagflation?" Really no more, no less. But I find that very helpful for early retirement planning.

Honestly, the biggest downside is it is probably (but unknowingly) way too conservative.

 

[REWahoo]

FIRECalc does a great job of providing information on how a portfolio would have performed in the past.

The big downside to FIRECalc is the total inability to accurately predict the future.

Please ask your friend to let us know when he finds a tool to do that.

 

[Dtail]

I have used many retirement calculators and Firecalc is definitely one of the more useful ones out there, especially with no yearly fees.
It basically runs the Bengen/Trinity retirement concept and gives a potential retiree some useful ballpark reasonability.
It also has some very good what if scenarios.

 

[OldShooter]

... The big downside to FIRECalc is the total inability to accurately predict the future. ...

IIRC the FireCalc home page is pretty clear about that. From reading many posts here though, I would say that the big downside is that people think and act like it can predict the future. That's not unique to FireCalc,though. Any of the ubiquitous retirement planners have pretty much the same problem.

Taleb's turkey clearly illustrates the pitfalls of this type of tool, which is basically inductive reasoning: https://www.businessinsider.com/nassim-talebs-black-swan-thanksgiving-turkey-2014-11

 

[Dtail]

IIRC the FireCalc home page is pretty clear about that. From reading many posts here though, I would say that the big downside is that people think and act like it can predict the future. That's not unique to FireCalc,though. Any of the ubiquitous retirement planners have pretty much the same problem.

Taleb's turkey clearly illustrates the pitfalls of this type of tool, which is basically inductive reasoning: https://www.businessinsider.com/nassim-talebs-black-swan-thanksgiving-turkey-2014-11

True, but then where does one go to feel they are reasonably ready to retire?
Yes, years ago there were no calculators and folks retired all the time, but the number of folks who retire early these days probably use some sort of calculator type scenario to feel comfortable.
We don't wish to be listening to Peter Lynch type example stating it is okay to spend use a 7% SWR and ignoring any SORR concept.

 

[Aerides]

What doesn't your friend like about it? IMO, it's one of the better ones - far too many are far to simplistic, or estimate your expenses for you based on your working income.

 

[GalaxyBoy]

FIRECalc is my go-to tool, but when making my decision to RE, I used multiple calculators out there. None are exact, and as others said none are a crystal ball, but when they tended to converge on the conclusion that I was ready, I pulled the ripcord and jumped.

Sometimes I see posts from people who seem to be obsessing over whether 99% is good enough or if they should hold out for 100%. That's like measuring with a micrometer and cutting with a hatchet.

 

[OldShooter]

True, but then where does one go to feel they are reasonably ready to retire? ...

I don't think it is bad to play with the calculators but I think giving two-digit probability numbers is what leads to people thinking they are predictive. Same story on the holy 4% number. Not predictive.

Here is a story possibly apocryphal but worthwhile repeating anyway:

One day well prior to D-day, the army Met (meteorological) office received a request from SHEAF for a weather forecast on a specific day a couple of months in the future. "Impossible," they said and this was relayed up the chain of command. Back down came the order: "A forecast is required for planning purposes."
​

Just because we want an answer to your question does not mean we can get one. The real world is that we are taking some risk; risk beyond just the portfolio stuff, especially the risk that future spending will be higher than we expect or that our future spending will turn out to be unaffordable. Or both.

 

[Midpack]

I've been using FIRECalc for a long time and recently introduced it to a friend who is probably no smarter (or dumber) than me. He refuses to believe that it's a good tool for retirement forecasting and it's driving me nuts.


Is there really an opinion out there that FIRECalc is not all its cracked up to be?


Don't want to start a riot here. I like it lot. Just wanted to know if there are downsides to using it.

Your friend is [-]probably[/-] mistakenly expecting a tool to predict the future, FIRECALC won't do that - it doesn't pretend to "forecast" anything, and that's explained on the site in great detail. But neither will any other tool, at any price - as much as many would like that. If your friend can predict the future, we can tell him/her how much of a $ portfolio will be needed.

FIRECALC tells you how you would have actually done over the past 140+ years. From there you have to decide if you believe the future will be worse than any 30 year (or whatever you choose) period since 1871 which includes a depression, two WW's, and lots of recessions. If you're convinced, or want to plan for a worse future - the user has the freedom to make very conservative choices in almost any variable. Or you can choose to retire when you have 1.5X, 2X of the 100% probability portfolio $ FIRECALC results return. Whatever YOU need to sleep at night.

If there's a better tool, I don't know what it is.

 

[Gumby]

FIRECalc is a model. As the saying goes - all models are wrong, some models are useful. I find FIRECalc to be useful. Given my inability to predict the future, it is useful to see how I would have fared with the same portfolio in the worst of the past 150 years. If your friend thinks things will be even worse in the future, then he should simply use a more conservative withdrawal rate than what FIRECalc says would have succeeded in past periods.

 

[ER Eddie]

I've been playing with it lately, and I've been impressed with how many variables you can adjust. If your friend doesn't like the default settings, he can always tinker with them.

I'm wondering if your friend is just someone who tends to take the other side. Some people are like that. You tell them X or Y, and their first reaction is to "yeah but" or take the other position. I'm a little like that myself, lol. I so love freedom and so hate being told what to do, I don't even like being given good advice sometimes, because it feels like control. Maybe your friend has a similar neurosis.

 

[pb4uski]

I've been using FIRECalc for a long time and recently introduced it to a friend who is probably no smarter (or dumber) than me. He refuses to believe that it's a good tool for retirement forecasting and it's driving me nuts.


Is there really an opinion out there that FIRECalc is not all its cracked up to be?


Don't want to start a riot here. I like it lot. Just wanted to know if there are downsides to using it.

I think FIRECalc is pretty well regarded. I have used many and it is pretty good once you learn its idiosyncracies.

It is hard to give you any good advice until you tell us WHY you friend doesn't believe FIRECalc is a good tool. For all we know it could be that your friend is just an ignorant knucklehead.

Is there a free retirement planning tool out there that he prefers?

 

[candrew]

The big downside to FIRECalc is the total inability to accurately predict the future.

Please ask your friend to let us know when he finds a tool to do that.

This guy.

 

[OldShooter]

... If there's a better tool, I don't know what it is.

Well, we would have to define "better" but I think esplanner (https://esplanner.com/) is a candidate. It is more comprehensive than anything I have seen, being almost a "lifetime" financial planner. The tradeoff is that it wants an incredible amount of data that is basically all guesses about the future. I used it 5-10 years ago and was very pleased.

It is the brainchild of Larry Kotlikoff, who is apparently a regularly-seen talking head. Normally that would lead me to suspect that the planner was just something they just paid him to endorse but that is not the case at all. I spent some time on the phone with him one evening discussing some questions that I had. He is really passionate about this tool and intimately involved in its development and support. I was impressed. It's worth a look (especially if you like details and have some free time.)

 

[jollystomper]

I've been using FIRECalc for a long time and recently introduced it to a friend who is probably no smarter (or dumber) than me. He refuses to believe that it's a good tool for retirement forecasting and it's driving me nuts.

Is there really an opinion out there that FIRECalc is not all its cracked up to be?

Don't want to start a riot here. I like it lot. Just wanted to know if there are downsides to using it.

Out of curiosity:
1) Has your friend ever actually looked at/tried FIRECalc?
2) What other tools has he looked at/tried for a basis of comparison?

Some people criticize things with no direct knowledge or comparative info... and those folks are awfully hard to convince if they are not willing to actually do the work.

FIRECalc is a good tool, but not the only tool I used planning my retirement. I used it with several other inputs see the range of retirement possibilities they provide, to see how much the results varied.

 

[Midpack]

Well, we would have to define "better" but I think esplanner (https://esplanner.com/) is a candidate. It is more comprehensive than anything I have seen, being almost a "lifetime" financial planner. The tradeoff is that it wants an incredible amount of data that is basically all guesses about the future. I used it 5-10 years ago and was very pleased.

It is the brainchild of Larry Kotlikoff, who is apparently a regularly-seen talking head. Normally that would lead me to suspect that the planner was just something they just paid him to endorse but that is not the case at all. I spent some time on the phone with him one evening discussing some questions that I had. He is really passionate about this tool and intimately involved in its development and support. I was impressed. It's worth a look (especially if you like details and have some free time.)

I bought ESPlanner Plus when it came out. It was a good tool, but it did use a lot of data, and I'm not sure I liked the 'consumption-income smoothing' approach. I don't think it was $150 (now $199?) better than FIRECALC. YMMV

 

[Whisper66]

The only "drawback" I've seen is it requires some self confidence of the user to provide input they are comfortable with, understand the output, and be willing to take action on it. (Ex:the debates on this board about what % success rate is acceptable always interest me.) The same is true with other tools but when you've had to muddle through all the dozens of inputs of other tools, it can mask the fact that the results are still no more accurate than the many assumptions you made to generate each item in the input. Sometimes complexity feels like it implies "better, more thorough tool" to folks.

 

[Dtail]

Well, we would have to define "better" but I think esplanner (https://esplanner.com/) is a candidate. It is more comprehensive than anything I have seen, being almost a "lifetime" financial planner. The tradeoff is that it wants an incredible amount of data that is basically all guesses about the future. I used it 5-10 years ago and was very pleased.

It is the brainchild of Larry Kotlikoff, who is apparently a regularly-seen talking head. Normally that would lead me to suspect that the planner was just something they just paid him to endorse but that is not the case at all. I spent some time on the phone with him one evening discussing some questions that I had. He is really passionate about this tool and intimately involved in its development and support. I was impressed. It's worth a look (especially if you like details and have some free time.)

What are your thoughts about Pralana, which is another comprehensive use of data tool, if you looked at it?

 

[HI Bill]

I don't really have any arguments 'against' FIRECALC. Like many here, we've run many different retirement calculators/planners.

If results from FIRECALC, Monte Carlo and MarketWatch's Retirement Planner, agree (that you can RE), then you've done about as well as you can in trying to ensure that you don't outlive your investments with your planned spending. There are so many variables, that these can't address, and there are so many assumptions that you have to make. Go too conservative, and you'll never be able to RE. Go too liberal, and you'll likely run out of $. Of course the past can't predict the future. This is the case for diversification, which is your best protection once you've accumulated 25X+ your annual spending in investments.

Vanguard also prepared a "Retirement Plan" for me (several versions) that agreed with the others mentioned above, using Monte Carlo simulations.

 

[OldShooter]

What are your thoughts about Pralana, which is another comprehensive use of data tool, if you looked at it?

Nope, sorry. I am not a big user of these things. I think I tried FireCalc once and after my first pass through ES planner I have not felt the need to use it again.

 

[Montecfo]

IIRC the FireCalc home page is pretty clear about that. From reading many posts here though, I would say that the big downside is that people think and act like it can predict the future. That's not unique to FireCalc,though. Any of the ubiquitous retirement planners have pretty much the same problem.

Taleb's turkey clearly illustrates the pitfalls of this type of tool, which is basically inductive reasoning: https://www.businessinsider.com/nassim-talebs-black-swan-thanksgiving-turkey-2014-11

Fine but Taleb's turkey is not analogous to Firecalc. An accurate analogy would be a graphic showing the lives of ALL turkeys, not a single bird.

That the future is not knowable is of course true. That is the case no matter what data you look at. But that does not render historical data useless.

And there is no strategy that can overcome the pessimism of black swan naysayers. Theoretically ANY strategy to secure your financial security is forever vulnerable to black swan events.

It is a bit like personal life expectancy: a great diet, regular exercise, and excellent genes will not insulate you from early death from an astroid strike, a stray bullet from a neighbor's gun, or being killed by flying road debris on the way to church. Yet most folks recognize and accept such risks while still doing the controllable things linked to health and longevity. And this is highly rational behavior.

I think it is the white swan events (known possible outcomes) most people should focus on. It seems FIRECALC does a pretty good job there.

 

[OldShooter]

... [-]Theoretically[/-] ANY strategy to secure your financial security is forever vulnerable to black swan events. ...

FTFY.

That fact is not a reason to hide in a hole somewhere, but it is a reason to be wary and always ready to adapt to changing circumstances. My point was that the various calculators lure folks into forgetting that.

 

[HI Bill]

Theoretically ANY strategy to secure your financial security is forever vulnerable to black swan events.

In risk management, it's a well-known and accepted concept, that you can manage most risk cost-effectively, but the last fraction of 1 percent or so is really expensive, if not impossible to manage.

But let's say you're Jeff Bezos. You live off $200K per year. You diversify investments across the world, including stocks, bonds, individual stocks, real estate, gold, cryptocurrencies, guns, and warehouses of food. You buy homes in all of the 'safe' countries, with bomb shelters. You have multiple jets available to whisk you away to safety in event of the plague, or WW III. You're not completely safe, but about as close as possible, financially, and physically. Given the unpredictability of when/where/what Black Swan events might occur in one's lifetime, it's impossible to plan for everything. But diversified investments including domestic and foreign equities and bonds will cover most of the distance, IMHO.

 

[Offgrid Organic Farmer]

I've been using FIRECalc for a long time and recently introduced it to a friend who is probably no smarter (or dumber) than me. He refuses to believe that it's a good tool for retirement forecasting and it's driving me nuts.

Is there really an opinion out there that FIRECalc is not all its cracked up to be?

I was retired over ten years, the first time I ever heard of FIRECalc.

My military pension is so much, I live within my means.

What can FIRECalc tell me that I don't already know?