Firecalc Entry of Many Spending Changes

[Hiram]

Hi,
Long time lurker here with my first question. I am about to pull the cord and retire but I keep running calculators to reassure myself. In doing that, I have come up with a question about whether I am using the manual entry of spending changes option in Firecalc properly.



I have a pretty good idea of my retirement income--DW's pension, my SS, an expected second house sale, a very likely inheritance and so on. I am 61 (expected retirement this year . . .) DW is 57 (expected retirement at 58). I am delaying SS until 70. DW doesn't get SS (she's a California teacher). That means for the next 8 1/2 years I will have to spend down my investments pretty rapidly.



I have tracked expenses over the last few years and developed a fairly detailed budget for retirement year by year. It shows we will spend quite a bit for the first years of retirement -- our house won't be paid off for another three years, for instance. With the sale of the second house and other one time chunks of income, our income and expenses vary a lot from year to year, at least for the next few years.



I didn't trust that I was getting these variations right by using the off the chart spending and pension entries--and there weren't enough entries for them anyway.



So instead of entering the pension and SS etc in the appropriate places on Firecalc, I made a spreadsheet that sums my expected expenses for each year and deducts that amount from the expected income for that year. (It is all done in today's dollars without inflation adjustments--including the future budgets and income). That leaves the amount I expect to have to withdraw from my portfolio for each year. I take the result for each year and enter it in the manual entry of spending changes.





Do you see a problem with this method rather than using firecalc's income entry sections?



Thanks for chiming in.

[SecondCor521]

I understand what you're saying.

I don't understand how, if the individual line items in your spreadsheet exceeded the offchart spending and pension number of entries, that your off-FIREcalc spreadsheet could have any fewer rows (and therefore fit, as you imply in your last paragraph). Unless, of course, two entries start in the same year and last the same duration. And if that's the case, then you could just combine those two entries into one (and repeat for any other pairs or triplets of sequences).

Personally I would suggest a couple of things:

1. Make sure you don't have any user errors in your off-FIREcalc spreadsheet. Duh.

2. I'd carefully consider whether the items were inflation-adjusted or not, and whether combining inflation-adjusted and non-inflation adjusted series in your off-FIREcalc spreadsheet might be making things murky.

3. I think there is an option to become a FIREcalc member by making a donation, and if you do that I think that you get more (unlimited?) income stream changes and portfolio changes.

4. Be sure that you understand that the "Other Income/Spending" tab adds a series of income or expenses from a given year into the future indefinitely, whereas the "Portfolio changes" tab is for one-time / one-year expenses or income.

[tb001]

It’s a good question. Not sure of the answer, but I would wonder about the assumptions for cola increases for pensions and SS in firecalc. If the assumptions are different than inflation related spend that could be an issue.

If you’re paying off your house in a few years, it probably doesn’t matter as much, but over a longer time period I think you want to use the alternative options in firecalc so you can not adjust the expense for inflation.

In theory, your property taxes should be capped below inflation as well. Don’t know that this plays out in practice.

[Hiram]

Thanks for the replies.



I am a Firecalc member, SecondCor521, which is why I was asking about the manual entry of spending changes section under the Spending Models tab.


And, I can't be sure there are no errors in my spreadsheet, particularly in predicting my future budgets--but I included a lot of fat so in case things turn out badly, we have a lot to cut without having to sell our main home, move in with the kids or other more desperate moves like, horrors, going back to work.



The inflation adjusted aspect is a good point. I am using current dollars for all figures since Firecalc asks for those to be entered not future value. I think that also works for for the manual entry of spending changes pull down, right?


And tb001, the whole thing could be more complicated--for instance since medical expenses will likely increase faster than inflation, but Firecalc, I imagine, applies an across the board inflation rate to income and expenses, that might make the figures far less reliable.


I guess my main thought as I write all this, is that the whole purpose of the exercise is to see if the strategy of spending down my investments before taking SS has a good likelihood of working in my case. Nothing is certain, of course, but I do want to at least use the tool right!

[Bir48die]

Along with using every online calculator known to man (free that is), I just made up my own spreadsheets with the appropriate formulas. One was for my portfolio income sources showing spend down and building in inflation and a modest investment gain. Second was my income statement for four different periods of time and adjusting spending for inflation and estimated taxes. Married the two up and review it yearly

[SecondCor521]

I'm not a FIREcalc member, so I'm not sure what you can see in the members only area. Sorry I can't help more.

[Dtail]

Firecalc does apply the same inflation rate increase across the board.
Some other calculators like Fidelity apply a different rate for Medical (4.9%) for example. With Marketwatch calculator, you can apply your own inflation rates to a broader group of categories.

[pb4uski]

How long before your spending gets to a steady state? If the variability is just within the first 10 years, a workaround is to just reduce your portfolio for the difference.

For example, let's say your steady state expenses are $75k a year in 2019 dollars, but in the first $10 years you expect to spend $1 million... run FIRECalc with $75k of spending and a $250k lower portfolio. It is as if you put $250k in a side fund to cover off the excess of planned spending over steady state spending... inflation is covered by interest from the side fund.

[COcheesehead]

I ran into issues like this with FireCalc and I ultimately tried to create averages to fit in the limited number of boxes. I thought it at least would get me in the ballpark.

I like the Fidelity calculator better because it lets you set up date ranges for multiple income and expenses to kick in or fall off. In the end both tools gave me answers with enough cushion that I felt comfortable with the results.

These tools are a good guess anyway so trying to be super precise with them just isn’t worth the brain damage.

[pb4uski]

Quote:

Originally Posted by COcheesehead .... These tools are a good guess anyway so trying to be super precise with them just isn’t worth the brain damage.

+1 that is why I think the workaround previously described is "good enough".

[Hiram]

Good enough is good enough for me (Except when I wake up at 3am worried I forgot something big, "OMG--I didn't include food in my budget!" But that usually passes.) I just want to get general confirmation that my numbers are in the ball park.



I will try the subtracting the first ten years as a lump, as pb4uski suggests, from the portfolio since that is pretty much the period I expect variable expenses (did I mention the basement remodel and new roof?). I used the Fidelity planner when I started thinking in detail about all this but haven't used it in a while. Will give it another shot.


Thanks everyone for the suggestions.

[Hiram]

BTW I just tried the Fidelity Planner again. I got similar results so I am feeling better about the decision. Now I just have to tell my colleagues . . .

[marko]

Quote:

Originally Posted by SecondCor521 I'm not a FIREcalc member, so I'm not sure what you can see in the members only area. .

After 15 years coming here almost every day, am I just learning that FIREcalc has a membership area where you can get more information than I have been getting?

[pb4uski]

I don't know what to say.

[marko]

Quote:

Originally Posted by pb4uski I don't know what to say.

Well, I just made a donation but it seems I had made one or two in the past as well. Running a quick calc, I don't see anything different.

So, per usual, it seems that I don't know what I'm doing.

[pb4uski]

IME the differences in the functionality of member vs non-member are fairly modest.

[Hiram]

Yes, the only difference I have noticed is the pull down for the manual entry of spending changes. Is there anything else it does--other than support the good work of firecalc?

[pb4uski]

That's the only difference that I'm aware of... and I don't really use that feature but am a supporter anyway.

[Mo Money]

I tripped across the New Firecalc. I entered my data but the final chart that shows all 100+ scenarios does not appear. It just takes me to a page stating:

"You have called the results page directly. You need to enter information so results can be calculated. Click on 'The Calculator' above."

I have entered all my info, but it goes to this message regardless.

Also, there are two "Next Step" buttons, which is confusing.

Any thoughts (other than "Hey, use the older version of FIREcalc for now")?

[Midpack]

Quote:

Originally Posted by pb4uski IME the differences in the functionality of member vs non-member are fairly modest.

Quote:

Originally Posted by Hiram Yes, the only difference I have noticed is the pull down for the manual entry of spending changes. Is there anything else it does--other than support the good work of firecalc?

That is the only difference, but any donation no matter how modest gets you the manual spending capability. I've used it just for fun, even though our income and spending fits easily in the free version. It is very useful to some users.

Quote:

Originally Posted by FIRECALC Note: FIREcalc supporters can make yearly spending revisions throughout the duration of their plan.