45 and FIREcalc gives 78% success

[MRG]

Thanks for all the replies!
It definitely give us more to think about and help to not overlook something.

The current volatility of the market makes it difficult to be confident in pulling the plug.
I looked closer at the FIREcalc and as of right now it gives 87% success, when just a few days ago it was 78%, and about a month ago it gave 92%...

Were going to have to look closer at our 80-20 ratio, we don't have individual stocks, just mutual funds and 20% bonds

100% success through FIREcalc doesn't look too far out of reach

To your point. We're in a decade long bull market some folks predict another decade of lower returns and probably a recession. If or when we get a 30-40% pullback how do you feel? If that happens your first year of retirement what's your contingency plan?

My opinion is you are too early to pull the plug but not too early to plan. Good luck.

 

[Sk08]

You also want to make sure that you don’t go beyond 40 years or so to include the worst starting years for a 49 year retirement. Having longer timeframes exclude the worst staring years and can make your retirement outlook better.

Are you referring to FIREcalc? I was using 50 years. I get a better outlook when entering shorter years.

 

[Sk08]

To your point. We're in a decade long bull market some folks predict another decade of lower returns and probably a recession. If or when we get a 30-40% pullback how do you feel? If that happens your first year of retirement what's your contingency plan?

My opinion is you are too early to pull the plug but not too early to plan. Good luck.

Thanks for the question on 30-40% pullback. We have thought about it, but honestly can't say how we would feel if I wasn't working. I remember the '08 dip very well, but being employed at the time, it didn't bother us much.
The contingency plan if the big pullback happens during the first year is a good question and gives us more to think about.
Right now I am slowly adding to our cash account, and would probably feel better if it at least a years worth of expense to hold over a shorter pullback.

 

[COcheesehead]

Thanks for the question on 30-40% pullback. We have thought about it, but honestly can't say how we would feel if I wasn't working. I remember the '08 dip very well, but being employed at the time, it didn't bother us much.
The contingency plan if the big pullback happens during the first year is a good question and gives us more to think about.
Right now I am slowly adding to our cash account, and would probably feel better if it at least a years worth of expense to hold over a shorter pullback.

Read Kitces’ blogs. He has some interesting thoughts and strategies on avoiding return sequence risk which is something you don’t have an answer for today.

https://www.kitces.com/

 

[Sk08]

Read Kitces’ blogs. He has some interesting thoughts and strategies on avoiding return sequence risk which is something you don’t have an answer for today.

https://www.kitces.com/

Thanks I'll check it out

 

[chassis]

Thanks for the replies so far.
I agree that 78% is on the low side. The sad thing is if I put in what my portfolio had about a month ago it gives a 92% success rate.

I don't factor in for Social Security when doing the Firecalc.

We have a 529 plan started and adding a small amount each month, might not be enough to fully fund it if I stop working, but a good start.

Health care is factored into the WD rate.

Haven't put much thought into LTC

@Sk08 Try the RPM spreadsheet, it is excellent. And try portfoliovisualizer "financial goals" model, also excellent.

Firecalc results are all over the place if you rerun the same scenario again and again. Firecalc is not sufficiently robust in my view, because it doesn't allow enough inputs and offers too little control over the inputs it allows.

 

[tb001]

Also, if your taxable account has some significantly appreciated positions, you may be able to do some gains trading and increase your basis at no tax federal income tax cost and if needed, increase your income so you don't need to rely on Medicaid for health care and can use low cost ACA health insurance instead.

How do you do this without having increased tax costs? I think I’m probably missing something.

 

[RunningBum]

Have you included income taxes? They might be $0 for federal, but in many states investment income is treated as regular income. (FIRECALC tells you to include income taxes in your expenses since it would have to handle the various account type sources of income, and cost basis, not to mention possible future tax law changes that you may or may not want to consider.)

 

[pb4uski]

How do you do this without having increased tax costs? I think I’m probably missing something.

In order to make it work you need to be in the 0% tax bracket for qualified dividends and LTCG... which in 2022 is $83,350 of taxable income and $109,250 of income for a married couple using standard deductions.

So say you're sitting there on New Year's Eve and have good estimates of your tax situation and know that your taxable income for the year will be $60,000... you could sell appreciated stock for as much as $23,350 of LTCG and pay $0 in federal income tax on the gain on that sale.

And since it is a gain the wash sale rules do not apply (they only apply to sales that result in losses, not gains) so you can buy back that same security a minute later.

Assuming no price changes in that one minute your investment risk is unchanged but you have increased the basis of your stock at a federal tax cost of $0. Be aware that there may be some state tax cost so consider that before making the decision.

 

[tb001]

In order to make it work you need to be in the 0% tax bracket for qualified dividends and LTCG... which in 2022 is $83,350 of taxable income and $109,250 of income for a married couple using standard deductions.

So say you're sitting there on New Year's Eve and have good estimates of your tax situation and know that your taxable income for the year will be $60,000... you could sell appreciated stock for as much as $23,350 of LTCG and pay $0 in federal income tax on the gain on that sale.

And since it is a gain the wash sale rules do not apply (they only apply to sales that result in losses, not gains) so you can buy back that same security a minute later.

Assuming no price changes in that one minute your investment risk is unchanged but you have increased the basis of your stock at a federal tax cost of $0. Be aware that there may be some state tax cost so consider that before making the decision.

Ah thank you, that makes total sense. It won’t work for us, but a good tip to keep in mind.

 

[F.I.R.E User]

That 78% may turn into 95% or more in few weeks. Market was at all time high not too long so wait for that again and then run the numbers.

 

[camfused]

Humor us and put in 75% of what your SS will be and tell us what Firecalc says. Based on what I read, you can count on at least that much SS.

 

[ERD50]

@Sk08 Try the RPM spreadsheet, it is excellent. And try portfoliovisualizer "financial goals" model, also excellent.

Firecalc results are all over the place if you rerun the same scenario again and again. Firecalc is not sufficiently robust in my view, because it doesn't allow enough inputs and offers too little control over the inputs it allows.

Not in my experience, not at all.

You must be talking about changing the default settings to Monte Carlo? I'm not a fan of Monte Carlo for this application (it's great for some other things), especially when there is history available.

And Monte Carlo also suffers a chicken-egg problem, the designer often defends it by saying they tweaked the parameters until it was in-line with historical! So why not just use historical?

And in general, whenever referencing FIRECalc, if you have changed something from the default, it should be mentioned so people know what you are talking about. If you get different results each time with the defaults, you need to report it in the FIRECalc thread, something is wrong.

-ERD50

 

[RxMan]

Why not? That's like ignoring the value of a pension. Not sure of future value then discount it.

I can give you 30 trillion reasons why not.

 

[COcheesehead]

@Sk08 Try the RPM spreadsheet, it is excellent. And try portfoliovisualizer "financial goals" model, also excellent.

Firecalc results are all over the place if you rerun the same scenario again and again. Firecalc is not sufficiently robust in my view, because it doesn't allow enough inputs and offers too little control over the inputs it allows.

I found it consistent.

If you want more inputs try Fidelity’s retirement planner. You can use it as a guest. It will allow you to create a budget and add in a bunch of one time expenses.

Both tools, Fidelity’s and FireCalc gave me just about the same results. As well as an app I paid for called Retire Plan.

 

[Dtail]

I found it consistent.

If you want more inputs try Fidelity’s retirement planner. You can use it as a guest. It will allow you to create a budget and add in a bunch of one time expenses.

Both tools, Fidelity’s and FireCalc gave me just about the same results. As well as an app I paid for called Retire Plan.

Fidelity is consistently around 2% lower than Firecalc in how much I can spend.
I like and use both calculators.

 

[pb4uski]

I can give you 30 trillion reasons why not.

You do realize that SS is ring-fenced within the US government budget, right? IOW, SS tax collections can't be used for anything other than SS benefit payments.

 

[COcheesehead]

Fidelity is consistently around 2% lower than Firecalc in how much I can spend.
I like and use both calculators.

FireCalc will calculate to a zero balance at end of plan if need be as a default.

 

[Dtail]

FireCalc will calculate to a zero balance at end of plan if need be as a default.

Yes I calculate Firecalc at current and also maximum spending for 100% success rate.
Brings up an interesting point. I don't fiddle around with Fidelity in order to make the ending balance be at zero, but effectively am using my current spending multiplied by my score in Fidelity to match against the max spending at Firecalc.
If one increases the spending at Fidelity, the success score will just go down and that score then gets multiplied by one's spending to calculate max spending. Seems like it would be a circular reference of sorts.
Agree?

 

[COcheesehead]

Yes I calculate Firecalc at current and also maximum spending for 100% success rate.
Brings up an interesting point. I don't fiddle around with Fidelity in order to make the ending balance be at zero, but effectively am using my current spending multiplied by my score in Fidelity to match against the max spending at Firecalc.
If one increases the spending at Fidelity, the success score will just go down and that score then gets multiplied by one's spending to calculate max spending. Seems like it would be a circular reference of sorts.
Agree?

Yes, it’s interesting. I never took Fidelity to zero either.

 

[GravitySucks]

The reason why we are thinking $5000 monthly WR, is our current $3100 does not leave a lot after bills, so the little extra would be for maxing out HSA and leave a little extra.

The 78% doesn't concern me as much as this. (Especially since you count SS as 0) Sounds like you won't have much leeway to enjoy your extra time. And that 12 year old might want to take up sports or hobbies that raise the cost (figure a 20% food bill bump to just feed a teenager!).

Best of luck!

 

[viking111]

Fidelity is consistently around 2% lower than Firecalc in how much I can spend.
I like and use both calculators.

I use fidelity and firecalc as well. Both give a good perspective. You have to make sure you are comparing apples to apples. Fidelity uses a 2.5% inflation rate. You can adjust inflation rate on firecalc. If I set firecalc on 2.5% inflation vs. CPI I get to spend much more. My personal inflation rate has been less than 2% so far. Even in the current inflation.

 

[Dtail]

I use fidelity and firecalc as well. Both give a good perspective. You have to make sure you are comparing apples to apples. Fidelity uses a 2.5% inflation rate. You can adjust inflation rate on firecalc. If I set firecalc on 2.5% inflation vs. CPI I get to spend much more. My personal inflation rate has been less than 2% so far. Even in the current inflation.

True. It appears the composite CPI on Firecalc is around 3%, but Fidelity also uses a higher inflation rate (4.9%?) for medical.

 

[matjung]

Ages in household, 45, 44, and 12
Would love to get opinions about what % success rate from FIREcalc is enough to comfortably pull the plug.
A few details
No debt, paid for house with siding and roof replaced 3 years ago with steel that has 50 year non prorated warranty.
Vehicles are in good shape, but over 10 years old, so a big unknown of when and how much will be needed for replacement.
80% mutual funds, 20% bonds,
investments as of today $1.2M Taxable, $400k Roth. With 25k cash in savings.
Current take home is $3100 per month, employer pays for health insurance.
Plan on withdrawing $5000 per month, and need to pay for health insurance.
Wife stay's home, so just need to figure out when I can comfortably stop working. I feel I'm close enough that if something happens at work I will put my notice in, I actually find myself secretly hoping for a reason... perhaps they will close and relocate us. It was proposed a few years ago, but didn't get approved. I was not happy about it back then, but as crazy as it sounds would be happy if it happened now. Wouldn't get any severance if it happened, but would be a good and easy reason to leave.
Thanks for your opinions, I was pretty excited when I stumbled across this forum.

My personal thinking is as long as your child goes to school you should go to work. Once your child goes to college stop working.

 

[rodi]

My personal thinking is as long as your child goes to school you should go to work. Once your child goes to college stop working.

Glad I didn't listen to you. LOL. I retired at 52 with two middle schoolers under the roof. (I was older when I had kids). Now I've been retired almost 8 years, they are in college.

An advantage to retiring or being retired when the kids are teenagers... you are able to pay attention/be in their business at a time when kids sometimes go off the rails. One son had some issues that we were able to devote more time/attention/love to address than if we'd been still working.

But... if you had kids young maybe getting them off to college first may make sense.