Big differences between FIRECALC and New Retirement

[Koolau]

Use all the calculators you want before retiring, but once in retirement all you have to do is compare your rate of return to your withdrawal rate.

What ratio of the two do you use as "acceptable?" I've never looked at it that way.

 

[COcheesehead]

What ratio of the two do you use as "acceptable?" I've never looked at it that way.

It depends how you view your drawdown. If you want a pile to pass on, the withdrawal needs to be below earnings. If you intend to die with zero, your withdrawal can be above earnings. It’s just a dashboard item. What you do with it depends on your situation.

 

[Montecfo]

Honestly, the best handy-dandy calculator I've seen is the "4% rule." Of course, it's a bit sloppy, and you have to make a couple of caveats (40/60 to 60/40.) Maybe be ready to cut back a skosh if things get tough. Other than that, most people are good to go. No fuss, no muss.



Having said that. I think a lot of people like the process of calculating every detail which gives them a better feeling that nothing has been left to chance. Of course, everything is left to chance since we're talking about the future.

You have an uncanny ability to say what I was just thinking. The purpose of all the calculators is to get the user comfortable with what the 4% Rule is already telling them. And if you are good there and if you assume 9% returns year after year, trust me, your plan will show you are good.

Much of the extra detail is things unlikely to move the ball.

Now what DOES make sense to look at? Sensitivity analysis and downside risk. But the best way to plan for this is to have more buffer. Meaning your planned withdrawal rate covers a lot discretionary expenses, you have a big house you could sell and rent or downsize, you view SS as icing rather than as required funds.

So I have not spent too much time with retirement planners. Some spreadsheets with only the most important variables seem to do the trick.

ETA: Cocheesehead's comment about rate of return and withdrawal rate is also on target.

 

[LateToFIRE]

I think all these various calculators are fine to play with and I'm sure each one helps to answer some different nagging questions. But when it's all said and done, using such calculators is a bit like measuring with a micrometer and cutting with an ax. NOTHING w*rks out in retirement the way you plan or expect. BUT you CAN go into it with the knowledge that (barring the apocalypse) you have enough.

I did all the "readers digest" or similar magazine calculators over the years (worst thing about them was they asked YOU what rate of return you were going to get - ridiculous.)

When I found FIRECacl, I was pretty well done. It showed I was in good shape. I played with some variables and eventually pulled the plug with the expectation that I would do fine. I did.

Honestly, the best handy-dandy calculator I've seen is the "4% rule." Of course, it's a bit sloppy, and you have to make a couple of caveats (40/60 to 60/40.) Maybe be ready to cut back a skosh if things get tough. Other than that, most people are good to go. No fuss, no muss.

Having said that. I think a lot of people like the process of calculating every detail which gives them a better feeling that nothing has been left to chance. Of course, everything is left to chance since we're talking about the future.

I like your approach! Not yet retired yet, but all the calculators are pointing in the green zone. And if life has taught me anything, it's as you pretty much stated, nothing ever quite goes according to plan.

Having observed various family members in retirement, and having been privy to the financial pictures in case of parent/in-laws, there is clearly more than one way to approach.

My in-laws provide a great example: they were fiscally modest people that had a really really great lifestyle on a fraction of what I "think" I need, seasonally shuttling between their Northern home and waterfront warm weather condo, surrounded by friends and family in both. Never really needed to tap their nest egg owing to SS/pension income until the very end, and even then barely, granted that was a decade ago. Biggest financial worry was what to do with those pain in the a** RMD's.

Lessons I should learn from the examples (both positive and negative) of my in-laws and other family elders:

(1) You'll probably need waaaay way less than all the budgets and fancy calculator tell you you'll need.

(2) Chances favor you dying or becoming physically limited sooner rather than later than you think you will.

(3) Spend the money for travel and experiences sooner rather than later, cause either you won't be in good enough shape later, you won't feel like it later, or significant others won't be around to share it later.

(4) Keep your family close if you can - you'll need them, they'll need you too.

(5) Put a plan for medical decisions and end of life in place ASAP. Don't wait. Decide who you trust carefully on Healthcare Proxy, Power of Attorney, Executor, etc., make sure your wishes and priorities are well known by all relevant parties.

(6) Don't skimp on the professionals (fin'l advisor, lawyer, etc.) - use specialists not a generalists, you'll be doing yourself and your family a big favor.

I'm sure I'm missing plenty. YMMV.

 

[LateToFIRE]

You have an uncanny ability to say what I was just thinking. The purpose of all the calculators is to get the user comfortable with what the 4% Rule is already telling them. And if you are good there and if you assume 9% returns year after year, trust me, your plan will show you are good.

Much of the extra detail is things unlikely to move the ball.

Now what DOES make sense to look at? Sensitivity analysis and downside risk. But the best way to plan for this is to have more buffer. Meaning your planned withdrawal rate covers a lot discretionary expenses, you have a big house you could sell and rent or downsize, you view SS as icing rather than as required funds.

So I have not spent too much time with retirement planners. Some spreadsheets with only the most important variables seem to do the trick.

ETA: Cocheesehead's comment about rate of return and withdrawal rate is also on target.

"9%" Is that for 100% stock?

Ok, I have to ask. What are most folks using for expected returns, I'm seeing everything from 5% to 10% on various forums.

I've been running a nominal 6.5% avg return for a balanced 60/40 portfolio - some element of conservatism in that to account for SORR. Also, assume some % of portfolio will be held in cash.

 

[Koolau]

"9%" Is that for 100% stock?

Ok, I have to ask. What are most folks using for expected returns, I'm seeing everything from 5% to 10% on various forums.

I've been running a nominal 6.5% avg return for a balanced 60/40 portfolio - some element of conservatism in that to account for SORR. Also, assume some % of portfolio will be held in cash.

I guess I don't figure anything in particular for an avg. return. I've been good for 17 years retired, so I figure I can "fake" it from now on.

 

[LateToFIRE]

I guess I don't figure anything in particular for an avg. return. I've been good for 17 years retired, so I figure I can "fake" it from now on.

Priceless!

 

[COcheesehead]

"9%" Is that for 100% stock?

Ok, I have to ask. What are most folks using for expected returns, I'm seeing everything from 5% to 10% on various forums.

I've been running a nominal 6.5% avg return for a balanced 60/40 portfolio - some element of conservatism in that to account for SORR. Also, assume some % of portfolio will be held in cash.

If you are a Fidelity customer, they have a bunch of mixed allocation indices under their performance tab that you can use for comparison.
A 60/40 portfolio has a 6.06% 5 year and a 5.83% 3 year return.

 

[COcheesehead]

(1) You'll probably need waaaay way less than all the budgets and fancy calculator tell you you'll need.

.

You’ll spend just about what you spent while working.

 

[LateToFIRE]

If you are a Fidelity customer, they have a bunch of mixed allocation indices under their performance tab that you can use for comparison.
A 60/40 portfolio has a 6.06% 5 year and a 5.83% 3 year return.

Will check that out. Those do seem low relative to what I've experienced over the past couple decades, but I've been more like an 80/20 mix, which thinking will continue for the foreseeable future.

 

[Dtail]

You’ll spend just about what you spent while working.

Possibly true for many folks, but not us.
We spend way less than what we did about 3 years before retirement, however we were reducing expenses generically those last years.
We knew we couldn't maintain the same lifestyle in retirement, but are very happy in our spending now.
A few examples of spending items in pre retirement were $2,300 for an anniversary dinner at Per Se., $1,300 for Lady Gaga tickets, etc.
We wouldn't think of spending these amounts in retirement for these items and have no interest in doing so.

 

[COcheesehead]

Possibly true for many folks, but not us.
We spend way less than what we did about 3 years before retirement, however we were reducing expenses generically those last years.
We knew we couldn't maintain the same lifestyle in retirement, but are very happy in our spending now.
A few examples of spending items in pre retirement were $2,300 for an anniversary dinner at Per Se., $1,300 for Lady Gaga tickets, etc.
We wouldn't think of spending these amounts in retirement for these items and have no interest in doing so.

We were the opposite. I was not sure about anything retiring at the beginning of Covid in 2020 so we pulled back the spending. Now I realize I can BTD.

 

[COcheesehead]

Will check that out. Those do seem low relative to what I've experienced over the past couple decades, but I've been more like an 80/20 mix, which thinking will continue for the foreseeable future.

Keep in mind those are 60/40 numbers.

 

[LateToFIRE]

Possibly true for many folks, but not us.
We spend way less than what we did about 3 years before retirement, however we were reducing expenses generically those last years.
We knew we couldn't maintain the same lifestyle in retirement, but are very happy in our spending now.
A few examples of spending items in pre retirement were $2,300 for an anniversary dinner at Per Se., $1,300 for Lady Gaga tickets, etc.
We wouldn't think of spending these amounts in retirement for these items and have no interest in doing so.

Curious, was the $2300 dinner for two? I've been once, thankfully on someone else's expense account

 

[Dtail]

Curious, was the $2300 dinner for two? I've been once, thankfully on someone else's expense account

Yes it was. From memory, $790 Price Fixe menu, $700 for 3 bottles of wine, $265 for ONE white truffle supplement on top of the pasta, tax and tip for the rest.
The food and service was outstanding.

 

[marko]

You’ll spend just about what you spent while working.

Oddly, we're spending way more. The reason is that I was travelling internationally 200 days a year.

DW most often was with me.

That meant that for 30 years, much of our food, travel and entertainment, misc expenses was paid for by "somebody else". Also had a company car.

But to your point, its true...spending is the same, just a matter of who's writing the checks.

 

[COcheesehead]

Oddly, we're spending way more. The reason is that I was travelling internationally 200 days a year.

DW most often was with me.

That meant that for 30 years, much of our food, travel and entertainment, misc expenses was paid for by "somebody else". Also had a company car.

But to your point, its true...spending is the same, just a matter of who's writing the checks.

We’ll end up likely like you and spending more as we have become more comfortable in retirement. I just had my three year anniversary.
My point with my post is that it’s very unlikely you’ll spend waaaaay less as another not yet retired poster stated.

 

[Koolau]

You’ll spend just about what you spent while working.

It does vary. We must spend at least twice what we spent before FIRE. YMMV

 

[youbet]

Ok, I have to ask. What are most folks using for expected returns, I'm seeing everything from 5% to 10% on various forums.

Because the sequence of returns is critical, using an average number and applying it to each year makes for a poor tool.

 

[COcheesehead]

Because the sequence of returns is critical, using an average number and applying it to each year makes for a poor tool.

+1 Sequential returns are a no no.

 

[LateToFIRE]

Yes it was. From memory, $790 Price Fixe menu, $700 for 3 bottles of wine, $265 for ONE white truffle supplement on top of the pasta, tax and tip for the rest.
The food and service was outstanding.

Those are some impressive numbers. I am appreciating my "free" dinner that much more now! And yes, agree, it was an outstanding experience.

 

[dknighd]

You’ll spend just about what you spent while working.

That has been my experience so far. Some years we spend more, some less, just like while I was working


Before I retired I used firecalc, and also i-orp which I don't think I've seen mentioned in this thread (use the extended version at https://www.i-orp.com/Plans/extended.html). I also used the free financial services TIAA provided. I also used a homegrown excel spreadsheet based on the PMV/NPV concepts. And of course the ever reliable back of an envelope (which I've since converted into a simple excel spreadsheet).


Before I retired we came up with 2 numbers. What we need to spend to be comfortable enough. What we would like to spend. What we were spending while working was between those numbers. What we are spending is also between those numbers. Funny how that worked out.


Before I retired everything pointed to being able to cover needed expenses 100%. Desired spending was about 70-80% safe. I have no looked at the "random" tools since I retired. Pretty much the only thing we can control at this point is spending.


After retiring I still look at my homegrown spreadsheets. To estimate what we can spend next year, and make sure we are still OK. I look forward to not having to look at them at all. SS and annuities will cover needed spending. RMD will be saved or spent as we choose

 

[dknighd]

Somebody asked, what should I use for portfolio value?
This is a number you can tweak. My best guess was the lowest over the last 6 months or so. But the reality is that number could vary by a lot if you were all stocks. So, try a couple of different numbers.



Somebody else asked, what should I use for rate of return?
Again, this is a number you can tweak. My best guess is 0-6% real return. So I tried them all. In my simple excel spreadsheets I currently use 1.6% in the NPV/PMV one - since that is about what you need on average for the 4% plan to work for 30 years. I use 0% on the back of the envelope, to keep it simple.


Nobody asked about inflation. I used to assume 3%, but now I'm assuming 4%. Again this is a number you can tweak. Anything between 0 and 6% is probably reasonable.



Honestly, these are unknown numbers. And history might not repeat itself. So try the reasonable range in all of them. And, do not forget, you have a magic wand, you can spend more or less than planned if you need to . . .

 

[dknighd]

Yes it was. From memory, $790 Price Fixe menu, $700 for 3 bottles of wine, $265 for ONE white truffle supplement on top of the pasta, tax and tip for the rest.
The food and service was outstanding.

I do not think I could bring myself to spend that much on dinner!


Edit: I must be middle class.

 

[Koolau]

I do not think I could bring myself to spend that much on dinner!


Edit: I must be middle class.

Nor I. I find it difficult to relate to food so wonderful or service so excellent that I'd pay that amount for a meal. BUT that's what makes us all unique here.