FICalc.app Results

[RetiredAt49]

I'm hoping to get other people's comments/feedback regarding your own FICalc.app results - specifically as it relates to the section "Portfolio at End of Retirement" (a.k.a. portfolio value when you die).

Having used FireCalc and other tools, I generally understand the logic behind these tools and recognize that the variance generally depends on what year someone retires. However, in the "Portfolio at End of Retirement" section I show the following results:

Median: $14,238,609
Average: $19,158,295
Standard Deviation: $15,830,833
Largest: $88,603,451
Smallest: $571,614

Hence, the tool is saying that when we die our portfolio could be as small as $571,614 or as large as $88 million... for those of you who use this tool do you see a huge variance between your largest and smallest numbers like this? Would you mind sharing your results (either publicly or send me a PM)?

I suspect there could be a bug in their system as it relates to the "additional income" section because I added SS (down the road when we start taking it) as well as various rental properties we plan to sell (down the road) - making sure I only selected that the sale of those properties is 1 year only and not reoccurring.

We put down in the withdrawal strategy constant dollar - adjusted for inflation. I would expect that the tool is smart enough to recognize that when additional income occurs (e.g. we sell a rental property in 2 years, another one in 4 years, ss, etc.) that rather than withdrawal from our initial portfolio, we would just use up the proceeds of our rental sale to fund our expenses for x years.

 

[SecondCor521]

Using my personal numbers, including the constant dollar withdrawal scheme, I see about a 10x variance between lowest and highest in FICalc.app. The numbers and the variance seem pretty similar to what I get when I use FIREcalc for the average and highest, although the lowest in FICalc.app is about 3x higher than the lowest in FIREcalc.

Your numbers don't seem unreasonable to me. The longer your retirement cycle and the more you have in equities and the smaller net withdrawal rate, the more variance in ending portfolio you'll see.

If you think there's a bug, probably the best thing to do is to provide all of your data inputs and question to the app owner. If you can create a simple case which shows the "buggy" behavior, all the better.

As to your last comment, I would expect the tool to take your spending in the year you sell a rental from the proceeds and invest the rest into your portfolio at whatever portfolio AA you've specified. I would not expect it to keep those proceeds in cash and use them up over X years.

 

[COcheesehead]

It really depends on allocation as well. Mine shows the lowest is 2.4 million, but highest is only $30 million, but I am super bond heavy and will likely stay that way.

 

[USGrant1962]

Not seeing that kind of spread here. How many years are you modeling? That seems to be a big driver of the final value spread (as expected for an balanced portfolio).

My base model at 34 years of retirement is about 9:1 largest:smallest. If I change the years to 50 it expands to 14:1. Your case seems extreme but your AA, SS, RE sales and duration all affect the result. You might just have a perfect storm of variance in your model.

 

[MichaelB]

Your numbers don't seem unreasonable to me. The longer your retirement cycle and the more you have in equities and the smaller net withdrawal rate, the more variance in ending portfolio you'll see.

I agree. The large variance in scenarios is a natural outcome from applying all the different historical market returns over a lengthy 30 year retirement period with a low-ish withdrawal rate. It assumes you aren’t reacting in any way, no buying, selling, or changing asset allocations, or varying spending. If you increase the withdrawal rate or shorten the time, the variance between low and high outcomes will fall sharply.

 

[Chuckanut]

Keep in mind Firecalc's goal is not to predict how much money you will leave to your heirs. It's goal is to compare your assets, income and withdrawal rate over many past market cycles and help you ensure you don't run out of money before you leave this planet.

In my mind, it's just another tool to use before making the decision to retire, early or not early. I also ran a Monte-carlo simulator and did my own back of napkin calculations using a spread sheet. All three said Go for It!, so I did.

 

[Exchme]

Sounds like RetiredAt49 ran into bugs with the FICalc app, I don't think that much variance can be real. There would be little point to planning if the same starting point could get you nearly nine figures or nearly broke, depending on the luck of timing.

I would believe the FireCalc numbers as it has been around for longer, so users have had more time to report bugs.

 

[USGrant1962]

I agree. The large variance in scenarios is a natural outcome from applying all the different historical market returns over a lengthy 30 year retirement period with a low-ish withdrawal rate. It assumes you aren’t reacting in any way, no buying, selling, or changing asset allocations, or varying spending. If you increase the withdrawal rate or shorten the time, the variance between low and high outcomes will fall sharply.

Playing with FICalc.org and logic suggest higher withdrawal rates increase variance - mostly by depressing the "smallest" final value. Try the defaults numbers in ficalc and enter 4%/$40K, 3%/30K, 2%/20K, etc. as WR and look at the finishing ratios. The upside just doesn't move very much with WR, which makes sense as one or two percent delta in WR is a small fraction of good market returns of say 10%+. It is a large fraction of poor market returns.

You can see the same in FIRECalc except the longstanding lowest portfolio balance bug breaks it at low WRs.

OP's case is odd because it is almost a failure case on the low end (indicating high WR) yet has a stupendous upside. Very peculiar and as Exchme says, maybe a bug?

 

[COcheesehead]

It assumes you aren’t reacting in any way, no buying, selling, or changing asset allocations, or varying spending. .

Not necessarily so. There are check boxes for rebalancing a static allocation at intervals of your choice, 1 year, 2 year, etc and for changing allocations over time as well as numerous spending models. So it can be a very dynamic model, if you choose to run it that way.

 

[SecondCor521]

Playing with FICalc.org and logic suggest higher withdrawal rates increase variance - mostly by depressing the "smallest" final value. Try the defaults numbers in ficalc and enter 4%/$40K, 3%/30K, 2%/20K, etc. as WR and look at the finishing ratios. The upside just doesn't move very much with WR, which makes sense as one or two percent delta in WR is a small fraction of good market returns of say 10%+. It is a large fraction of poor market returns.

You can see the same in FIRECalc except the longstanding lowest portfolio balance bug breaks it at low WRs.

OP's case is odd because it is almost a failure case on the low end (indicating high WR) yet has a stupendous upside. Very peculiar and as Exchme says, maybe a bug?

Good points.

Regarding your last paragraph, I played around with FICalc.app and I think OP's case is probably impacted quite positively on the upside by the rental sales that add to the stash. Depending on the amounts and timing, I could still see the OP's results happening.

 

[MercyMe]

I also have a large delta between the smallest and largest ending portfolio value when using FICalc - $490k to $30M. But I've seen this in every scenario I've run for friends and family. I think this shines a rather brilliant light on the incredible impact of sequence of returns (whether they be negative or very positive).

There is one thing I wish the FICalc tool would calculate - which would explain the huge end-of-plan portfolio ranges - and that is CAGR. Wouldn't it be nice to know the CAGR on those model years that return $30 million?

You can email the guy who runs the site (James). I've emailed him two questions. In one, he was super helpful in his reply. But the other email question was not answered.

 

[MercyMe]

Correction to the above comment...
The owner of the FICalc App replied to both of my emails. He seems like a really nice guy.