FireCalc: Anyone UNDER 100% ??

[OldShooter]

... now at 100%. Of course that means little as it's based on the past, not the future where it will matter.

Exactly! No retirement calculator can honestly claim to predict anything.

 

[Dtail]

I think you have to look at that differently. If you have a 95% success rate in your plan you actually have 95%*80% or 76%. If you retired with an 80% success rate you actually only have a 64% chance of success.



I think where it becomes important is when people kid themselves and keep staying one more year at the job (or eat ramen for lunch, etc.) to get from 95% to 100%.



I get it, some people want certainty, but there is no such thing in this world.

Bolded by me - agree with this statement, umm 100%.

 

[big-papa]

Bolded by me - agree with this statement, umm 100%.

Indeed! And no way am I going follow a withdrawal method like the default in Firecalc and others, which assumes a fixed withdrawal, adjusted for inflation each year. I see these tools more as a ballpark guesstimate to see if you've stashed enough away to start retirement - once that commences, flexibility is the name of the game. This can be done in an ad-hoc manner or by one of many other retirement methods out there which aren't SWR.

 

[Doc0]

The biggest determinant is what you spend in reality. Most people just pluck a number out of thin air like 100K, but if your spend down is 110K it makes a difference longevity and success, so I would track a budget for a while using Mint or something and create a spread sheet of actual spending for 2-3 years. In my case I budgeted 10k/mo live on about 8500/mo and use the accumulating 1500 as cushion money for a new A/C or something.

 

[strathglass]

Let me add to that my 3%/5% rule of thumb: If you have a withdrawal rate around 5% or more, you probably need to be willing to take on more risk of portfolio failure including ability to cut back on spending and return to work if necessary. If you have a withdrawal rate around 3% or less, you are almost certainly going to die with a good deal of money. Actually, Firecalc and other sources peg the 'failsafe' withdrawal rate somewhere around 3.5% - the rate the survives any set of historical returns/inflation etc.

This is helpful, but is there an easy way to adapt this when I want to start at close to 5% but then reduce that due to government pensions (Canadian OAS and CPP)?

Example: Plan is for 30 year withdrawal phase from age 58 to 88:
How safe am I if I start high (4.9% WDR for 7 years), but then at age 65 drop that to 4.3% (for 5 years), then finally drop again to 2.8% at age 70 for the final 18 years?
I guess Firecalc does the math for you, but was wondering if there was an easy rule of thumb as per catman2020 that handles this kind of phased withdrawal rate reduction from high too low?

 

[HI Bill]

This is helpful, but is there an easy way to adapt this when I want to start at close to 5% but then reduce that due to government pensions (Canadian OAS and CPP)?

Example: Plan is for 30 year withdrawal phase from age 58 to 88:
How safe am I if I start high (4.9% WDR for 7 years), but then at age 65 drop that to 4.3% (for 5 years), then finally drop again to 2.8% at age 70 for the final 18 years?
I guess Firecalc does the math for you, but was wondering if there was an easy rule of thumb as per catman2020 that handles this kind of phased withdrawal rate reduction from high too low?

• Input your 4.9% withdrawal rate (in $) on the first screen.
• In the second tab, input government pensions and their corresponding starting years under the SS section. If you're single, you could enter your first pension under "Your Social Security", and the second under "Spouses Social Security".
  
  If your intent is to offset your withdrawal rate by the pension amounts, you're done, and FIRECALC includes the assumed lowered withdrawal rate, which increases your success %. If, however, you're actually going to change (lower) your annual spending rate, under "Pension Income (or off chart spending reduction)", enter the $ amount you are reducing your spending by as a negative dollar amount in the lower portion of the screen . Note: Don't do this if you're not actually going to be lowering your annual spending and are counting on SS or pensions to maintain the original spend amount, or you'll be counting it twice.

 

[strathglass]

• Input your 4.9% withdrawal rate (in $) on the first screen.
• In the second tab, add SS and the start year. Under "Pension Income (or off chart spending reduction)", enter your new reduced spending level as a negative dollar amount in the lower portion of the screen for the drop to 4.3% and 2.8%. Note: Don't do this if you're counting on SS or pensions to maintain the original spend amount, or you'll be counting it twice.

I have tried that...just wondering if there was any trick to do a quick and dirty assessment based on the percentages, along catman2020's simple rule of thumb. For example, could I convert my phased WDR reduction to a single equivalent WDR?
E.G. Do a weighted average (4.44% in the above example).
I guess really it is probably best to just plug the numbers into Firecalc like you suggest!

 

[HI Bill]

I have tried that...just wondering if there was any trick to do a quick and dirty assessment based on the percentages, along catman2020's simple rule of thumb. For example, could I convert my phased WDR reduction to a single equivalent WDR?
E.G. Do a weighted average (4.44% in the above example).
I guess really it is probably best to just plug the numbers into Firecalc like you suggest!

It's best to plug in the numbers as suggested. That way, FIRECALC includes the SORR associated with the differing durations, and includes the stability of your pension income as something that does not add SORR to your situation. Using a weighted average won't give you a realistic determination, as it wouldn't model the three indpendent withdrawal rates and their durations.

With higher withdrawal rates, the SORR generally hits at 12 to 17 years (for around 5% withdrawal rates), meaning that if you take out 6% for 17 years, you're much more likely to run out of $ beginning in this time period due to the SORs. Hope this made sense.

 

[badatmath]

I am shooting for 95% but I don't count all my assets in firecalce either. Figure they are my oh s**t fund. . . Plus my life expectancy number is likely too high as no one in my family has made it there.

 

[Dtail]

I am shooting for 95% but I don't count all my assets in firecalce either. Figure they are my oh s**t fund. . . Plus my life expectancy number is likely too high as no one in my family has made it there.

That's the old back and forth of including all funds or not. I and some others do not include emergency type funds as part of our investment assets.
Most do however and feel it is just mental accounting of sorts.

 

[ychuck46]

Same here

Linear math does not work for retirement. Read up on sequence of return risk. I go for 100% success on firecalc.

Exactly how I feel. I like to see 100% success just to feel comfortable. Since I have no problem leaving a healthy chunk to our only child, if that is how it works out, I am good with 100%.

 

[ychuck46]

Vanguard as well

The one I like besides FIRE Calc is the one from Fidelity.

Vanguard has a pretty good one as well. Simple but still utilizes Monte Carlo simulation to get the job done.

 

[Gumby]

For me, 100% was too low to make the leap. When I retire in 6 days, we'll be >200%. That is, if I double our current actual spending, we still show 100% on FireCALC.

 

[FREE866]

I was at 100% success 30 months ago when I retired and still am. However, if I run portfolio at ~30% less of what value is now it dips down to 95% success.

 

[HI Bill]

I was at 100% success 30 months ago when I retired and still am. However, if I run portfolio at ~30% less of what value is now it dips down to 95% success.

There's quite a bit of discussion on this topic (especially around the last quarter of last year). I believe the consensus is that you should run FIRECALC based on the peak value (assuming you're not retired), as FIRECALC then accounts for the potential drops. OTOH, if you've spent down your portfolio, inflation-adjusted, from your starting balance (rate of withdrawal is too high or special one-time expenditures), then, re-running with the new invested asset value is appropriate. Running it for an assumed 30% market drop is just doubling down on the SORR already included in FIRECALC.

 

[FREE866]

There's quite a bit of discussion on this topic (especially around the last quarter of last year). I believe the consensus is that you should run FIRECALC based on the peak value (assuming you're not retired), as FIRECALC then accounts for the potential drops. OTOH, if you've spent down your portfolio, inflation-adjusted, from your starting balance (rate of withdrawal is too high or special one-time expenditures), then, re-running with the new invested asset value is appropriate. Running it for an assumed 30% market drop is just doubling down on the SORR already included in FIRECALC.

Not totally sure what you mean. I am drawing down on the portfolio. I retired in January of 2017 ( 30 months ago)
When I take the total amount from friday---5/24/19 and reduce it by 30% the success % drops from 100 to 95%

 

[trumpeting_angel]

Call me anxious, but I wouldn’t ’consider it under 100%. As others have pointed out, there are far too many variables that are mostly guesses, and so many that are simply unknown. Will I end up in long term care? Will the cost of taxes go up so high I can’t manage? Will Social Security fail (or falter) just when I need it the most? Will we decide that the Baby Boomers just cost too much and raise Medicare rates dramatically?

I feel fortunate that I will be able to do more work in my field, since the physical requirements are few and it is in high demand. I hope I don’t need to, though.

 

[Major Tom]

Call me anxious, but I wouldn’t ’consider it under 100%. As others have pointed out, there are far too many variables that are mostly guesses, and so many that are simply unknown. Will I end up in long term care? Will the cost of taxes go up so high I can’t manage? Will Social Security fail (or falter) just when I need it the most? Will we decide that the Baby Boomers just cost too much and raise Medicare rates dramatically?

+1

Another factor to bear in mind is that if you are close to, or below, 100%, there is a greater chance you will see what could be some rather scary lows in your NW. Are you prepared for that? If so, carry on, carry on.

 

[HI Bill]

Not totally sure what you mean. I am drawing down on the portfolio. I retired in January of 2017 ( 30 months ago)
When I take the total amount from friday---5/24/19 and reduce it by 30% the success % drops from 100 to 95%

Are you drawing down the portfolio by more than 3.5-4% annually? My assumption is that you're limiting your annual distributions to 4% annually or less, and that you have a more or less typical AA, and that in the past year, your investments have gained 7 to 10%. If you're making much less than that (in one of the longest bull markets ever, or taking 30% out in one year, it's looking like you're heading towards depleting the funds. Maybe I'm missing something?

 

[FREE866]

Are you drawing down the portfolio by more than 3.5-4% annually? My assumption is that you're limiting your annual distributions to 4% annually or less, and that you have a more or less typical AA, and that in the past year, your investments have gained 7 to 10%. If you're making much less than that (in one of the longest bull markets ever, or taking 30% out in one year, it's looking like you're heading towards depleting the funds. Maybe I'm missing something?

At my current balance my SWR % is ~3.5%. However, IF my portfolio drops 30% my withrawal % would be 5%. I'm taking a fixed amount. I take out a fixed amount every year ( so far anyway)Make sense?

 

[trumpeting_angel]

+1

Another factor to bear in mind is that if you are close to, or below, 100%, there is a greater chance you will see what could be some rather scary lows in your NW. Are you prepared for that? If so, carry on, carry on.

A big drop in my net worth would prompt lowering spending, picking up some new income, and re-reading reassuring books about spending in retirement.

If anxiety gets to be too high, or even if it doesn't, buying a deferred annuity to start at 80 or 85 would be helpful. Of course, I'd have to have the foresight to do so before that big market drop!

 

[WestUniversity]

We were well over 100% at our current projected spending level upon my retirement. When I say well over, I used the “investigate” tab to see how high our spending could go, and we had upward room of about 50% higher spending before dropping below 100% success. That said however, all of these analysis tools (FIRECalc,I-ORP, Portfolio Visualizer, etc. etc.) simply provide a guesstimate based upon various assumptions. Fact-based and historically driven, yes, but still a guesstimate.

FIRECalc’s main assumption, as they say on the site, is whether your portfolio and spending plan would have weathered everything the market has had thrown at it since 1871, including two world wars, The Great Depression and so on. That’s all well and good but needless to say if TSHTF all bets are off.

One of the input assumptions loaded was life expectancy. Actuarial results for me say a life expectancy of 93 and for DW 96. In light of both of our family medical histories and actual life spans I find both of those numbers overly optimistic/conservative. Realty for DW and myself is more like 85 plus or minus a few years. So that has a large impact on portfolio success as well.

In modeling for our retirement I looked at a worst case scenario figuring if we could have success under those assumptions then we should be fine, come what may...

 

[tdv2]

For me, 100% was too low to make the leap. When I retire in 6 days, we'll be >200%. That is, if I double our current actual spending, we still show 100% on FireCALC.

I was in a similar boat when I retired last year. I am ratcheting up spending a bit now albeit slowly.

 

[Dtail]

We were well over 100% at our current projected spending level upon my retirement. When I say well over, I used the “investigate” tab to see how high our spending could go, and we had upward room of about 50% higher spending before dropping below 100% success. That said however, all of these analysis tools (FIRECalc,I-ORP, Portfolio Visualizer, etc. etc.) simply provide a guesstimate based upon various assumptions. Fact-based and historically driven, yes, but still a guesstimate.

FIRECalc’s main assumption, as they say on the site, is whether your portfolio and spending plan would have weathered everything the market has had thrown at it since 1871, including two world wars, The Great Depression and so on. That’s all well and good but needless to say if TSHTF all bets are off.

One of the input assumptions loaded was life expectancy. Actuarial results for me say a life expectancy of 93 and for DW 96. In light of both of our family medical histories and actual life spans I find both of those numbers overly optimistic/conservative. Realty for DW and myself is more like 85 plus or minus a few years. So that has a large impact on portfolio success as well.

In modeling for our retirement I looked at a worst case scenario figuring if we could have success under those assumptions then we should be fine, come what may...

Bolded by me - Hasn't TSHTF happened many times historically already, which could mimic any current SHTF scenarios?

 

[WestUniversity]

Bolded by me - Hasn't TSHTF happened many times historically already, which could mimic any current SHTF scenarios?

As defined by the previous events noted, yes. Anything worse is outside historical precedent...