Firecalc meaning

[viking111]

Hello all,
Hope everyone is doing great. Haven't posted for some time.
My question is about firecalc.

What does 100% success with 2 million left over at 100 year old really mean in firecalc?

I've read that if you have, lets say 95% success rate and you happen to get bad sequence of return, then perhaps taking a few less vacations for a couple of years would be enough to make up for it and you can get back to it as long as the sequence is not a horrible catastrophic thing.

So with 100% and money left over. What does it really mean?

 

[rodi]

You can either spend more or leave more to heirs

 

[Dtail]

It means you have a very good plan in general. Remember the success rate takes into account bad sequencing of returns.
Most folks desire a 90%+ success rate before retiring as one measure of is one ready to retire.
Most folks do not withdraw monies with inflation weighted increases in a linear fashion each year.
The calculator is best used as a pre retirement readiness concept, plus a what if type of concept for maximum withdrawals, etc.
I personally use it as retire again and again each year with a decreasing number of years remaining with my current spending and investment assets.

 

[viking111]

It means you have a very good plan in general. Remember the success rate takes into account bad sequencing of returns.
Most folks desire a 90%+ success rate before retiring as one measure of is one ready to retire.
Most folks do not withdraw monies with inflation weighted increases in a linear fashion each year.
The calculator is best used as a pre retirement readiness concept, plus a what if type of concept for maximum withdrawals, etc.
I personally use it as retire again and again each year with a decreasing number of years remaining with my current spending and investment assets.

So some of those lines in the outcomes are half of what I started with but according to firecalc I would still have 2 million at 100. So based on this and past returns if things are similar, I would not really have to worry ab out my withdrawals. Also, I was reading on Kitces site that if you don't have major issues with a bad sequence after ten years of retirement, sequence may not matter much or at all. I've been retired 5 years. My withdrawal rate goes down with time due a little to less spending but mostly because of social security. It is also travel and automotive heavy.

 

[Dtail]

So some of those lines in the outcomes are half of what I started with but according to firecalc I would still have 2 million at 100. So based on this and past returns if things are similar, I would not really have to worry ab out my withdrawals. Also, I was reading on Kitces site that if you don't have major issues with a bad sequence after ten years of retirement, sequence may not matter much or at all. I've been retired 5 years.

Yes Kitces addresses the SORR concept. I thought it was the first 15 years.
Nevertheless, the worst sequences in history all had real returns of less than 1% real return in the first 15 years.
The starting year of 1966 was the last 30 year sequence of bad results, although the starting year 2000 retiree is doing fine but no guarantees yet.

 

[SecondCor521]

What does 100% success with 2 million left over at 100 year old really mean in firecalc?

When you run FIRECalc, it will give you a result like:

"Here is how your portfolio would have fared in each of the 124 cycles. The lowest and highest portfolio balance at the end of your retirement was $-300,739 to $4,259,606, with an average at the end of $1,424,807. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.2%."

So I'm not sure which number you're looking at when you say "$2M left over". As you can see, FIRECalc gives you a range and an average, as well as a percentage of success.

Make sure you understand that in FIRECalc's reckoning, a "success" means not running out of money during the time period. By default, it does not mean that you'll have your original portfolio balance at the end of the time period, although there are some options that you can set to make the success criteria more stringent.

There are other tools out there that perform similar calculations. Were you running FIREcalc (www.firecalc.com) or a different one?

 

[viking111]

When you run FIRECalc, it will give you a result like:

"Here is how your portfolio would have fared in each of the 124 cycles. The lowest and highest portfolio balance at the end of your retirement was $-300,739 to $4,259,606, with an average at the end of $1,424,807. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)

For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 95.2%."

So I'm not sure which number you're looking at when you say "$2M left over". As you can see, FIRECalc gives you a range and an average, as well as a percentage of success.

Make sure you understand that in FIRECalc's reckoning, a "success" means not running out of money during the time period. By default, it does not mean that you'll have your original portfolio balance at the end of the time period, although there are some options that you can set to make the success criteria more stringent.

There are other tools out there that perform similar calculations. Were you running FIREcalc (www.firecalc.com) or a different one?

My range:
Lowest: 2.2 million
Highest: 26+million
Average: 13 million

All rounded down. 100% success rate. 39 years of retirement period, starting today.

 

[Dtail]

My range:
Lowest: 2.2 million
Highest: 26+million
Average: 13 million

All rounded down. 100% success rate. 39 years of retirement period, starting today.

Usually when one has a very large average result with a 100% success rate, then it means that your lowest number of 2.2m is equal to the investment assets that you have input in Firecalc. This is a bug of sorts in Firecalc, that the lowest ending number can't be higher than your investment assets.

 

[viking111]

Usually when one has a very large average result with a 100% success rate, then it means that your lowest number of 2.2m is equal to the investment assets that you have input in Firecalc. This is a bug of sorts in Firecalc, that the lowest ending number can't be higher than your investment assets

So that means I could have much more than the lowest number? The number I put in was higher than 2.2 million. But it seams with drawdowns and some poor return years the lowest ended up being 2.2. I guess what I'm looking for is reassurance that I can continue current spending levels. It appears that I can and have money left over unless something worse than the past happens.

 

[Dtail]

So that means I could have much more than the lowest number? The number I put in was higher than 2.2 million. But it seams with drawdowns and some poor return years the lowest ended up being 2.2. I guess what I'm looking for is reassurance that I can continue current spending levels. It appears that I can and have money left over unless something worse than the past happens.

Actually the bug is that it can understate the lowest number. Your number is not lower than the 2.2m result if you put in a higher number than 2.2m.
The bug comes into play that the lowest number should be HIGHER than the investment assets, but will default to the investment asset number. This is NOT your situation.
Being that your potential larger number is quite different than your lower number could just indicate a very high equity allocation.

 

[viking111]

Actually the bug is that it can understate the lowest number. Your number is not lower than the 2.2m result if you put in a higher number than 2.2m.
The bug comes into play that the lowest number should be HIGHER than the investment assets, but will default to the investment asset number. This is NOT your situation.
Being that your potential larger number is quite different than your lower number could just indicate a very high equity allocation.

Interesting. 60/40 aa. 40% in short term treasury will glide to 20% short term and 20% intermediate over the next few years.

 

[Dtail]

Interesting. 60/40 aa. 40% in short term treasury will glide to 20% short term and 20% intermediate over the next few years.

Hmm kind of surprised on your high number 26m result with 60% allocated to equities, but it is what it is.

 

[viking111]

Hmm kind of surprised on your high number 26m result with 60% allocated to equities, but it is what it is.

Did it again. This time total stock market 60%, 40% intermediate bonds

Lowest: 2.9m
Highest: 57m
Average: 18m

Starting portfolio: 5.6m
adding 1.7m in a couple of years due to home downsize
300k added in about 20 years due to investment condo sale. Conservative.

 

[Dtail]

Did it again. This time total stock market 60%, 40% intermediate bonds

Lowest: 2.9m
Highest: 57m
Average: 18m

Starting portfolio: 5.6m
adding 1.7m in a couple of years due to home downsize
300k added in about 20 years due to investment condo sale. Conservative.

What is your expense level?

 

[viking111]

Heavy on travel and auto.
All in including taxes 275K. Property I have generates income for now. So 212K to start then in a couple of years 275K. Then goes down due to SS at 65 and 70 for us. SS is 23K at 65, 38K at 70.

 

[Dtail]

Heavy on travel and auto.
All in including taxes 275K. Property I have generates income for now. So 212K to start then in a couple of years 275K. Then goes down due to SS at 65 and 70 for us. SS is 23K at 65, 38K at 70.

Okay with that spending level and SS (although don't know age and you don't need to tell me), it all seems reasonable for the large differences between low and high.
Did you try using the last tab to figure out what is your maximum spending while still achieving 100%?
Just another data point for you.

 

[viking111]

Okay with that spending level and SS (although don't know age and you don't need to tell me), it all seems reasonable for the large differences between low and high.
Did you try using the last tab to figure out what is your maximum spending while still achieving 100%?
Just another data point for you.

I did. I was basically 286K at 100%, 60/40. So it seems I'll should be alright?

 

[SecondCor521]

My range:
Lowest: 2.2 million
Highest: 26+million
Average: 13 million

All rounded down. 100% success rate. 39 years of retirement period, starting today.

Then I sort of don't understand your question. It means if the future plays out as the past did, and assuming historical patterns of investment returns, AA, spending, and your SS, you'd end up with that range of results.

Maybe your question indicates surprise and incredulity. But math is math. The only way it's wrong is if (a) the future is vastly different, or (b) you made a data entry error somewhere or misunderstood the input prompts.

FWIW, I've been retired for 8 years, have a 1% WR, and have education and experience with math and investing, and I still am incredulous most of the time.

 

[Dtail]

I did. I was basically 286K at 100%, 60/40. So it seems I'll should be alright?

Yes that would appear to be in the reasonableness with your other numbers. That is why you are at 100%, but your low number does not equal to your investments, i.e. you are at 100%, but not too much % above that.

 

[mrfeh]

Heavy on travel and auto.
All in including taxes 275K. Property I have generates income for now. So 212K to start then in a couple of years 275K. Then goes down due to SS at 65 and 70 for us. SS is 23K at 65, 38K at 70.

Receiving SS doesn't reduce your expenses. It adds an income stream.

 

[viking111]

Then I sort of don't understand your question. It means if the future plays out as the past did, and assuming historical patterns of investment returns, AA, spending, and your SS, you'd end up with that range of results.

Maybe your question indicates surprise and incredulity. But math is math. The only way it's wrong is if (a) the future is vastly different, or (b) you made a data entry error somewhere or misunderstood the input prompts.

FWIW, I've been retired for 8 years, have a 1% WR, and have education and experience with math and investing, and I still am incredulous most of the time.

Yes, it appears that the math works out correctly. Several runs. Retired 5 years. The reason for the question is the farther I go into retirement the less likely I will be able to do any work. So I have to make as certain as possible that the money will last . It seems that it will based on several calculations which include firecalc, montecarlo and engaging data. They use the same data in different ways. A large part of my spending in on Travel and automobiles (my passion, vice). Both can be scaled back if a bad sequence comes and does not resolve expeditiously. It also appears I don't really have to do much scaling back because I have 100% with money left over. So technically I'm not spending enough. My spending will reduce as I get older and as one poster stated SS will give me a source of income. That would give me a reduction in my withdrawal rate. So if it works now, it should work with an extra income source and some lowered spending as we age.