Firecalc Problem?

[marko]

July 17:
While running Firecalc for my brother, I was getting some odd results, particularly on the spending level.

As a test, I entered an annual SS of $16,000, beginning in 2014 and a pension of $10,000 beginning in 2014.

I inputted a $25K portfolio and was told that his spending amount was $4,000 per year. The chart was a straight line with no slope.

With a SS and pension income of $26,000 it looks like something is off.

Anyone with any insight.


"FIRECalc Results
Looking for a spending level that will result in 95% success rate . . . . . . . . . . . . . . . [done]
A spending level of $4,000 provided a success rate of 100.0% (114 total cycles, of which 0 failed). This spending level is 16.00% of your starting portfolio. (Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)"

 

[Midpack]

Hard to say without knowing what spending, how many years, and which investigate option you used among other possible variable inputs. But see note in red from the result you provided - FIRECALC results show withdrawals from the portfolio only, above and beyond SS/pensions. And that's what most people want to know. SS and pensions are assumed to be "known" income sources, the question is how much can I spend from "my portfolio."

So if you entered $26,000 in SS and pensions and FIRECALC results showed spending (from portfolio) of $4,000 - that's total income of $30,000.

Looking for a spending level that will result in 95% success rate . . . . . . . . . . . . . . . [done]
A spending level of $4,000 provided a success rate of 100.0% (114 total cycles, of which 0 failed). This spending level is 16.00% of your starting portfolio. (Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)

 

[marko]

Hard to say without knowing what spending, how many years, and which investigate option you used among other possible variable inputs. But see note in red from the result you provided - FIRECALC results show withdrawals from the portfolio only, above and beyond SS/pensions. And that's what most people want to know. SS and pensions are assumed to be "known" income sources, the question is how much can I spend from "my portfolio."

So if you entered $26,000 in SS and pensions and FIRECALC results showed spending (from portfolio) of $4,000 - that's total income of $30,000.

Are you sure that FC "only show withdrawals above and beyond SS and pensions"? That has never been my understanding.

If so, that would make sense. Otherwise, it seems that FC is not calculating those inputs.

FYI, the spending was $30K and the duration was 30 years.

Now, as an additional test, if I add a portfolio of $180K and a $250K adder in 2019, I get a spending level of ~$28K per year, which again, does not seem right as the SS and pension almost come to that amount.

I suspect that the "spending level" analysis is off and maybe the rest of the areas are correct, but I can't determine that at this point.

 

[golfnut]

Just a guess here but for the pension, did you hit the "pension income" button?

 

[NW-Bound]

The level of spending that FIRECalc computes is for "constant spending power". For people who retire early prior to SS or pension eligibility, it shows what they can spend out of their portfolio, which will then be reduced as SS or pension comes online.

For example, if you have SS coming in 5 years from now at $20K/yr, and FIRECalc says you can spend $30K/yr, it means that you are expected to draw the entire $30K/yr from the portfolio, then reduce down to $10K/yr once you get SS.

I tried the exact numbers that Marko described and got the same weird answer. Somehow, when the portfolio is small relative to the future SS or pension, FIRECalc screws up.

Note that in some cases, if the delayed SS and/or pension is large relative to the portfolio, the portfolio will be insufficient to "tide over" until the SS/pension comes online. But by playing with FIRECalc, I can see where it gives the wrong answer even when it is not yet the case.

For example, I tried the following scenarios.

Case 1) $25K portfolio. Portfolio choice set to "Consistent growth of 0%, with inflation of 0%". No SS or pension. FIRECalc answer for 100% success: $833.

The "no growth/no inflation" makes it much easier to verify the result. Note that $833 = $25K divided by 30 years. Checked.​

Case 2) Add pension at $3K/yr, starting in 2019. Answer: $3,333.

In this case, the $25K will be drawn down at $3K/yr for the first 5 years, then the withdrawal will be reduced to $333/yr when the pension starts. How it works out is that you draw $3,333/yr for 5 years, which is $16,666 total. The balance of the portfolio will be $25K-$16.67K = $8,333. That remaining amount divided by the remaining 25 years works out to be $333/yr. Add that to your $3K pension, and the answer is $3,333. Bingo!
​

Case 3) Increase pension to $3500. Answer: $3,750.

Still correct. Here's how. Portfolio drawn down $3,750/yr for the first 5 years means a balance of $6,250 when pension starts. That balance divided by the remaining 25 years is $250/yr to supplement the pension. The total is still at $3,750. Checked.​

Case 4) Increase pension to $5000. Answer: $4,000!

Note that the $25K is enough for draw $5K/yr for the first 5 year. It is then depleted when the pension starts. Hence, $5K should be the answer, not the $4K which is less than the pension itself.​

 

[marko]

The level of spending that FIRECalc computes is for "constant spending power". For people who retire early prior to SS or pension eligibility, it shows what they can spend out of their portfolio, which will then be reduced as SS or pension comes online.

For example, if you have SS coming in 5 years from now at $20K/yr, and FIRECalc says you can spend $30K/yr, it means that you are expected to draw the entire $30K/yr from the portfolio, then reduce down to $10K/yr once you get SS.

I tried the exact numbers that Marko described and got the same weird answer. Somehow, when the portfolio is small relative to the future SS or pension, FIRECalc screws up.

Note that in some cases, if the delayed SS and/or pension is large relative to the portfolio, the portfolio will be insufficient to "tide over" until the SS/pension comes online. But by playing with FIRECalc, I can see where it gives the wrong answer even when it is not yet the case.

For example, I tried the following scenarios.

Case 1) $25K portfolio. Portfolio choice set to "Consistent growth of 0%, with inflation of 0%". No SS or pension. FIRECalc answer for 100% success: $833.

The "no growth/no inflation" makes it much easier to verify the result. Note that $833 = $25K divided by 30 years. Checked.​

Case 2) Add pension at $3K/yr, starting in 2019. Answer: $3,333.

In this case, the $25K will be drawn down at $3K/yr for the first 5 years, then the withdrawal will be reduced to $333/yr when the pension starts. How it works out is that you draw $3,333/yr for 5 years, which is $16,666 total. The balance of the portfolio will be $25K-$16.67K = $8,333. That remaining amount divided by the remaining 25 years works out to be $333/yr. Add that to your $3K pension, and the answer is $3,333. Bingo!
​

Case 3) Increase pension to $3500. Answer: $3,750.

Still correct. Here's how. Portfolio drawn down $3,750/yr for the first 5 years means a balance of $6,250 when pension starts. That balance divided by the remaining 25 years is $250/yr to supplement the pension. The total is still at $3,750. Checked.​

Case 4) Increase pension to $5000. Answer: $4,000!

Note that the $25K is enough for draw $5K/yr for the first 5 year. It is then depleted when the pension starts. Hence, $5K should be the answer, not the $4K which is less than the pension itself.​

Ok, that makes sense.

But now I've entered the following:
Start: Spending $45K
Portfolio: $180K
30 years
SS $16K in 2014
Pension $10K in 2014
Porfolio Add: $200K in 2014

My results say: "A spending level of $28,799 provided a success rate of 100.0% (114 total cycles, of which 0 failed). This spending level is 16.00% of your starting portfolio" and the chart shows a flat 100% right out past $37,439.
Again, I'd expect SS and pension coupled to a $180K portfolio with another $200K add would net greater than a $28K spending level.

I tried other scenarios with the same numbers and different dates for SS and portfolio adder with the same $28.7K result.

 

[NW-Bound]

Aye, aye, aye... FIRECalc apparently does not like you.

I tried your numbers, and saw what you meant. Aye, aye, aye... That chart does not make sense at all.

If instead of the Portfolio Addition of $200K, I upped the starting portfolio from $180K to $380K, the results look OK again.

All I can say now is it looks like a bug all right, and I guess somebody like Andy must look into this to debug the program.

 

[marko]

Aye, aye, aye... FIRECalc apparently does not like you.

I tried your numbers, and saw what you meant. Aye, aye, aye... That chart does not make sense at all.

If instead of the Portfolio Addition of $200K, I upped the starting portfolio from $180K to $380K, the results look OK again.

All I can say now is it looks like a bug all right, and I guess somebody like Andy must look into this to debug the program.

Yeah. I'm hoping the powers-that-be see this. Dear brother is on the cusp of an (unplanned, ACA related) ER and it would be nice to corroborate other calculators. I pretty much know what the number should be but like FireCalc to confirm