FIRECalc Retirement Tool Pros and Cons Explained. Video by Ethan S. Braid, CFA

2HOTinPHX

Full time employment: Posting here.
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Hello all,

I have posted a few videos from this gentleman that recently started showing in my youtube feed. I think he has provided some good things to think about for retirement planning. Maybe not new stuff to long time members who have more planning experience than peeps like me. Always hoping people take a little bit of time to watch the videos but if you don't that is OK too.

In this video he discusses the good and bad he sees in Firecalc. He is overall positive about it but does points out some reasons it should probably not be your only tool as we probably already know. As someone looking for your business he does subtly remind you people may not be properly prepared to handle a large downturn in the market and shares some reasons why. Again not ground breaking stuff but things to think about.

His video description on youtube. The FIRECalc retirement planning tool is a great resource for investors trying to determine the amount of money they need to retire. This simple tool has some good features. There are also some pitfalls you need to be aware of.

Hoping some get something out of it and your feedback is always appreciated.

 
is Firecalc still being updated ?

I thought firecalc allowed a person to adjust the investment ratio from 75/25 to other percentages, which he says it does allow, so doesn't make it a bad part. Just adjust it.

It's true Firecalc doesn't know a person's emotional state, but I bet this guy doesn't either.
He does have a good point that selling after the market dropped is a terrible idea, instead of waiting for the market to recover.

His point of large unplanned expenses can be simply stated that these shouldn't be unplanned
 
Just seems to be his pitch for why you need his services instead of relying on FIRECALC. No big surprise. FIRECALC is an axe, not a scalpel.

If you don't budget, haven't projected retirement spending, don't understand taxes and haven't considered lumpy expenses - you're taking your chances no matter how you "plan." Or you can pay him to remind you to take all these into account...but he won't reduce the associated uncertainty.
 
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His comments about the cons of the program were overstated or misplaced. Most of the cons that he mentioned are related to poor input of data, not the program itself. Firecalc has the capability if a wide variety of AA not just 75/25. It also has the capability of recurring expenses for future start dates. The one thing that he mentioned is future one-time expenses which I have not seen in Firecalc. It is easily accounted for by including at least one amount for unexpected occurrence per year or maybe 1/2 of an that expense per year.

This is essentially a reminder that GIGO is ever present. Garbage In-Garbage Out, which is common with all computer calculators.
 
I think the "downsides" that he discussed can all be addressed. As with any tool, you have to understand how it works.
And discussions here on the forum all talk about adding in your taxes, making sure you account for all costs, etc.
It is always a good idea to check with multiple calculators, I think Firecalc is one of the most useful to me.
 
Nothing new here for me, but could be useful for a first time user of Firecalc.
 
FIREcalc has several broad investment types to choose from in any ratio which is a strength.
 
His comments about the cons of the program were overstated or misplaced. Most of the cons that he mentioned are related to poor input of data, not the program itself. Firecalc has the capability if a wide variety of AA not just 75/25. It also has the capability of recurring expenses for future start dates. The one thing that he mentioned is future one-time expenses which I have not seen in Firecalc. It is easily accounted for by including at least one amount for unexpected occurrence per year or maybe 1/2 of an that expense per year.

This is essentially a reminder that GIGO is ever present. Garbage In-Garbage Out, which is common with all computer calculators.
One of the ways to account for future expenses that are likely to occur only one time, but when they occur will be substantial, is to use the concept of a sinking fund. Say, for example, based on research about how long roofs typically last and knowledge of when it was last done, you think you'll need to reroof your house around 20 years from now and that it will cost $50,000 in today's dollars. So you increase your spending input to FIRECalc by $2500 per year starting now. You can also do this for future car purchases.

Or you can just brute force it by doubling your actual current spending and seeing how that fares. It is unlikely that unexpected spending in any year will double your regular spending. The downside is that this amount of conservatism will then advise you to save more and wait longer before retiring.

In the end, planning for retirement necessarily involves careful thought about how the future will unfold. If one is not willing or able to do that, no tool can make up for that deficiency.
 
One of the ways to account for future expenses that are likely to occur only one time, but when they occur will be substantial, is to use the concept of a sinking fund. Say, for example, based on research about how long roofs typically last and knowledge of when it was last done, you think you'll need to reroof your house around 20 years from now and that it will cost $50,000 in today's dollars. So you increase your spending input to FIRECalc by $2500 per year starting now. You can also do this for future car purchases.

Or you can just brute force it by doubling your actual current spending and seeing how that fares. It is unlikely that unexpected spending in any year will double your regular spending. The downside is that this amount of conservatism will then advise you to save more and wait longer before retiring.

In the end, planning for retirement necessarily involves careful thought about how the future will unfold. If one is not willing or able to do that, no tool can make up for that deficiency.
Lots of businesses (our HOA included) use sinking funds very effectively. When our building required new elevators after 50 years, the money to do the j*b (half a million) was sitting in a fund (invested) to make it happen without a special assessment. There is a similar building close by which had put off spalling repair for lack of funds. When they could put it off no longer, they had to come up with over a million dollars and that required a special assessment. A tale of two buildings, if you will.

Though I don't set aside money in a fund, I recognize things like the need for a new(er) car, new roof, new HVAC system, etc. and plan accordingly, and add such expenses to my yearly spending numbers. I did this for FIRECalc when I first ran it all those years ago. There are always surprises, but they don't upset our finances very often. If anything, I've over-planned for the surprises. YMMV
 
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