While I realize that the more sophisticated models like FireCalc will probably do a much better job, I have made some simple spreadsheets to try to get a grip on things.
I FIRE'd nearly 5 years ago. I made a sheet that made some gross assumptions such as an expense inflation rate of 5%, an investment gain on my total portfolio of 3% a social security COLA of 2%.
I made a similar one where I subtracted the equivalent of a 50% loss on my equity exposure in the first year, and another where I took a 10% loss on my total portfolio in two of the first five years.
I took a wild guess at taxes and added 30% to my estimated expenses.
I figured that this was probably overly pessimistic, but it showed I would survive until 85 or so and I was about 60, so once my BS bucket was overflowing I stopped working.
The results of the past five years have been that my total portfolio has increased about 12%, even with my expenses being taken out. Right now I have what some might consider a stupidly conservative asset allocation of about 22% stocks and 50% cash.
I have not figured out my actual return but taking the info from the performance page on my largest account and guess at the others, I think my total return has been between 3% and 5%. I realize that the market has been much higher and in hind-sight I would have been much better off with a large equity exposure, but I went through three bubble pops where I lost close to 50% each time and figure I don't have the stomach for that now that I am living off my savings.
Well, anyway, I tried to make a better model and used VBA to put in the accurate calculations for my taxes using current rates and switching to the previous 2015 rates in 2025 and forward.
I put in a factor for expense inflation and a factor for total portfolio gain rate, but have not put in any factor for social security COLA or for possible increase in SS taxation.
I ran the model with 0% for inflation and investment gain and went to 100 years old fine.
I did 3% inflation and 0% investment gain and was surprised how much it lowered my portfolio value, running out around 93 years old.
When I put in 2.5% inflation with a 2% or 3% investment gain rate, I was back in the black pretty handily.
This gives me the feeling that from the view of my simple model, I am probably OK. I realize that there could be huge market swings in real life, but I am figuring that my conservative equity allocation will smooth that.
What did strike me is how pronounce the effect of a 1% or 2% change in my investment return rate had on the simple model.
When I have some more time I will probably try to do FireCalc again or use the retirement planner from my brokerage account, which I did try to do in the years leading up to FIRE.
Any thoughts on my simple model (hoping I have explained enough to get an idea) or on some of the assumptions I chose or should be trying to build into my model?
Thanks.
I FIRE'd nearly 5 years ago. I made a sheet that made some gross assumptions such as an expense inflation rate of 5%, an investment gain on my total portfolio of 3% a social security COLA of 2%.
I made a similar one where I subtracted the equivalent of a 50% loss on my equity exposure in the first year, and another where I took a 10% loss on my total portfolio in two of the first five years.
I took a wild guess at taxes and added 30% to my estimated expenses.
I figured that this was probably overly pessimistic, but it showed I would survive until 85 or so and I was about 60, so once my BS bucket was overflowing I stopped working.
The results of the past five years have been that my total portfolio has increased about 12%, even with my expenses being taken out. Right now I have what some might consider a stupidly conservative asset allocation of about 22% stocks and 50% cash.
I have not figured out my actual return but taking the info from the performance page on my largest account and guess at the others, I think my total return has been between 3% and 5%. I realize that the market has been much higher and in hind-sight I would have been much better off with a large equity exposure, but I went through three bubble pops where I lost close to 50% each time and figure I don't have the stomach for that now that I am living off my savings.
Well, anyway, I tried to make a better model and used VBA to put in the accurate calculations for my taxes using current rates and switching to the previous 2015 rates in 2025 and forward.
I put in a factor for expense inflation and a factor for total portfolio gain rate, but have not put in any factor for social security COLA or for possible increase in SS taxation.
I ran the model with 0% for inflation and investment gain and went to 100 years old fine.
I did 3% inflation and 0% investment gain and was surprised how much it lowered my portfolio value, running out around 93 years old.
When I put in 2.5% inflation with a 2% or 3% investment gain rate, I was back in the black pretty handily.
This gives me the feeling that from the view of my simple model, I am probably OK. I realize that there could be huge market swings in real life, but I am figuring that my conservative equity allocation will smooth that.
What did strike me is how pronounce the effect of a 1% or 2% change in my investment return rate had on the simple model.
When I have some more time I will probably try to do FireCalc again or use the retirement planner from my brokerage account, which I did try to do in the years leading up to FIRE.
Any thoughts on my simple model (hoping I have explained enough to get an idea) or on some of the assumptions I chose or should be trying to build into my model?
Thanks.