Author Topic: 70% FireCalc Success Rate  (Read 2442 times)

yachi

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70% FireCalc Success Rate
« on: March 11, 2019, 09:25:33 AM »
I could FIRE now with a 71% success rate:
Stache: $835,000
Withdrawal: $40,000
71% is a good C letter, passing grade.
On average my portfolio when I pass away would be nearly 7.5 million dollars.  That's a lot.
I have a family, so there is the possibility of expenses increasing before they go down.

Would you say this plan is irresponsible, or just: Hey it might work, but it will suck looking for a job when/if it fails.

I have a neighbor around age 48 that lived on inheritance money for 4 or 6 years during which she got a degree that helped her get a job.  My plan wouldn't be any worse than that.

reeshau

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Re: 70% FireCalc Success Rate
« Reply #1 on: March 11, 2019, 09:52:07 AM »
Your risk tolerance is something only you can comment on.  If this was your chance of not getting cancer, or chance of continuing to be able to work until a traditional retirement, most people would probably be squirming in their seats.

Before anyone could really opine, though, you should share some of the assumptions you have put into FireCalc.  Have you run your model based on historical average projections?  Or have you done your best to guess where we are today: old bull market, growth perhaps faltering, low interest rates, etc.--i.e. less-than-ideal conditions?

If the former, then I would worry.  A lot.  If the latter, then it might just be pessimistic enough to be a solid guess.

The other half, of course, is what about your withdrawal rate?  Is it bare bones, covering just food, clothing, shelter for you, or is 1/4 of it for world travel?  The best thing you can do is to control your expenses when the markets are going to crap--that is something most models don't comprehend.

And what about your career or skills?  Could you easily rejoin the workforce after a decade on the sidelines?  Could you work a side gig for $10k per year, and boost your chances significantly?  (Second question would be, would it be worth it to you to do so?)
« Last Edit: March 11, 2019, 10:26:01 AM by reeshau »

Daisyedwards800

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Re: 70% FireCalc Success Rate
« Reply #2 on: March 11, 2019, 09:58:20 AM »
I honestly believe we are due for a recession so I might wait till after that or possibly scale back (part-time ? ) and not use your $40k yet.

sol

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Re: 70% FireCalc Success Rate
« Reply #3 on: March 11, 2019, 10:02:14 AM »
At anything above 50%, you are more likely to die with extra money than you are to ever need to reduce your spending.

How flexible is your $40k spending rate?  If you have the option to turn that down a few thousand dollars in bad years, you dramatically increase your odds.  Variable spending rates make all the difference in the success percentages.

Malkynn

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Re: 70% FireCalc Success Rate
« Reply #4 on: March 11, 2019, 10:12:24 AM »
At anything above 50%, you are more likely to die with extra money than you are to ever need to reduce your spending.

How flexible is your $40k spending rate?  If you have the option to turn that down a few thousand dollars in bad years, you dramatically increase your odds.  Variable spending rates make all the difference in the success percentages.

Yep.
Between flexible spending and the possibility of generating some income, I see no problem with quitting full time work at that level.

Are you trying to quit work forever with a bare bones spend of 40K and a guarantee of never having to work again?? Probably not, or you wouldn't be asking the question, you would be asking how much lower than 4% is safe.

If I were in your position and wanted to leave my job, I probably would have left several hundred thousand ago.

YttriumNitrate

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Re: 70% FireCalc Success Rate
« Reply #5 on: March 11, 2019, 10:41:34 AM »
I could FIRE now with a 71% success rate:
Stache: $835,000
Withdrawal: $40,000
71% is a good C letter, passing grade.
On average my portfolio when I pass away would be nearly 7.5 million dollars.  That's a lot.
I have a family, so there is the possibility of expenses increasing before they go down.
Would you say this plan is irresponsible, or just: Hey it might work, but it will suck looking for a job when/if it fails.
Echoing Daisy's sentiments, I also believe a 20-40% downturn is likely in the next five years. My question would be how flexible is that $40,000 spend rate? How much can you pull back on that spending rate to preserve your stache when the downturn comes?

dougules

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Re: 70% FireCalc Success Rate
« Reply #6 on: March 11, 2019, 11:07:34 AM »
With the market having run up so quickly, I would go to cfiresim or firecalc and run scenarios starting from where you were a few years ago.  I think that will give you a better indication of your success rate.  It would put some context on where we are now in terms of the market. 

Another question, how likely do you think it is that you will earn money during FIRE?

yachi

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Re: 70% FireCalc Success Rate
« Reply #7 on: March 11, 2019, 11:49:21 AM »
I wouldn't mind part time work, and there is the possibility my wife starts working 5 to 6 years from now making the whole withdrawal rate a moot point.  The spend rate itself is not terribly flexible it's basically what we currently spend, and we don't have things like household services we could cancel.  We probably can do meals cheaper, and eat out less with the additional time at home.
I mainly want my time to focus on raising my kids, studying and learning things, maybe dabble in programming.

honeybbq

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Re: 70% FireCalc Success Rate
« Reply #8 on: March 11, 2019, 11:53:17 AM »
That's one of the lowest rates I've seen anyone post anywhere (say here, or BH, or running my own).

At only 40k, and with medical expenses rising, I don't really see how much you could "cut back" if suddenly you need 10 or 15k a year for medical expenses.

If you were at 100k withdraw and 70%, that'd be something else.

I am risk averse and I (personally) would be full on scared by that 70%.

teltic

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Re: 70% FireCalc Success Rate
« Reply #9 on: March 11, 2019, 12:25:38 PM »
If realistically, you see yourself getting a new job sometime in the future (even if that's in 10 years), I'd do it.  You mentioned maybe playing around in programming... Could you see yourself practicing enough to want to land a job sometime in the future?  Even if that's part time?

do you really see yourself never working again? If no = work longers; if yes = quit and enjoy life!

yachi

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Re: 70% FireCalc Success Rate
« Reply #10 on: March 11, 2019, 12:50:30 PM »
That's one of the lowest rates I've seen anyone post anywhere (say here, or BH, or running my own).

At only 40k, and with medical expenses rising, I don't really see how much you could "cut back" if suddenly you need 10 or 15k a year for medical expenses.

If you were at 100k withdraw and 70%, that'd be something else.

I am risk averse and I (personally) would be full on scared by that 70%.

I noticed your location is listed as Seattle: My housing costs around $950 a month for mortgage paydown and all taxes, so I consider myself to be in a low cost of living area.  The drawback of that is it leaves me with fewer options of, say relocating or downsizing should my plan not work. 

yachi

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Re: 70% FireCalc Success Rate
« Reply #11 on: March 11, 2019, 01:21:30 PM »
If realistically, you see yourself getting a new job sometime in the future (even if that's in 10 years), I'd do it.  You mentioned maybe playing around in programming... Could you see yourself practicing enough to want to land a job sometime in the future?  Even if that's part time?

do you really see yourself never working again? If no = work longers; if yes = quit and enjoy life!

I think I'd love something like that part time at like 20 hours a week.  If I could make $25/hr at something part time 15-20 hours a week, I'd have a 100% success rate.  I haven't been able to find those positions, or I don't know how to look.

Playing with Fire UK

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Re: 70% FireCalc Success Rate
« Reply #12 on: March 11, 2019, 01:36:28 PM »
I wouldn't mind part time work, and there is the possibility my wife starts working 5 to 6 years from now making the whole withdrawal rate a moot point. 

This pushes me towards a yes.

kei te pai

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Re: 70% FireCalc Success Rate
« Reply #13 on: March 11, 2019, 01:47:44 PM »
I presume your wife working in 5 to 6 years is because of children. If you left the workforce, would she be interested in an earlier return to work while you picked up the load at home?

TexasRunner

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Re: 70% FireCalc Success Rate
« Reply #14 on: March 11, 2019, 01:58:09 PM »
Use this calculator:  https://engaging-data.com/will-money-last-retire-early/

It has the FANTASTIC feature of taking into account the ability to 'turn down' the spending after a recession.

Full thread is on here about it:  https://forum.mrmoneymustache.com/welcome-to-the-forum/rich-broke-or-dead-visualizing-probabilities-of-outcomes-in-early-retirement/


With your details (I assumed 40 as the age), you are at 76% once you account for 14k in SS at 65.
Once you add in 20% spending flexibility (IE the ability to turn the 40k 'down' to 32000 in an emergency) --OR-- get a part time gig in an emergency and make at least 8k a year, and all of the sudden you are at a 98% success rate.  Thats why getting a part time job in FI to remain RE is so powerful, you barely need anything to get the withdraw rate down to something dang near invincible (like 3.8%).

Most likely you'll wind up earning more money by accident anyway.  Ref soccer games, wood working, rebuilding cars...  All of these when sought full time as a hobby will actually net pretty good income- which floats the stash that much more.

https://engaging-data.com/will-money-last-retire-early/?spend=40000&initsav=835000&age=40&yrs=60&stockpct=80&bondpct=18&cashpct=2&sex=1&infl=1&taxrate=0&fees=0.3&income=14000&incstart=65&incend=99&expense=0&expstart=50&expend=70&showdeath=1&showlow=1&show2x=1&show5x=1&flexpct=20

Malkynn

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Re: 70% FireCalc Success Rate
« Reply #15 on: March 11, 2019, 02:06:39 PM »
If realistically, you see yourself getting a new job sometime in the future (even if that's in 10 years), I'd do it.  You mentioned maybe playing around in programming... Could you see yourself practicing enough to want to land a job sometime in the future?  Even if that's part time?

do you really see yourself never working again? If no = work longers; if yes = quit and enjoy life!

I think I'd love something like that part time at like 20 hours a week.  If I could make $25/hr at something part time 15-20 hours a week, I'd have a 100% success rate.  I haven't been able to find those positions, or I don't know how to look.

Yeah...those jobs don't usually just exist in any form that you can apply for because so few people are looking for them. You usually have to generate them for yourself through active networking.

Myself and everyone I know who works part time does so because people wanted us for positions and we made it known that those are simply the hours we are available and that's that. Some employers will pass, but a lot will jump at the opportunity to have only a partial salary as part of overhead.
« Last Edit: March 11, 2019, 02:08:38 PM by Malkynn »

teltic

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Re: 70% FireCalc Success Rate
« Reply #16 on: March 11, 2019, 03:31:06 PM »
Yeah getting a part time gig would be hard to interview for... I  think the realistic choice would be to work full time for a year or two, then ask to go part time.

I just watched a finance director go part time (after having a baby, simply decided not to come back full time)... I. Am. So. Damn. Jealous.

sol

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Re: 70% FireCalc Success Rate
« Reply #17 on: March 11, 2019, 03:49:35 PM »
Yeah getting a part time gig would be hard to interview for...

I found it super easy.  After I retired, someone wanted to hire me.  I told them I was retired and not really interested in having a new job, but if they really wanted to give me a huge raise I'd only consider it if I could work part time, from home.

They said yes.  I worked part time for a while, decided I didn't like it, and now I don't work at all anymore.

Malkynn

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Re: 70% FireCalc Success Rate
« Reply #18 on: March 11, 2019, 04:05:06 PM »
Yeah getting a part time gig would be hard to interview for...

Not even a little bit, and that's *if* there's even an interview.

yachi

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Re: 70% FireCalc Success Rate
« Reply #19 on: March 11, 2019, 04:08:01 PM »
Yeah getting a part time gig would be hard to interview for...

I found it super easy.  After I retired, someone wanted to hire me.  I told them I was retired and not really interested in having a new job, but if they really wanted to give me a huge raise I'd only consider it if I could work part time, from home.

They said yes.  I worked part time for a while, decided I didn't like it, and now I don't work at all anymore.

I did see that thread, but didn't follow it to its ultimate conclusion.  I worry I may not be able to jump back into a job either, but I suppose that's how the transition from college/summer jobs to full time work was.  Jacob from ERE was one who retired and then went back to work when something interesting came along.

yachi

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Re: 70% FireCalc Success Rate
« Reply #20 on: March 11, 2019, 04:12:36 PM »
If realistically, you see yourself getting a new job sometime in the future (even if that's in 10 years), I'd do it.  You mentioned maybe playing around in programming... Could you see yourself practicing enough to want to land a job sometime in the future?  Even if that's part time?

do you really see yourself never working again? If no = work longers; if yes = quit and enjoy life!

I think I'd love something like that part time at like 20 hours a week.  If I could make $25/hr at something part time 15-20 hours a week, I'd have a 100% success rate.  I haven't been able to find those positions, or I don't know how to look.

Yeah...those jobs don't usually just exist in any form that you can apply for because so few people are looking for them. You usually have to generate them for yourself through active networking.

Myself and everyone I know who works part time does so because people wanted us for positions and we made it known that those are simply the hours we are available and that's that. Some employers will pass, but a lot will jump at the opportunity to have only a partial salary as part of overhead.

I guess that's probably the way to go.  I found myself imagining an assistant manager job at a movie theater would be a fun job when I came across it.  I would probably have to pivot to a different full-time job, work it a little, and then ask them for part time work.

yachi

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Re: 70% FireCalc Success Rate
« Reply #21 on: March 11, 2019, 04:18:55 PM »
Use this calculator:  https://engaging-data.com/will-money-last-retire-early/

It has the FANTASTIC feature of taking into account the ability to 'turn down' the spending after a recession.

Full thread is on here about it:  https://forum.mrmoneymustache.com/welcome-to-the-forum/rich-broke-or-dead-visualizing-probabilities-of-outcomes-in-early-retirement/


With your details (I assumed 40 as the age), you are at 76% once you account for 14k in SS at 65.
Once you add in 20% spending flexibility (IE the ability to turn the 40k 'down' to 32000 in an emergency) --OR-- get a part time gig in an emergency and make at least 8k a year, and all of the sudden you are at a 98% success rate.  Thats why getting a part time job in FI to remain RE is so powerful, you barely need anything to get the withdraw rate down to something dang near invincible (like 3.8%).

Most likely you'll wind up earning more money by accident anyway.  Ref soccer games, wood working, rebuilding cars...  All of these when sought full time as a hobby will actually net pretty good income- which floats the stash that much more.

https://engaging-data.com/will-money-last-retire-early/?spend=40000&initsav=835000&age=40&yrs=60&stockpct=80&bondpct=18&cashpct=2&sex=1&infl=1&taxrate=0&fees=0.3&income=14000&incstart=65&incend=99&expense=0&expstart=50&expend=70&showdeath=1&showlow=1&show2x=1&show5x=1&flexpct=20

I really like the belt tightening feature on that calculator.  Is there any information for how often it's used?  At 20% flexibility, if I only need it 2 out of 6 years, I could set aside a $16,000 pile that I replenish during the other 4 years, only requiring $4,000 a year.  I could probably get $4,000 a year just helping out some small business owners I know.

Classical_Liberal

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Re: 70% FireCalc Success Rate
« Reply #22 on: March 11, 2019, 04:21:01 PM »
Yeah getting a part time gig would be hard to interview for...

I found it super easy.  After I retired, someone wanted to hire me.  I told them I was retired and not really interested in having a new job, but if they really wanted to give me a huge raise I'd only consider it if I could work part time, from home.

They said yes.  I worked part time for a while, decided I didn't like it, and now I don't work at all anymore.

I did see that thread, but didn't follow it to its ultimate conclusion.  I worry I may not be able to jump back into a job either, but I suppose that's how the transition from college/summer jobs to full time work was.  Jacob from ERE was one who retired and then went back to work when something interesting came along.

If you read through the journals of Re'ed folks, I'd say earning money within the first few years of early RE is pretty damned prevalent.  Now, if you wait four years and try to break into your old industry without maintaining a network, you probably wont command the salary you once did. 

Still, I've switched careers multiple times in my life and it really only takes a couple years to reach well compensated level in any field, if you're a reasonably competent individual.  Fears of not wanting or not being able to earn monetary compensation in the future are highly exaggerated around here.

Since you brought it up. According to Jacob's comments over on ERE, between books sales and his two year stint in the new career, he more than doubled his FIRE stache without market gains. 

If you don't like your job, please quit!  I think the  problem will be the mentality shift, not the money.  FIRE'ing without mental preparedness ain't easy.

Classical_Liberal

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Re: 70% FireCalc Success Rate
« Reply #23 on: March 11, 2019, 04:22:51 PM »
I really like the belt tightening feature on that calculator.  Is there any information for how often it's used? 

Per the comments on the calculator, it assumes you "tighten belt" any year that your stache is below the inflation adjusted start point.

Prairie Stash

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Re: 70% FireCalc Success Rate
« Reply #24 on: March 11, 2019, 05:24:32 PM »
Welcome to the 2019 cohort! My plan is roughly similiar, retire and spend 25-30k/year.

One of the weird oversights some people make is that at some point the mortgage is paid off. I don't think anyone has retired with 30 years on their mortgage, usually its 20 or less. Theres some belt tightening the day that sucker is paid off, unless you renew it and pull cash for investing from it or lower your payments.

Basically, no one has constant $40k spends for 30 years once you consider that the mortgage payments change at some point.

I have 0 years of mortgage left, my mortgage payments are recession proof and I pay the consequence of lower growth. Since you can't tighten the belt on a mortgage payment, it helps to lower risk today at the expense of my future self.

des999

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Re: 70% FireCalc Success Rate
« Reply #25 on: March 11, 2019, 06:30:36 PM »
I've always been under the mindset that I am comfortable leaving my job with a much lower success rate than 100 (like 80ish), but I also make the assumption that I will mess around and make 10-15k / year just doing projects, side gigs, etc..

if you're not happy, I would def say you can leave, worse case you may have to make a few bucks.


MustacheAndaHalf

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Re: 70% FireCalc Success Rate
« Reply #26 on: March 12, 2019, 08:16:44 AM »
I like Vanguard's simulator since it has few moving parts, making it easy to get a rough estimate of your chances of avoiding $0.  For example:
https://www.vanguard.com/nesteggcalculator
40 years retirement
$850,000 nest egg
$40,000 / year spending

Then pick 60% stocks/40% bonds, and it simulates to a 73% success rate.  Going broke 1 time in 4 doesn't strike me as good, but there's another caveat not mentioned in most simulations:
Life expectancy is an average, with half the people living longer.  Meaning your chance of outliving your nest egg might be higher than you expect.

Lowering expenses (how very Mustachian!) is one of the best ways to increase your chances, I've found:
change the above to a $35,000 / year spend and your chance of success leaps from 73% to 83%.
going all the way to $30,000 / year gives you a 91% success rate.

Another approach is to save up a bit more, and retire on $40k / year starting with a $1.1M nest egg.

TexasRunner

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Re: 70% FireCalc Success Rate
« Reply #27 on: March 12, 2019, 09:56:08 AM »

I really like the belt tightening feature on that calculator.  Is there any information for how often it's used?  At 20% flexibility, if I only need it 2 out of 6 years, I could set aside a $16,000 pile that I replenish during the other 4 years, only requiring $4,000 a year.  I could probably get $4,000 a year just helping out some small business owners I know.

The rules on how its applied are buried in that other thread. 

"You specify a % reduction in your inflation adjusted spending (e.g. 5%) and if your portfolio is below the inflation-adjusted starting value, then your spending will be reduced by this much, otherwise it will be what you stated.  "

So basically if your portfolio ever falls below your FIRE number, reduce spending according to the percentage entered...  IE, a massive correction hits in year 2, reduce spending by 20% (or whatever) until the balance rises above starting balance again.  (Or, alternatively, earn enough income to replace it).

Since 2008 took about 2 years or so to recover, I would say two years during a correction (or three years if work isn't found until after the recession) should be just fine.  And if you survive a 2008, the subsequent run-up should last you forever (probably at even higher spending).  And there is always a run up after recessions, if you aren't counting on that then FIRE isn't possible.  Overall, the idea of **maybe** having to have a part time gig for two or three years in 30% of the cases isn't off putting to me, but I would have to find a part time gig that I liked.

More part time ideas:
- Local guides
- Hiking guides
- Sports instructors (baseball, kayaking, soccer, literally anything people do)
- Retail in an area that you actually like (as a specialist) (eg: gun counter, sports gear, running shoes, fishing gear, etc)
- Chef or cooking at a restaurant (if you want).  Tons of restaurants would love part-time good help for weekend or evening work.
- Consulting in your field of expertise (this is apparently incredibly common among FIRE folks)

And on and on...

GuitarStv

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Re: 70% FireCalc Success Rate
« Reply #28 on: March 12, 2019, 10:04:40 AM »
I honestly believe we are due for a recession so I might wait till after that or possibly scale back (part-time ? ) and not use your $40k yet.

There's always a chance of a recession in the immediate future.  This will be true every year of your life.  Trying to guess when it's going to happen and basing your retirement date around it is really just a form of market timing.

Classical_Liberal

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Re: 70% FireCalc Success Rate
« Reply #29 on: March 12, 2019, 12:52:06 PM »
So basically if your portfolio ever falls below your FIRE number, reduce spending according to the percentage entered...  IE, a massive correction hits in year 2, reduce spending by 20% (or whatever) until the balance rises above starting balance again.  (Or, alternatively, earn enough income to replace it).

Since 2008 took about 2 years or so to recover, I would say two years during a correction (or three years if work isn't found until after the recession) should be just fine.  And if you survive a 2008, the subsequent run-up should last you forever (probably at even higher spending).  And there is always a run up after recessions, if you aren't counting on that then FIRE isn't possible.  Overall, the idea of **maybe** having to have a part time gig for two or three years in 30% of the cases isn't off putting to me, but I would have to find a part time gig that I liked.

Just to be realistic, 2008 is not a good historical example.  The massive amount of monetary policy change that took place to reduce the depth and breath of that "correction" is likely not repeatable.  I say this not to discourage FIREing in OP's situation, rather to make sure reality is considered.  If you are considering increasing income/decreasing spending by whatever % until stache is replenished, make sure you understand it will probably be closer to a decade than 2 or 3 years.
« Last Edit: March 12, 2019, 12:54:20 PM by Classical_Liberal »

Classical_Liberal

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Re: 70% FireCalc Success Rate
« Reply #30 on: March 12, 2019, 12:53:28 PM »
The rules on how its applied are buried in that other thread. 
It also states it right on the calculator, so not so buried.