1) If you think of the stock market returns we've experience as being a sample of the universe of potential stock market returns, then each additional year gives you better sampling of the "true" average. Better sampling will reduce the error in your model. Right?

I think I'd be more inclined to believe that if the long term average was stationary over time. Except that no stock market in the history of the world has ever had a consistent long term average over hundreds of years, because stock markets reflect economies and economies evolve. If the period of 2014 to 2044 averaged 1% return, would you believe that the Dow was due for a couple of huge decades to get us back to our long term average, or would you believe that the US economy had stalled?

I don't see why they'd be biased towards recent years

Not biased towards, just biased by. The long term CAGR of the US market is about 0.2% different through 2007 than it is through 2013. 0.2% is a small number unless you're talking about compounding market history, in which case it is approximately a 100% difference in dollar value.

Yes, after a bull market cFIREsim will have a few extra simulations of success... OTOH, after a bear market cFIREsim may be under representing how safe your portfolio is, and you might work even longer than necessary.

Right, this was exactly my point. If there have been recent dramatic swings in the market, then the tools will give you different answers and they will be different in the way that is exactly backwards from reality. Use it after a bear and you've worked too much, use it after a bull and you quit too soon.

Maybe someone with the time and cleverness can see if you can do something neat with P/E or Schiller P10 and cFIREsim (i.e. compare success rates of years in which it was above or below X).

Several people have mentioned this idea already, and I had actually already formulated a post on this very topic several months back and just never got around to posting it. I dug it up, and have pasted it below. It's a little rough, this was a first draft, but I think it highlights how using the CAPE is very relevant to predicting future success ratios. The 1973 example beltim just posted as one of the 4% SWR failures is, notably, a lower value than we're seeing today, suggesting that a 4% SWR may not be safe at this moment in time. This is exactly what I mean by needing to use P/E to make retirement predictions, not just the historical simulators.

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Firecalc suggests that the returns in the few years immediately following your retirement are most significantly determinitive of your long term success rate at fixed spending amounts.

For example, for a 35 year retirement at 30k on 750k saved, firecalc suggests a 93% success rate.

But if the market has a 10% "correction" in the first year of your retirement, now you're looking at having withdrawn the 30k and then seen the remaining 720 reduced to 645. Re-evaluating the odds on 645k for the remaining 34 years shows a 72.5% success rate.

And this effect is not symmetric. If the market surges 10% in the first year of your retirement instead of dropping then your odds do increase but only by about 4%.

To review, if the market goes up 10% in your first year your odds increase 4% but if the market goes down 10% in your first then your odds decrease by 20%. Very lopsided. Depending on your assumptions about the market's future, you can construct a scenario in which your EV on firecalc success in the future should drop on the day you retire regardless of when that is.

I think this effect can be partially comensated by using CAPE or P/E ratio or something else. The 1973/4/5 example from the

firecalc homepage shows dramatically different outcomes for the same nest egg and withdrawal combination in three consecutive years. In 1973 30k on 750k goes bankrupt in 19 years, but P/E was ~18. Same numbers in 1974 does okay, but P/E was ~12. 1975 with same numbers does fantastic, but P/E was only 8.3.

Here's the frightening part: Today's P/E (trailing 12 month as of Feb 5 2014) is 18.56, higher than 1973. Of course this ignores the importance of inflation in the 1970s, but I think it's still relevant. Using the Cyclically Adjusted P/E should account for this effect, but in this example it doesn't make much of a difference (1973/4/5 are 18.7, 13.5, 8.9).