Author Topic: Anyone use their cfiresim assumptions to run their budget?  (Read 1914 times)

spokey doke

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Anyone use their cfiresim assumptions to run their budget?
« on: March 03, 2017, 11:55:32 AM »
I really like cfiresim as a tool for understanding how different assumptions and conditions might affect my portfolio throughout retirement, and for honing in on an FI number that I can have some confidence in...but once there, and you pull the RE plug, you then need to go into application mode.

Anyone take their chosen spending model and assumptions from their cfiresim modeling and APPLY them in determining withdrawals/expenditures/budget???

[I personally am drawn to the variable spending plan, which looks to me like it is based on Bengen's floor and ceiling rule (?!)]
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MsRichLife

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #1 on: March 03, 2017, 10:06:00 PM »
Somewhat. I'm only 4 months into FIRE, and am still coming to terms with the shift from saving to spending. It's a much larger paradigm shift than I anticipated. As such, I'm still running scenarios in order to optimise how we spend.

For example, we have our basic living budget which is quite a comfortable existence with funds for dining out each week and $10K a year for family holidays. This was my expected budget for FIRE if we didn't earn anything more.

Since FIRE, I'm now in receipt of a rather large increase in passive income. I knew it might be coming, but it wasn't a certainty so I didn't plan for it in our spending budget. If we don't spend it, my son will be a multi-millionaire upon our death. So we've decided to go a little bit crazy and increase our expenditures quite significantly, at least for a couple of years.

I expect that most people once FIRE'd will find their assumptions changing, and I'd be surprised if they didn't run scenarios to adjust their spending in order to accommodate those changes.




steveo

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #2 on: March 04, 2017, 07:26:28 PM »
I just adjusted a couple of things in my plan.

Part 1:- I plan my total success rate on a low FI figure but I include getting social security at 67. This gives me a success rate of 93%. I think we will retire with more money than this. If we end up with our likely target the success rate is 100%.
Part 2:- I'm Australian so I need to get to 60 to access my Super. I have a target to get to here which typically gives me a success rate of about 70%. If I add to this though selling my house and downsizing and collecting a modest estimate I get a 100% success rate.

I use a variable spending plan with a higher initial spend than what we currently spend in both instances.

All we have to hit is the target required for part 2 and even then I could push it more but I don't intend too. It makes me realise though how in all of these discussions about the SWR how the assumptions in hitting a 4% target would require me working longer than I need too. In the 2 instances above I am not hitting a 4% WR and at best it's a 5% WR. The assumptions underlying the 4% SWR are far to the side of additional security for my personal situation.
« Last Edit: March 04, 2017, 07:28:52 PM by steveo »

Metric Mouse

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #3 on: March 04, 2017, 07:37:04 PM »
I like your plan steveo.
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steveo

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #4 on: March 04, 2017, 08:23:01 PM »
I like your plan steveo.

The thing with the 4% SWR is that the assumptions are in my opinion so far on the side of security. It assumes no income or increase in assets other than what your stash provides. I understand some people may be in that position but surely it's rare. So you never go back and work at all. You never get any inheritance or social security. You never downsize your home.

This isn't meant to be a discussion of the 4% SWR as we have enough of them but everytime I read those discussions I come to the same conclusion and that is how far on the side or safety the SWR of 4% really is. If you amend some of those assumptions a little bit your safety level changes significantly.

I live in Sydney and I own my house. It's freaken crazy land when it comes to house prices. I also have 3 kids. Surely I'm at the top of my required spending level right now. I accept I may retire and want to travel or spend a bit more stupidly at some point but that isn't worth working another 5 years for me personally.

Metric Mouse

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #5 on: March 06, 2017, 04:36:21 AM »
I like your plan steveo.

The thing with the 4% SWR is that the assumptions are in my opinion so far on the side of security. It assumes no income or increase in assets other than what your stash provides. I understand some people may be in that position but surely it's rare. So you never go back and work at all. You never get any inheritance or social security. You never downsize your home.

This isn't meant to be a discussion of the 4% SWR as we have enough of them but everytime I read those discussions I come to the same conclusion and that is how far on the side or safety the SWR of 4% really is. If you amend some of those assumptions a little bit your safety level changes significantly.

I live in Sydney and I own my house. It's freaken crazy land when it comes to house prices. I also have 3 kids. Surely I'm at the top of my required spending level right now. I accept I may retire and want to travel or spend a bit more stupidly at some point but that isn't worth working another 5 years for me personally.
Just the assumption of 1% expense ratios on a rather conservative portfolio mix is enough for me to feel completely confident blowing the 4% rule out of the water. Though my 'stache is increasingly outstripping even my outrageous spending, and it's quite likely I'll soon be drawing even less than 4%. I would always advise retiring earlier, if that is one's goal, over waiting to high 4% or some other lower, uber-safe WR.
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spokey doke

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #6 on: March 06, 2017, 07:57:50 AM »

I use a variable spending plan with a higher initial spend than what we currently spend in both instances.


This is the model I've been using too, but haven't strictly implemented it yet...and that is the kind of thing I was hoping to hear more about from others.  What are the mechanics/process of putting your variable spending plan to work?
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respond2u

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #7 on: March 15, 2017, 12:56:33 PM »
Just the assumption of 1% expense ratios on a rather conservative portfolio mix is enough for me to feel completely confident blowing the 4% rule out of the water. Though my 'stache is increasingly outstripping even my outrageous spending, and it's quite likely I'll soon be drawing even less than 4%. I would always advise retiring earlier, if that is one's goal, over waiting to high 4% or some other lower, uber-safe WR.

I don't believe a 1% expense ratio is included in the 4% SWR advice from Bengen (http://www.retailinvestor.org/pdf/Bengen1.pdf).

Instead, it looks like he expects a 0% expense ratio, so you should add the expense ratio to your withdrawal rate to get a comparable value.

respond2u

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #8 on: March 15, 2017, 01:02:39 PM »
I'm using cfiresim; however, because of the ACA subsidy "tax" on income my plan is to withdraw much less than it allows (about 1%). I've double-checked with a few others, but I like cfiresim's display the most.

One of the things I like about cfiresim is that it allows me to include Social Security and pensions in calculating the amount I can budget (both of which Bengen ignored when coming to his "4% adjusted for inflation on 50-75% stock allocation" advice.

Mr. Green

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #9 on: March 15, 2017, 01:37:06 PM »
We're currently transitioning to FIRE and it's been a much bigger bear (mentally) than I thought it would be. As someone who has been driven to save since his first job at 16, the shift to spending is difficult. Our planned target in FIRE is a 4% withdrawal rate, or $40,000, but I think our actual withdrawal rate for these first couple years will be closer to $30,000. For one, we're trying to start a family so I expect a little spending increase there. There's also the up-in-the-air healthcare status. We want to be on the conservative side of spending for now so that as our expenses smooth out we haven't blown our budget.

Ultimately I would like to use the variable spending plan because I think it will allow us to enjoy some additional travel, etc. without adding a ton of risk to our portfolio but for now we're just getting used to this new paradigm.
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Spork

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Re: Anyone use their cfiresim assumptions to run their budget?
« Reply #10 on: March 15, 2017, 01:56:20 PM »
Sort of...

What I used to do was automatically run multiple automatic scenarios based on actual expenses.  I used it to generate graphs for "how long until retirement", "what size stash is required", "what is my max expenditure with my current stash", etc.  I ran it with short term expenses (30 day, 90 day) and longer horizon expenses (1 year, 5 year).

But... at some point the site got rewritten to rely on so much javascript that I could no longer scrape the web page successfully.  I finally gave up on it.

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