Firecalc

[tuckred]

Hi, I don't think I've ever introduced myself, and will do that soon, but have a question that I was wondering if anyone can answer (I'm sure some of you can!). I have been playing around with Firecalc, and don't understand how the results could be possible. I understand that it is based on historical data, and no one can predict the future, but still...  This is what I entered: Spending, 50,000; Portfolio, 220,000, Time, 30 years (dh is 64, I am 62). Pension (cola'd), 17,580 starts 2018, SS, mine and husband taking spousal, 30,260 starting 2017, then increase of 19,370 when he is 70, in 2020 (total of 49,630 at this point). I left everything else as is, such as spending same amount adjusted for inflation and whatever they have for portfolio. Success rate is 100%. What really confused me though was that it said that my portfolio balance at the end would range from $220,000 to $41,394,100, with average at $21,287,807.  That doesn't seem possible, considering that we wouldn't have any income until 2017, and would be living out of our portfolio! (We won't be, but those are the numbers that I put into Firecalc).  So, we'd be taking out nearly half of our nest egg...does not seem like we'd end up multimilionaires in the end! Do I have something entered wrong? Am I not considering something that I should be considering? Thanks for any suggestions you have...I'm retired in 4 more days, for several reasons, ready or not!

[MDM]

If I read your numbers correctly,

  - Starting in 2020 your guaranteed income exceeds your expenses by ~$17K and your portfolio is worth ~$96K.

  - Beyond that it is simply a question of historical market returns on your $96K portfolio plus the $17K annual investment.

[tuckred]

Ah, that makes sense. Compound interest, crazy stuff; thanks, MDM!

[KungfuRabbit]

Ah, that makes sense. Compound interest, crazy stuff; thanks, MDM!

i dont follow.

starting with 100k and adding 17k per year of guaranteed income, i don't get 41 million after 25 more years, unless you are rocking about 25% interest

[MDM]

starting with 100k and adding 17k per year of guaranteed income, i don't get 41 million after 25 more years, unless you are rocking about 25% interest

Yes, that is too high.  I was looking at the 100% success part.

[tuckred]

Oh, darn, there go my plans for...well, I have no idea WHAT I'd do with 40M, especially when I'm 90! I'm a pretty simple-living girl. When I put it into a compounding calculator at 8%, it ends up ~2M....that'll just have to do.
Not sure what's up with what I got; I was just wondering if Firecalc has some known issues where it miscalculates things.

[clifp]

Actually the 44 million isn't completely crazy just very unlikely.  You figure the S&P 500 was has averaged 19% for the last 3 years.  It is all about sequence of returns.  If you retired 3 years ago with $220,000 the S&P was up 16% year 1 meaning you made $35,200 after  subtracting 50,000 expense your portfolio leaving 205K. In Year 2 (2017) your pension income was $30K but the S&P was up 32% generating an additional $65,600 after expense you portfolio would worth over $250, and then in year 3 your pension income hits ~48K only $2K below expenses at which point its pretty much impossible to run out of money. If the 2010 turn out to be like the 1950, 1980s, or 1990 with annual returns of 16.7%, 11.6, or 14.7% you are looking at ending the decade with a few million, Adding 17K a year it not hard to end up with 8 figure net worth.