cFIREsim Questions

[AdrianC]

Edited to apply to cFIREsim in place of FIREcalc.

I have a couple of questions about FIRECalc cFIREsim. Perhaps folks here know the answers or could help me find them?

http://www.firecalc.com/  http://www.cfiresim.com/

In the Other Income/Spending tab Extra Income/Savings section we can enter Social Security and Pension income.

Question 1
I get the Social Security estimate from here:

https://www.ssa.gov/retire/estimator.html

Does anyone know that this estimate is in today's dollars? I think it is, want to be sure. Is that what cFIREsim is looking for?

Question 2
Under Pensions, does cFIREsim take the number entered in today's dollars or dollars as of the "Start Year" date? I think it's the latter.

I assume "Inflation Adjusted" means the annual payment is adjusted for inflation by the annuity provider.

Thanks.

[arebelspy]

I would ask FIRECalc questions on their section of the E-R.org forums.

I personally recommend www.cFIREsim.com -- same idea, but more features, updated more often (with features and market data), open source, the creator is Mustachian and participates here, and takes feature requests.

[AdrianC]

I would ask FIRECalc questions on their section of the E-R.org forums.

I personally recommend www.cFIREsim.com -- same idea, but more features, updated more often (with features and market data), open source, the creator is Mustachian and participates here, and takes feature requests.

Many thanks. I tried cFIREsim and like it better. I have the same questions related to cFIREsim, so I edited the OP. Hope that was OK.

[lauren_knows]

Edited to apply to cFIREsim in place of FIREcalc.

I have a couple of questions about FIRECalc cFIREsim. Perhaps folks here know the answers or could help me find them?

http://www.firecalc.com/  http://www.cfiresim.com/

In the Other Income/Spending tab Extra Income/Savings section we can enter Social Security and Pension income.

I believe that SSA.gov gives you a monthly amount. Please be sure to put the YEARLY amount into cFIREsim.

Question 1
I get the Social Security estimate from here:

https://www.ssa.gov/retire/estimator.html

Does anyone know that this estimate is in today's dollars? I think it is, want to be sure. Is that what cFIREsim is looking for?

Yes, it gives the answer in Today's dollars, and yes that it what you should put in cFIREsim.

Question 2
Under Pensions, does cFIREsim take the number entered in today's dollars or dollars as of the "Start Year" date? I think it's the latter.

It's actually the former.  Many pension estimators will give you an estimate in Todays dollars for a specific date.  If you put in $10,000 pension starting in 2040 into cFIREsim, cFIREsim would move that pension up with inflation (assuming you chose that).

I assume "Inflation Adjusted" means the annual payment is adjusted for inflation by the annuity provider.

That is correct. This is often called "Cost of Living Adjustment" or COLA.

[arebelspy]

Is there any way to put in a pension in today's dollars, but have it not inflate until you start to take it?  My pension will stay fixed until I start to take it, then have COLA'd adjustments (specific, not tied to inflation, but too specific to ask you to code it in, so COLA is probably close enough).

[lauren_knows]

Is there any way to put in a pension in today's dollars, but have it not inflate until you start to take it?  My pension will stay fixed until I start to take it, then have COLA'd adjustments (specific, not tied to inflation, but too specific to ask you to code it in, so COLA is probably close enough).

There is no current way to do this elegantly, however I have heard this request before.  If trying for a quick solution, you could try to reduce the pension by a factor of inflation over X years, so that when cFIREsim inflates it, it ends up being roughly what you wanted at Year 1 of taking the pension.

[arebelspy]

That makes sense.

I've just been manually inputting the amounts received each year, especially since I have a different COLA.  It's a lot more work though, cause I have to put in about 30 separate entries from age 60-90.

[BigRed]

Is there any way to put in a pension in today's dollars, but have it not inflate until you start to take it?  My pension will stay fixed until I start to take it, then have COLA'd adjustments (specific, not tied to inflation, but too specific to ask you to code it in, so COLA is probably close enough).

There is no current way to do this elegantly, however I have heard this request before.  If trying for a quick solution, you could try to reduce the pension by a factor of inflation over X years, so that when cFIREsim inflates it, it ends up being roughly what you wanted at Year 1 of taking the pension.

We have 2 pensions that both have this behavior.  The problem with the proposed solution is that it doesn't capture the risk properly.  The main risk in such a pension is high inflation eroding its value over the time before it kicks in, which in our case is 20-25 years.  Assuming average devaluation for inflation fails to capture that risk, while pricing in high inflation overstates the risk involved.  I think many pensions carry this form, so it would be useful to have it modeled, but I'll take your word for it that it is harder to code than it looks.

I also have a pension that acts like a deferred indexed annuity, where the yearly payout is indexed to the unit value of the total pension fund (which is basically 50/50 stocks/bonds).  I haven't figured out how to model this either, to capture the risk that when the market is down I would need to either reduce spending or sell more from my savings.  Currently, I'm treating it like it is an inflation adjusted pension, but that badly underestimates the volatility it will have as an income stream.  Any suggestions?

[FI40]

Sorry to hijack the thread, but I just searched for 10 minutes and couldn't find the answer. What is the equity market data used in simulation, the S&P500 total return?

Have you considered adding an international index? Not sure how far back it would go, but the fact is many people have international equity exposure these days. Also, as a Canadian if you could include TSX market data and an input for % allocation to it, it would be awesome. I'm aware we're a minority though, so I'm not holding my breath for it.

[lauren_knows]

Sorry to hijack the thread, but I just searched for 10 minutes and couldn't find the answer. What is the equity market data used in simulation, the S&P500 total return?

Yes, specifically the data from economist Robert Shiller.

Have you considered adding an international index? Not sure how far back it would go, but the fact is many people have international equity exposure these days. Also, as a Canadian if you could include TSX market data and an input for % allocation to it, it would be awesome. I'm aware we're a minority though, so I'm not holding my breath for it.

Most "other" data goes back to 1972. I've briefly thought about adding it in, but a lot of folks in these forums are trying to simulate 40+yr retirements, which doesn't lend well to include data that is only 44 years old.  If you had a novel idea on how to combine such data sets, I'm all ears :)

[AdrianC]

Question 2
Under Pensions, does cFIREsim take the number entered in today's dollars or dollars as of the "Start Year" date? I think it's the latter.

It's actually the former.  Many pension estimators will give you an estimate in Todays dollars for a specific date.  If you put in $10,000 pension starting in 2040 into cFIREsim, cFIREsim would move that pension up with inflation (assuming you chose that).

Many thanks, Bo.

DW's pension is different to others mentioned here. It has a current notional value that increases each year by inflation + 3%. The estimate we get is a choice of annuities based on the notional value at that time. It looks like they are assuming 2.7% inflation.

For cFIREsim I have taken the future estimate and discounted back by 3% per year.

The results are very satisfactory. Thanks again for a great planning tool.