Has Firecalc or I-ORP altered your retirement plans?

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TheTimeLord
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Has Firecalc or I-ORP altered your retirement plans?

Post by TheTimeLord » Mon Sep 04, 2017 8:41 am

Did utilizing a tool like I-ORP or Firecalc or your own homegrown spreadsheet influence or extend your retirement date. Personally, I have found the value of my human capital to be highlighted by running multiple scenarios with these planning tools. How has using tools like these effected your retirement planning?
IMHO, Investing should be about living the life you want, not avoiding the life you fear. | Run, You Clever Boy! [9085]

Dottie57
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by Dottie57 » Mon Sep 04, 2017 8:57 am

Using these tools makes me more comfortable with the idea of retirement. I have enough. Yea!

SimplicityNow
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by SimplicityNow » Mon Sep 04, 2017 9:15 am

Using the various online calculators gave me additional information I needed to determine that we had "enough".

I wouldn't say by itself it convinced me but it gave me a larger psychological comfort level with my determination.

curmudgeon
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by curmudgeon » Mon Sep 04, 2017 10:19 am

SimplicityNow wrote:
Mon Sep 04, 2017 9:15 am
Using the various online calculators gave me additional information I needed to determine that we had "enough".

I wouldn't say by itself it convinced me but it gave me a larger psychological comfort level with my determination.
Likewise for me. In our case, the margin between our default comfortable baseline spending and the calculator projections of available income is quite large. The calculators helped drive home the point that additional working years weren't important from a financial perspective, though interest in the work and people kept me going for a while longer. The calculators also helped to validate the decision we had made a few years earlier to "take the foot off the gas" in terms of aggressive saving and mortgage paydown; we kept up with the 401K contributions, but didn't feel the need to keep adding to taxable savings and instead opted for a bit more spending now vs later (consumption smoothing).

jebmke
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by jebmke » Mon Sep 04, 2017 10:26 am

TheTimeLord wrote:
Mon Sep 04, 2017 8:41 am
Did utilizing a tool like I-ORP or Firecalc or your own homegrown spreadsheet influence or extend your retirement date. Personally, I have found the value of my human capital to be highlighted by running multiple scenarios with these planning tools. How has using tools like these effected your retirement planning?
I used a couple of tools (Firecalc was one) as well as had VG do some simulations under different conditions just to assure myself that my more simplistic spreadsheet view wasn't off the mark. At no time did I think "gee, if I work X years more I can amass $Y more" if that is what you mean by valuing human capital. FI was a necessary condition for decision making but not the driver.
When you discover that you are riding a dead horse, the best strategy is to dismount.

DrGoogle2017
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by DrGoogle2017 » Mon Sep 04, 2017 10:38 am

I ran multiple calculators plus having my own spreadsheet to make sure I was ok to retire at 55. I often withhold a few accounts just to be conservative. That's how I knew I was able to retire. I did run FIRECALC but I don't think I did it correctly. There are many ways to plan for retirement.
Last edited by DrGoogle2017 on Mon Sep 04, 2017 10:56 am, edited 4 times in total.

2pedals
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by 2pedals » Mon Sep 04, 2017 10:54 am

Yes, mostly help me understand the timing of Roth conversions and how much and projected discretionary spending I might have and timing of SS. I really don't believe in extending my retirement date at this point, maybe if I had much less discretionary spending I would considered it and if my defined pension plan did not freeze. I have put waaaay too many hours in the office and I am looking forward to retirement in less than a 2 years from now. How much is enough? Time is money and less you have the more valuable it becomes.

MnD
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by MnD » Mon Sep 04, 2017 12:03 pm

Yes they (Homegrown spreadsheet, Schwab and Personal Capital monte-carlo and Cfiresim historical returns calculators) have added lines of evidence that my plan to retire at age 56 in 15 months is on track and "enough". Also supports that retirement at age 55 if i am offered a separation incentive this fall works out too.

Thirdly they demonstrate that historically, a higher percent "percentage of annual portfolio" withdrawal strategy with a conservative inflation-adjusted floor is a superior to maximize the utility of retirement assets versus a conservative inflation-adjusted SWR. The latter approach helps very little in a very poor sequence of returns situation but does a wonderful job at denying utilization of retirement savings for retirement spending and promoting richest person in the graveyard outcomes if returns and sequences of returns are in the so-so to wonderful range.

LeeMKE
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by LeeMKE » Mon Sep 04, 2017 11:35 pm

Yup. I've used a variety of tools to look at many aspects of our retirement planning. I-ORP was important for us.
The mightiest Oak is just a nut who stayed the course.

afan
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by afan » Tue Sep 05, 2017 8:07 am

MnD wrote:
Mon Sep 04, 2017 12:03 pm
... but does a wonderful job at denying utilization of retirement savings for retirement spending and promoting richest person in the graveyard outcomes if returns and sequences of returns are in the so-so to wonderful range.
Agreed, but for some of us, maximizing, within reason, the size of our estates is more important than maximizing retirement spending.

In addition to retirement planning itself, I use firecalc for scenario planning around long term care needs. Input the costs of such care and see what asset base would be needed to support such expenses over the long term. Also use it for investigating gifting strategies: Add the value of the gifts to annual spending and see whether they are sustainable long term.

I found that I-ORP just does not work. It is so focused on maximizing spending that it does not work if you put in a spending rate below what it considers to be the maximum sustainable amount. Generates nonsensical results. I contacted the developer and he agreed that it was not designed to optimize anything other than maximizing retirement spending and that it did not deal appropriately with estate taxes.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

sixtyforty
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by sixtyforty » Tue Sep 05, 2017 8:33 am

MnD wrote:
Mon Sep 04, 2017 12:03 pm

... Thirdly they demonstrate that historically, a higher percent "percentage of annual portfolio" withdrawal strategy with a conservative inflation-adjusted floor is a superior to maximize the utility of retirement assets versus a conservative inflation-adjusted SWR. The latter approach helps very little in a very poor sequence of returns situation but does a wonderful job at denying utilization of retirement savings for retirement spending and promoting richest person in the graveyard outcomes if returns and sequences of returns are in the so-so to wonderful range.
Who is the "they" you are referring to ? I would like to learn more about the "higher percentage of annual portfolio with a conservative inflation-adjusted floor" withdrawal.
"Simplicity is the ultimate sophistication" - Leonardo Da Vinci

smitcat
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by smitcat » Tue Sep 05, 2017 9:59 am

afan wrote:
Tue Sep 05, 2017 8:07 am
MnD wrote:
Mon Sep 04, 2017 12:03 pm
... but does a wonderful job at denying utilization of retirement savings for retirement spending and promoting richest person in the graveyard outcomes if returns and sequences of returns are in the so-so to wonderful range.
Agreed, but for some of us, maximizing, within reason, the size of our estates is more important than maximizing retirement spending.

In addition to retirement planning itself, I use firecalc for scenario planning around long term care needs. Input the costs of such care and see what asset base would be needed to support such expenses over the long term. Also use it for investigating gifting strategies: Add the value of the gifts to annual spending and see whether they are sustainable long term.

I found that I-ORP just does not work. It is so focused on maximizing spending that it does not work if you put in a spending rate below what it considers to be the maximum sustainable amount. Generates nonsensical results. I contacted the developer and he agreed that it was not designed to optimize anything other than maximizing retirement spending and that it did not deal appropriately with estate taxes.
I have run the IORP below max spending and the results did not seem at all nonsensical.
I have checked a number of runs with specific tax software for income tax purposes and it was very close in the estimation given the same outputs.
Likely there is no way a calculator could optimize estate taxes given the variability of what state you reside in and the holdings of that estate - we will work on that separately when we are much closer to that need.
Please be more specific when you refer to these problems so we can see if it applies to our case as well.
Thank you

afan
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by afan » Wed Sep 06, 2017 7:17 am

smitcat wrote:
Tue Sep 05, 2017 9:59 am

I have run the IORP below max spending and the results did not seem at all nonsensical.
I have checked a number of runs with specific tax software for income tax purposes and it was very close in the estimation given the same outputs.
Likely there is no way a calculator could optimize estate taxes given the variability of what state you reside in and the holdings of that estate - we will work on that separately when we are much closer to that need.
Please be more specific when you refer to these problems so we can see if it applies to our case as well.
Thank you
OK, trying to be specific enough to be helpful without going into so much detail that the post goes on for pages.

I contacted James Welch about my results and after some clarification on both ends, he agreed that the program does not work for my situation. So I do not believe that the problems were errors in input or failing to understand the results.

I indicated a retirement age of 80.
While working, a little room left in the 35% bracket.
Starting Social Security at 70.
Most retirement money in 401(k) with the option to delay required minimum distributions until I stopped working.
Spending well below the maximum ORP would estimate, with the difference going into savings- which is reality for me.

In spite of this, I-ORP had me wait until age 70 to start Roth conversions. That is, ignored years before that when there was some space at 35%, but started conversions when I would be firmly in 39.6% bracket due to SS alone.
I-ORP also had me taking RMDs from my 401(k) starting at age 70, even though I did not have to and since I was still working, I did not need the money.

Welch said
Imposing a spending cap of 50% of your maximum potential spending has ORP committing unnatural acts as it drains your IRA (thank you RMD) and stuffs your Roth. The spending cap treats spending at a constraint and maximizes your estate. Your ensuing reports, while appearing to be mathematically correct, are distorted. This is the first time I've seen a plan in Death Tax estate terrain.
I pointed out that I had some 35% room before age 70, then firmly in the top tax rate once SS starts, even including only the RMD on my IRA, not 401(k), then drop again once I did retire at age 80. Intuitively, if I were to do Roth conversions, I would do some some before age 70, then pause while collecting SS and RMDs on the IRA on top of earned income and perhaps resume conversions after retiring at age 80, when earned income had gone away.

Welch said
Before 80 you have after retirement earnings, none after 80. Your pre 80 income for these 10 years is twice your constant spending value which applies to all of retirement. Where does the extra money go? (Here is where the model departs from the real world due to the restrictive constant spend assumption!) From age 70 through 74 the extra money pays the taxes on the conversions, making the conversions essentially tax free -- in the model but not necessarily in the real world. From age 75 through 79 the extra money pays taxes on conversions at a much lower level and some of it gets saved in the after-tax account( AftxTrns). What happened at age 75? I don't know; the mismatch between income and spending clearly has reached a tipping point. This, as they say in the journals, "Is an area of further investigation."
See how it again assumes that I am "retired" as of age 70, although I keep working, with the only difference being taking SS.

A further illustration of the problems, from Welch
The retirement plan starts at age 70 because you are retiring at age 70. ORP does not model conversions before retirement, or anything else except savings contributions. The assumption is that the wage earner is earning big bucks before retirement and not so much after retirement, making conversions more attractive. That is a feature of the model. You are an exception. Trying to model income taxes along with other pre retirement activities is beyond ORP's scope. ESPlanner, I believe does something like that.
Again, I was NOT retiring at age 70. I was just starting SS at 70, since there was no value to further delaying it.

And
ORP assumes that all accumulation phase activity stop at the beginning of retirement, such as savings contributions. That is a simplifying assumption, all models are loaded with them. We are just trying to model the essence of the real world, not all the fiddly bits.
with "retirement" again equated with "starting SS". Note that ORP appears to make that assumption about accumulation phase activity ending at "retirement" even if one indicates a post "retirement" income.

Welch concluded with
There is no question that ORP is not for you. Your numbers are way to big. Your problem is estate planning. Look at the top of your report, the Estate report shows that you are putting serious money into the Republican's Death Tax. That's where you need to focus, IMHO.
Welch was incredibly helpful and responsive in working through my case, particularly since he makes not a penny for anyone using the program.

I was left with the impression that the program definitely did not work for me. The guy who wrote it said that it did not.

I thought it was possible it might work for others whose retirement plans more closely matched the embedded assumptions. But the fact that it would output a plan wholly inappropriate for me, rather than just returning an error, left me worried. If the plan does not work because the ORP assumptions do not apply it would be safer to get a message that said as much, rather than a plan that makes no sense. That means people may think it works for them when it does not.

I also learned more about assumptions in the program that are not stated on the site. Those assumptions make it clear that it does not apply to my situation, but I would not have known that from reading the documentation online.

It seems that ORP will accept inputs that are outside the ranges on which the programming is based and return results that do not reflect anything approaching optimal. It will do this without warning. This means that one is left to one's own devices to decide whether ORP works for them. Maybe yes, but it could be very far off, with no warning.

So use with care.
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

afan
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by afan » Wed Sep 06, 2017 7:49 am

State estate taxes:

I never got that far. It was far off just worrying about federal estate taxes and Welch declared that ORP was not for me. Had it all been fine at the tax and estate planning levels just considering fed estate taxes, I would have tried to chase it to the state level. As it was, there seemed to be no point...
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

LeeMKE
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by LeeMKE » Wed Sep 06, 2017 8:16 am

How I use I-ORP, and who shouldn't
Edit Report this post Quote
Post by LeeMKE » Thu May 11, 2017 1:47 am

I fit the parameters to use I-ORP, and it has been a big help:

1) I am principally invested in tax deferred accounts (IRA and 401K) and had done some IRA to ROTH conversions, but wanted to know if more would optimize my taxes during retirement.
2) My estate is not over $5 million, so no estate tax consideration is needed.
3) Optimizing our income is our goal. We are not optimizing to leave an estate.
4) For us, postponing Social Security needs to be balanced against portfolio withdrawals to cover any period we delay Social Security.

If you have 3 or 4 of these same parameters, I-ORP may be very helpful. If you have just two, this tool might help, but might mislead. If you have only one, I-ORP is unlikely to be helpful IMHO.
This is from the other thread discussing I-ORP, the original post.
viewtopic.php?f=10&t=218659

So, you've confirmed that I-ORP does NOT apply:
1) Your estate is likely to be over $5 million, making your case an estate planning case instead of a withdrawal optimization case.
2) You aren't trying to optimize retirement withdrawals.
3) Your retirement will take place after age 70.
4) You will continue adding to savings (more than just replenishing your emergency fund) after retirement.
The mightiest Oak is just a nut who stayed the course.

smitcat
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by smitcat » Wed Sep 06, 2017 8:29 am

afan wrote:
Wed Sep 06, 2017 7:17 am
smitcat wrote:
Tue Sep 05, 2017 9:59 am

I have run the IORP below max spending and the results did not seem at all nonsensical.
I have checked a number of runs with specific tax software for income tax purposes and it was very close in the estimation given the same outputs.
Likely there is no way a calculator could optimize estate taxes given the variability of what state you reside in and the holdings of that estate - we will work on that separately when we are much closer to that need.
Please be more specific when you refer to these problems so we can see if it applies to our case as well.
Thank you
OK, trying to be specific enough to be helpful without going into so much detail that the post goes on for pages.

I contacted James Welch about my results and after some clarification on both ends, he agreed that the program does not work for my situation. So I do not believe that the problems were errors in input or failing to understand the results.

I indicated a retirement age of 80.
While working, a little room left in the 35% bracket.
Starting Social Security at 70.
Most retirement money in 401(k) with the option to delay required minimum distributions until I stopped working.
Spending well below the maximum ORP would estimate, with the difference going into savings- which is reality for me.

In spite of this, I-ORP had me wait until age 70 to start Roth conversions. That is, ignored years before that when there was some space at 35%, but started conversions when I would be firmly in 39.6% bracket due to SS alone.
I-ORP also had me taking RMDs from my 401(k) starting at age 70, even though I did not have to and since I was still working, I did not need the money.

Welch said
Imposing a spending cap of 50% of your maximum potential spending has ORP committing unnatural acts as it drains your IRA (thank you RMD) and stuffs your Roth. The spending cap treats spending at a constraint and maximizes your estate. Your ensuing reports, while appearing to be mathematically correct, are distorted. This is the first time I've seen a plan in Death Tax estate terrain.
I pointed out that I had some 35% room before age 70, then firmly in the top tax rate once SS starts, even including only the RMD on my IRA, not 401(k), then drop again once I did retire at age 80. Intuitively, if I were to do Roth conversions, I would do some some before age 70, then pause while collecting SS and RMDs on the IRA on top of earned income and perhaps resume conversions after retiring at age 80, when earned income had gone away.

Welch said
Before 80 you have after retirement earnings, none after 80. Your pre 80 income for these 10 years is twice your constant spending value which applies to all of retirement. Where does the extra money go? (Here is where the model departs from the real world due to the restrictive constant spend assumption!) From age 70 through 74 the extra money pays the taxes on the conversions, making the conversions essentially tax free -- in the model but not necessarily in the real world. From age 75 through 79 the extra money pays taxes on conversions at a much lower level and some of it gets saved in the after-tax account( AftxTrns). What happened at age 75? I don't know; the mismatch between income and spending clearly has reached a tipping point. This, as they say in the journals, "Is an area of further investigation."
See how it again assumes that I am "retired" as of age 70, although I keep working, with the only difference being taking SS.

A further illustration of the problems, from Welch
The retirement plan starts at age 70 because you are retiring at age 70. ORP does not model conversions before retirement, or anything else except savings contributions. The assumption is that the wage earner is earning big bucks before retirement and not so much after retirement, making conversions more attractive. That is a feature of the model. You are an exception. Trying to model income taxes along with other pre retirement activities is beyond ORP's scope. ESPlanner, I believe does something like that.
Again, I was NOT retiring at age 70. I was just starting SS at 70, since there was no value to further delaying it.

And
ORP assumes that all accumulation phase activity stop at the beginning of retirement, such as savings contributions. That is a simplifying assumption, all models are loaded with them. We are just trying to model the essence of the real world, not all the fiddly bits.
with "retirement" again equated with "starting SS". Note that ORP appears to make that assumption about accumulation phase activity ending at "retirement" even if one indicates a post "retirement" income.

Welch concluded with
There is no question that ORP is not for you. Your numbers are way to big. Your problem is estate planning. Look at the top of your report, the Estate report shows that you are putting serious money into the Republican's Death Tax. That's where you need to focus, IMHO.
Welch was incredibly helpful and responsive in working through my case, particularly since he makes not a penny for anyone using the program.

I was left with the impression that the program definitely did not work for me. The guy who wrote it said that it did not.

I thought it was possible it might work for others whose retirement plans more closely matched the embedded assumptions. But the fact that it would output a plan wholly inappropriate for me, rather than just returning an error, left me worried. If the plan does not work because the ORP assumptions do not apply it would be safer to get a message that said as much, rather than a plan that makes no sense. That means people may think it works for them when it does not.

I also learned more about assumptions in the program that are not stated on the site. Those assumptions make it clear that it does not apply to my situation, but I would not have known that from reading the documentation online.

It seems that ORP will accept inputs that are outside the ranges on which the programming is based and return results that do not reflect anything approaching optimal. It will do this without warning. This means that one is left to one's own devices to decide whether ORP works for them. Maybe yes, but it could be very far off, with no warning.

So use with care.
Thank you for taking the time to answer my question.
The IORP obviously does not apply to your situation, it works very well for us.

smitcat
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by smitcat » Wed Sep 06, 2017 8:32 am

LeeMKE wrote:
Wed Sep 06, 2017 8:16 am
How I use I-ORP, and who shouldn't
Edit Report this post Quote
Post by LeeMKE » Thu May 11, 2017 1:47 am

I fit the parameters to use I-ORP, and it has been a big help:

1) I am principally invested in tax deferred accounts (IRA and 401K) and had done some IRA to ROTH conversions, but wanted to know if more would optimize my taxes during retirement.
2) My estate is not over $5 million, so no estate tax consideration is needed.
3) Optimizing our income is our goal. We are not optimizing to leave an estate.
4) For us, postponing Social Security needs to be balanced against portfolio withdrawals to cover any period we delay Social Security.

If you have 3 or 4 of these same parameters, I-ORP may be very helpful. If you have just two, this tool might help, but might mislead. If you have only one, I-ORP is unlikely to be helpful IMHO.
This is from the other thread discussing I-ORP, the original post.
viewtopic.php?f=10&t=218659

So, you've confirmed that I-ORP does NOT apply:
1) Your estate is likely to be over $5 million, making your case an estate planning case instead of a withdrawal optimization case.
2) You aren't trying to optimize retirement withdrawals.
3) Your retirement will take place after age 70.
4) You will continue adding to savings (more than just replenishing your emergency fund) after retirement.

Yes Lee I agree based upon what we see in our case. But with our inputs it does do a credible job addressing your #1 if the other issues are not in play. Of course it does not plan estate strategy but it does help maximize estates and will allow quick comparisons that allow you to end up with more funds in Roths if you prefer that vehicle for heirs.

MandyT
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by MandyT » Fri Sep 08, 2017 9:39 pm

Dottie57 wrote:
Mon Sep 04, 2017 8:57 am
Using these tools makes me more comfortable with the idea of retirement. I have enough. Yea!
SimplicityNow wrote:
Mon Sep 04, 2017 9:15 am
Using the various online calculators gave me additional information I needed to determine that we had "enough".

I wouldn't say by itself it convinced me but it gave me a larger psychological comfort level with my determination.
I'm pretty much with them. Early in 2016, I found out that, in order to be eligible for retiree medical insurance, I would have to either retire in 2017 or wait until 2022. Based on running a variety of FIRECalc simulations, I discovered (with mild surprise) that I was in pretty good shape to retire in 2017, so I did. In a weird way, I'm thankful that I never encountered the One More Year dilemma. I knew that I didn't want to commit to five more years if I could possibly avoid it, and FIRECalc provided some reassurance that, while nothing is guaranteed, retiring now was not patently stupid.

afan
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by afan » Sun May 20, 2018 8:37 am

Bumping this thread with another question about IORP.
I tried running it today and it simply returned an error. As you can see above, in the past I found it was not designed to address my situation and I was concerned that it would give a result that was wrong, but with no warning.

So it is possible that the new behavior of giving an error rather than a retirement plan is an improvement.

I also starting wondering what IORP assumed happened to tax deferred money at death. I suspect it assumes the accounts would be emptied immediately and a whopping tax bill paid at date of death. That is, I suspect it ignores the possibility of heirs to stretch distributions for their life expectancy. To account for this, IORP would have to inquire about ages and tax brackets of heirs, which it does not do. In reality, younger heirs could stretch out those distributions for many decades, with lower hits to their tax rates and certainly lower tax rates than the maximum on an estate at date of death.

If I am right about this, then the endgame logic, assuming taxability all at once at death, would be wrong for many people. With that wrong, I would assume the error would propagate backwards to all of the planning for Roth conversions, even at the top tax rate, while working.

Anyone know whether I am correct in my inferences about IORP handling of balances in tax deferred accounts and ignoring the option of heirs to stretch?
We don't know how to beat the market on a risk-adjusted basis, and we don't know anyone that does know either | --Swedroe | We assume that markets are efficient, that prices are right | --Fama

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TheTimeLord
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by TheTimeLord » Sun May 20, 2018 8:47 am

TheTimeLord wrote:
Mon Sep 04, 2017 8:41 am
Did utilizing a tool like I-ORP or Firecalc or your own homegrown spreadsheet influence or extend your retirement date. Personally, I have found the value of my human capital to be highlighted by running multiple scenarios with these planning tools. How has using tools like these effected your retirement planning?
Ran several scenarios yesterday and Firecalc seems to confirm what my homegrown spreadsheets have been telling me and what I knew antidotally, I am by any pragmatic definition Financially Independent.

Firecalc:
For our purposes, failure means the portfolio was depleted before the end of the 50 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.
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DR
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by DR » Sun May 20, 2018 8:53 am

I used a different planning calculator, not one of those two. But I discovered that by optimizing my SS withdraw strategy I was able to buy myself 2.5 years of early retirement.

IlliniDave
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by IlliniDave » Sun May 20, 2018 9:12 am

For me such tools, both homespun and online, have been part of the process from the beginning when I first transitioned from retirement/FI being a vague future notion to a specific plan. It's hard to point out individual influences because they were part of everything.
Don't do something. Just stand there!

LeeMKE
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by LeeMKE » Sun May 20, 2018 9:23 am

You have to use a tool with the underlying assumptions taken into consideration.

I-ORP optimizes for your planning period, not beyond. So yes, if you are planning to leave an estate to heirs and want to plan for how the funds are held at death, I-ORP stops short of that analysis.
by DR » Sun May 20, 2018 8:53 am

I used a different planning calculator, not one of those two. But I discovered that by optimizing my SS withdraw strategy I was able to buy myself 2.5 years of early retirement.
Any chance you would try out I-ORP with your "just before" numbers to tell us what it comes up with in comparison?

Social Security optimization was the original reason I tried I-ORP. The other calculators told me to have both H & W wait to take Social Security. But none of them analyzed the impact on the portfolio by not working during the period 62 to 70, and that made me nervous. I-ORP specialized in accounting for the early draw downs and advised a different strategy for us.

So, I'm wondering how I-ORP compares with the planning calculator you chose to follow.
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by TimeRunner » Sun May 20, 2018 9:39 am

I-ORP has been useful for our planning for Roth IRA conversions and understanding the pattern for optimal account withdrawal in retirement. There was a frustrating issue with saved data from previous run not being carried over when the I-ORP model on the website was periodically updated, but that was fixed a few months ago.
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by Greg in Idaho » Sun May 20, 2018 10:18 am

I have spent lots of time with cfiresim and it has made a significant contribution to my comfort level with retiring.

In particular, the process of starting with my best estimates for numbers, then doing a series of iterations with increasingly conservative numbers, has been illuminating.

...now let's chop SS in half
...now let's leave out SS altogether
...now let's increase periodic spending for house/cars
...now let's increase annual spending on health care
...now let's cut back expected pension
...now let's decrease expected return on portfolio
...now let's increase the spending floor on the variable withdrawal

Not that any of the results tell me what's going to happen...but playing around a bunch with different assumptions and seeing the modeled results adds details to what is otherwise a rather limited view of the possibilities (for me at least).

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by marcopolo » Sun May 20, 2018 10:35 am

TheTimeLord wrote:
Mon Sep 04, 2017 8:41 am
Did utilizing a tool like I-ORP or Firecalc or your own homegrown spreadsheet influence or extend your retirement date. Personally, I have found the value of my human capital to be highlighted by running multiple scenarios with these planning tools. How has using tools like these effected your retirement planning?
I think these tools are very helpful for fine tuning your plans (Roth Conversions, Asset Allocation, Asset Location, Tax Optimization, etc.), but as far overall plan, I think they largely suffer from confirmation bias. That is, if you (just for example :wink: ) are inclined to believe you still One More Year to retire, you will find evidence in these tools to support that belief. Another person with the same situation, who believes they are ready, will likewise find evidence in these tools to support their beliefs as well.
Once in a while you get shown the light, in the strangest of places if you look at it right.

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by 2pedals » Sun May 20, 2018 11:31 am

afan wrote:
Sun May 20, 2018 8:37 am
Bumping this thread with another question about IORP.
I tried running it today and it simply returned an error. As you can see above, in the past I found it was not designed to address my situation and I was concerned that it would give a result that was wrong, but with no warning.

So it is possible that the new behavior of giving an error rather than a retirement plan is an improvement.

I also starting wondering what IORP assumed happened to tax deferred money at death. I suspect it assumes the accounts would be emptied immediately and a whopping tax bill paid at date of death. That is, I suspect it ignores the possibility of heirs to stretch distributions for their life expectancy. To account for this, IORP would have to inquire about ages and tax brackets of heirs, which it does not do. In reality, younger heirs could stretch out those distributions for many decades, with lower hits to their tax rates and certainly lower tax rates than the maximum on an estate at date of death.

If I am right about this, then the endgame logic, assuming taxability all at once at death, would be wrong for many people. With that wrong, I would assume the error would propagate backwards to all of the planning for Roth conversions, even at the top tax rate, while working.

Anyone know whether I am correct in my inferences about IORP handling of balances in tax deferred accounts and ignoring the option of heirs to stretch?
I-ORP does not consider post taxes for legacy concerns, i.e. stretch advantages in a Roth or step up basis for an inherited taxable account.

The tax rates have changed since this post and I-ORP has discontinued a feature that caps annual spending. I am not happy that I am not able to cap annual spending, but do think it is a great tool and has helped me immensely. I-ORP suggests that two superior alternatives for cap spending are available. They are fixing your minimum estate or using the 3-PEAT simulation.

I do not agree that they are superior for my current situation. I do not need to fix my estate parameter and it not a big priority to me, nothing I want to "fix" for my planning purposes. It is to me, something nice to know but have little faith that this estimate will be accurate. I have much more faith in my ability to limit spending to a conservative amount using an essential plus generous discretionary cap for capping the spending. The withdrawal method 3-PEAT simulation gives me too much disposable income, it give me more than 2.7x what we should ever need. :D I want to know what the estate result "could be" using the optimizer (how to maximize Roth conversions and SS strategies) if I limit spending instead, like I was able to do in 2017.
Last edited by 2pedals on Sun May 20, 2018 2:36 pm, edited 1 time in total.

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by smitcat » Sun May 20, 2018 11:43 am

2pedals wrote:
Sun May 20, 2018 11:31 am
afan wrote:
Sun May 20, 2018 8:37 am
Bumping this thread with another question about IORP.
I tried running it today and it simply returned an error. As you can see above, in the past I found it was not designed to address my situation and I was concerned that it would give a result that was wrong, but with no warning.

So it is possible that the new behavior of giving an error rather than a retirement plan is an improvement.

I also starting wondering what IORP assumed happened to tax deferred money at death. I suspect it assumes the accounts would be emptied immediately and a whopping tax bill paid at date of death. That is, I suspect it ignores the possibility of heirs to stretch distributions for their life expectancy. To account for this, IORP would have to inquire about ages and tax brackets of heirs, which it does not do. In reality, younger heirs could stretch out those distributions for many decades, with lower hits to their tax rates and certainly lower tax rates than the maximum on an estate at date of death.

If I am right about this, then the endgame logic, assuming taxability all at once at death, would be wrong for many people. With that wrong, I would assume the error would propagate backwards to all of the planning for Roth conversions, even at the top tax rate, while working.

Anyone know whether I am correct in my inferences about IORP handling of balances in tax deferred accounts and ignoring the option of heirs to stretch?
I-ORP does not consider post taxes for legacy concerns, i.e. stretch advantages in a Roth or step up basis for an inherited taxable account.

That tax rates have changed since this post I-ORP discontinued to feature that caps annual spending. I am not happy that I am not able to cap annual spending, but do think it is a great tool and has helped me immensely. I-ORP suggests that two superior alternatives for cap spending are available. They are fixing your minimum estate or using the 3-PEAT simulation.

I do not agree that they are superior for my current situation. I do not need to fix my estate parameter and it not a big priority to me, nothing I want to "fix" for my planning purposes. It is to me, something nice to know but have little faith that this estimate will be accurate. I have much more faith in my ability to limit spending to a conservative amount using an essential plus generous discretionary cap for capping the spending. The withdrawal method 3-PEAT simulation gives me too much disposable income, it give me more than 2.7x what we should ever need. :D I want to know what the estate result "could be" using the optimizer (how to maximize Roth conversions and SS strategies) if I limit spending instead, like I was able to do in 2017.
"I am not happy that I am not able to cap annual spending, but do think it is a great tool and has helped me immensely. I-ORP suggests that two superior alternatives for cap spending are available. They are fixing your minimum estate or using the 3-PEAT simulation."

We have used variable amounts of fixed estate funds to simulate caps on spending with good results.
I see little or no difference from the older version in that respect.

"I want to know what the estate result "could be" using the optimizer (how to maximize Roth conversions and SS strategies) if I limit spending instead, like I was able to do in 2017."
A tool that accomplishes this goal in greater detail than IORP is the RPM calculator/spreadsheet but the price you pay for detail is longer set up time and longer time to get comfortable using the tool.

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by AtlasShrugged? » Sun May 20, 2018 12:20 pm

Mostly, these tools have terrified me. They show how woefully behind I am. :shock:
“If you don't know, the thing to do is not to get scared, but to learn.”

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by michaeljc70 » Sun May 20, 2018 12:24 pm

They've helped me. I've run a ton of scenarios and it gives me a good idea not just what I can take out planning for the worst case scenarios but what happens in the more likely scenarios. For example, though I get 100% success with a 4% SWR, there is a 50%+ chance a 6% SWR will work. I've also played a lot with "what-if" scenarios like how much of an impact on retirement income will working an extra X years make and how changes in AA impact things (hypothetically).

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by nisiprius » Sun May 20, 2018 12:38 pm

I used a FIRECALC-like tool provided by Fidelity, called the Fidelity Retirement Income Planner, circa 2007. Here are some things that really influenced me.

a) I had and have a very conservative allocation. After I ran the tool, it gave me a very specific recommendation that I should consider increasing my stock allocation substantially, in order to improve the success percentage. I tried following that recommendation. The results were virtually identical. The obvious explanation is that by default Fidelity assumes bad (though not worse-case) stock market performance, 10th percentile, and the 10th percentile returns from stocks are not that different from bonds. So the result was not a surprise, except that it directly contradicted the tool's own recommendation--following their recommendation did not produce the results they said it would produce, in their own simulation tool.

b) Fidelity's tool doesn't do any sensitivity analysis, but I did a crude form myself by varying things and seeing what changed. What leapt out at me is that the results were hugely sensitive to the amount of money I said I would need, or would spend. And remarkably insensitive to asset allocation. The most powerful lever controlling success or failure is simply how much you spend.

c) Fidelity assumed a healthcare cost inflation rate 3% higher than inflation in general. This assumption dominates the analysis; in effect climbing healthcare costs are, maybe not a vertical brick wall, at least the side of a halfpipe. If healthcare costs really keep climbing at that rate, you are s---wed no matter what you do. You tell me what assumption to plug in--accept Fidelity's assumption? Or say "obviously this can't continue" and can the assumption? Again, this is a hugely consequential assumption.
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2015
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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by 2015 » Sun May 20, 2018 1:12 pm

Used too many to count pre-retirement. Post-retirement only use Fidelity's Retirement Income Planner, more as an exercise than anything else, since I now use LMP and am largely insulated from the vagaries of the stock market. I've always used FRIP's "significantly lower than historical averages" output as my baseline for concern (keeping in mind said output has a 90% confidence level, and that said output performance assumptions fail 10 out of 100 times according to Fidelity's methodology explanation). It's been interesting to observe my actual performance fall within Fidelity's "if market averages continue" outputs. In other words, I've been beating the worse and worst case scenarios.

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by LeeMKE » Sun May 20, 2018 1:24 pm

Every tool has assumptions. Some we may agree with, some we may disagree with, many we have no better insight than the tool developer.

My solution has been to use 3 tools I have confidence in. When all three tools correlate, the next decision is easy. When two correlate, I'll probably go with majority rule. If all 3 diverge, I'll have to revisit everything to review all the tools (and maybe check out others since developed) and as I get older, will probably take the situation to a fee-base financial planner for another review.

So far, all my tools have correlated for the last 3 years. The test will come when we face a disruption.

I'm using:
  • Fidelity Retirement Income Planner - my first tool, used for years as we began the final approach to retirement.
  • I-ORP - We are still making IRA2Roth conversions, and also like the guidance of how much to draw from each type of account to smooth out our tax brackets
  • Prime Harvesting Worksheet - The newest tool. The backend is a little complex for me, but McClung convinced me that he has looked at all the right issues and come up with a decent approach.
Three tools seem prudent because one may fall away or stop being updated. Fidelity changed their tool a few years ago, and I was dismayed by some of the changes. I-ORP is created and maintained by a retiree with no profit motive to keep it going after he stops working on it. And Prime Harvesting is newly published. Maybe something will happen that makes it less attractive.
The mightiest Oak is just a nut who stayed the course.

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by jminv » Sun May 20, 2018 2:51 pm

Yes, when I first used firecalc it got me comfortable with the idea of retirement in my mid-30s and then to try and get my wife comfortable with it, which is still an ongoing process.

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by 2pedals » Sun May 20, 2018 3:12 pm

smitcat wrote:
Sun May 20, 2018 11:43 am
We have used variable amounts of fixed estate funds to simulate caps on spending with good results.
I see little or no difference from the older version in that respect.
2pedals wrote:
Sun May 20, 2018 11:31 am
I want to know what the estate result "could be" using the optimizer (how to maximize Roth conversions and SS strategies) if I limit spending instead, like I was able to do in 2017.
A tool that accomplishes this goal in greater detail than IORP is the RPM calculator/spreadsheet but the price you pay for detail is longer set up time and longer time to get comfortable using the tool.
smitcat,
When using I-ORP and fixing the estate funds, I have not been able to reduce my spending down to below my expected spending (I good problem to have). If I fix my estate funds too high I get an "modeling error". The highest fix estate value without an modeling error gives me a projected disposable of 2.3 times my expected spending. Since I can no longer cap my spending to a reasonable amount the optimizer is assuming I will be spending much more that I wish for modeling purposes, this will affect my "optimum" result.

I have used Bigfoots, RPM, and I agree that the RPM calculator is a great tool as well but it is not an optimizer.

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Re: Has Firecalc or I-ORP altered your retirement plans?

Post by smitcat » Sun May 20, 2018 4:30 pm

2pedals wrote:
Sun May 20, 2018 3:12 pm
smitcat wrote:
Sun May 20, 2018 11:43 am
We have used variable amounts of fixed estate funds to simulate caps on spending with good results.
I see little or no difference from the older version in that respect.
2pedals wrote:
Sun May 20, 2018 11:31 am
I want to know what the estate result "could be" using the optimizer (how to maximize Roth conversions and SS strategies) if I limit spending instead, like I was able to do in 2017.
A tool that accomplishes this goal in greater detail than IORP is the RPM calculator/spreadsheet but the price you pay for detail is longer set up time and longer time to get comfortable using the tool.
smitcat,
When using I-ORP and fixing the estate funds, I have not been able to reduce my spending down to below my expected spending (I good problem to have). If I fix my estate funds too high I get an "modeling error".

I have used Bigfoots, RPM, and I agree that the RPM calculator is a great tool as well but it is not an optimizer.
"The highest fix estate value without an modeling error gives me a projected disposable of 2.3 times my expected spending. Since I can no longer cap my spending to a reasonable amount the optimizer is assuming I will be spending much more that I wish for modeling purposes, this will affect my "optimum" result."

Sounds like you are modeling accumulating more funds in retirement than spending - at least based upon your spending and the inputs you have supplied for fund(s) earnings.
If that is the case then you will not require a majority of the funds and an optimizer for 'spending' is not likely the key that you are seeking.
Likely your goals revolve around either heirs and/or charities which will drive your decisions towards optimizing 'giving it away'.
For that I would guess one of the largest drivers will be to avoid taxes on the funds given away - dependent upon where they would go.

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