What do folks use for long-term forecasting of their personal finances?

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alexcr
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What do folks use for long-term forecasting of their personal finances?

Post by alexcr »

I'm curious what folks use to do long-term budgeting and forecasting for their (and, if relevant, their family's) personal finances. I'm not referring to month-to-month or annual budgeting so much as laying out your long-term budget and wealth outlook based on assumptions around salary, taxes, investments, real estate purchases, college savings, retirement, etc.. And, ideally, doing this in fairly minute detail as opposed to simply doing a high-level, back-of-envelope projection.

I imagine there are a lot of folks on here who do this themselves, e.g. in Excel. I imagine there are other folks who rely on their financial advisor for this kind of thing. But for other folks, is there any existing software or services that they use that does a good job of guiding them through this exercise? Sort of like an equivalent to TurboTax for your taxes.

Thanks in advance for your advice.
BuckStacker
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Re: What do folks use for long-term forecasting of their personal finances?

Post by BuckStacker »

I like using the Personal Capital retirement planner. You link all your accounts so everything stays up to date and it allows you to model out different scenarios to account for retirement age, spending, income, inheritance, anticipated market returns, etc.

I also like that it shows you the median and 10th percentile portfolio values over time. Oh, and it’s totally free. They try to get you to sign up with them to manage your money, but while not very Boglegead friendly in terms of fees, they’ll leave you be when you tell them you aren’t interested in anything but the awesome free web software tools.

Check it out at: personal capital.com

BuckStacker

P.S. I’m not affiliated with Personal Capital. Just think they have an awesome tool!
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vineviz
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Re: What do folks use for long-term forecasting of their personal finances?

Post by vineviz »

Personal Capital has a pretty good free tool of medium sophistication , you’ll just need to ignore their (mostly) soft sales messages about hiring them as an advisor.

FIRECalc is also good.
https://firecalc.com/
"Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves." ~~ Peter Lynch
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TinkerPDX
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Re: What do folks use for long-term forecasting of their personal finances?

Post by TinkerPDX »

I use excel for forecasting spending and saving with “predictive” (ie estimating future based on past for expenditures and based on moderately conservative return projections) rather than normative/aspirational numbers.

I do also check in once in a while with personal capital’s much higher-level retirement tool.
basspond
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Re: What do folks use for long-term forecasting of their personal finances?

Post by basspond »

Excel, I can customize anyway I want.
Admiral
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Admiral »

Flexible Retirement Planner.
jharkin
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Re: What do folks use for long-term forecasting of their personal finances?

Post by jharkin »

basspond wrote: Tue Sep 25, 2018 3:42 am Excel, I can customize anyway I want.
+1.. I basically wrote my own excel retirement planner, factoring all our assets, income ,contribution rate, estimated taxes, social security, my wife's pension... I even but in options to vary inflation, returns, back test with different start dates, automatically calculate optimal roth conversion up to various tax brackets, potential ACA subsidies for early retirement, etc.

I probably spent hundreds of hours on it over the years... if not thousands. Every time I see these "whats your side hustle" thread I chuckle that mine is reading finance books and excel planning...

From time to time I sanity check the results against FIREcalc.
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mhc
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Re: What do folks use for long-term forecasting of their personal finances?

Post by mhc »

I usually do it in my head relying heavily on the rule of 72 and doing piecewise analysis. I believe this is accurate enough for forecasting the next 50 years. There is so much uncertainty, I do not believe it is worth putting too much effort into forecasting out decades.

I also like firecalc. It can show you the sensitivity of your assumptions.

Fidelity has some good tools too.
52% TSM, 23% TISM, 24.5% TBM, 0.5% cash
Jack FFR1846
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Jack FFR1846 »

Excel with annual predictions. Each year, I can change the % gain expected. When each year ends, I enter the actual numbers. Future predictions then are based on those actual numbers.
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Watty
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Watty »

basspond wrote: Tue Sep 25, 2018 3:42 am Excel, I can customize anyway I want.
Another +1

But I actually used LibreOffice :D

A key thing to do is to use multiple tools to cross check your results to see if they agree. I also checked my numbers a lot with FireCalc to make sure that the various scenarios also looked Ok using the FireCalc result. I also used a couple other online retirement planning tools to do quick cross checks but I forget which ones I used.

To me a key thing I could do in a spreadsheet was to play with the assumptions to see how much I could change things like spending and the expected investment return and still be OK. I think of this as being a sensitivity analysis to help see that there might be risk like if a 5% investment return would work but a 4.8% return would fail.

There are so many unknowns and uncertainties that a simple model is likely just as useful as a very complex model since the margin of error is so much larger than any small factors that you might add to a complex model.

One thing to keep in mind is the definition of "failure" when you run your numbers in a model. It does not necessarily mean that you spend mindlessly according to plan until you are broke, it more likely means something like you might have to cut your spending back by 10% when you are 75. As long as your retirement budget is not bare bones you should be able to do that and still be more than comfortable.

Many if not most models ignore your odds of outliving your money and just do the model over a fixed period of time. For example the results of a FireCalc test might show a 5% failure rate over 30 years. There might only be a 20% chance that you would live 30 years so the odds of you living to see that failure would be closer to 1%.
Ron Scott
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Ron Scott »

alexcr wrote: Mon Sep 24, 2018 11:34 pm I'm curious what folks use to do long-term budgeting and forecasting for their (and, if relevant, their family's) personal finances. I'm not referring to month-to-month or annual budgeting so much as laying out your long-term budget and wealth outlook based on assumptions around salary, taxes, investments, real estate purchases, college savings, retirement, etc.. And, ideally, doing this in fairly minute detail as opposed to simply doing a high-level, back-of-envelope projection.
I have used a personally developed spreadsheet for many years and it's worked out great. It does take time to write but when you're done you understand it like the back of your hand.

Comments about forecasting and "wealth outlook" for your long-term future:

1. Regardless of what you read here or in any articles or books, it is not possible to predict future returns in investments. Some will tell you to use historical data as a guide (Firecalc or some Monte Carlo sims for example) because you get the benefit of averages and seeing what they call the "worst case scenario". What they don't tell you is before that worst case happened no one believed it would happen and no one planned for it. AND THE NEXT WORST CASE SCENARIO HASN'T BEEN THOUGHT OF AND IS NOT IN PEOPLE'S PLANNING. No one knows what the worse case is or even if we will enter a period of very low returns for a couple decades. We just don't know, period. So telling yourself "I need 25X expenses to retire at a 4% SWR" is like spitting in the wind.

Many of us like to use some % just to drive the numbers along and I use 0% real (just keeping pace with inflation). To me that's conservative and makes some sense without relying on history to predict the future. YMMV.

2. The best thing we can do to ensure we build a successful retirement portfolio is to overcompensate and build redundancy into it: Save more than you think you may need. This means overestimating your expenses and underestimating your returns.
Retirement is a game best played by those prepared for more volatility in the future than has been seen in the past. The solution is not to predict investment losses but to prepare for them.
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galeno
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Re: What do folks use for long-term forecasting of their personal finances?

Post by galeno »

We use the 4% rule. The expected real net CAGR of our portfolio is 1.2% (3% for equities and 0% for FI). As long as we don't overspend it should last our lifetime and have something left over.
KISS & STC.
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Kenkat
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Kenkat »

Excel
PatrickA5
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Re: What do folks use for long-term forecasting of their personal finances?

Post by PatrickA5 »

Does anyone know of a planning software that you can download all of the results into a spreadsheet? I'm looking for something that would have beginning balance, expenses, earnings, contributions and ending balance for each of 20-30 years. A lot of the retirement planners will give me nice graphs showing projections going out X years, but I'm looking for the downloadable underlying data that can be used to start a spreadsheet. Thanks.
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Taylor Larimore
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Vanguard Retirement Income Calculator

Post by Taylor Larimore »

Alexer:

Try this:

Vanguard Retirement Income Calculator

Best wishes.
Taylor
"Simplicity is the master key to financial success." -- Jack Bogle
JBTX
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Re: What do folks use for long-term forecasting of their personal finances?

Post by JBTX »

Quicken for expense tracking, and excel for long term forecasting.
Island John
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Island John »

I have used the Retiree Portfolio Model spreadsheet posted by BigFoot48. I think it's pretty comprehensive and flexible. You can use it to do “what if” scenarios. I also like the fact that, in addition to the Results information, it provides worksheets with the detailed information that allows me to make sure that I've entered my data correctly.

I found it a little difficult to understand the first time I used it but after a few tries, I found it very useful.

Here’s the link to the post: viewtopic.php?f=1&t=97352&p=1405885#p1405885

It’s described as being for people nearing retirement but it seems flexible enough that it could be used for longer term planning.
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Beehave »

I made a custom Social Security claiming spreadsheet. It showed optimum claiming at age 68. Then I waited until 70 anyway.

I use the back of an envelope or long yellow sheets and longhand arithmetic and algebra or a calculator for asset allocation and long-term planning. This is a personal preference that helps me think. I would not recommend it to those very comfortable with spreadsheets unless it somehow works for them in a way that is more valuable than its inefficiency.

P. S. My Soc'l Security spreadsheet was very helpful to me because it ensured that I knew what I was doing and that my emotions and rationality were in synch. The same goes for my back of the envelope calculations. Creating my own mathematical understanding, whether by pencil and paper, calculator, or my own spreadsheet causes me to think deeply about the nature, impact, and relations, of facts and possibilities and provides me with confidence to stay the course. Plugging numbers into someone else's program or spreadsheet serves me as more of a sanity check than a confidence-builder.
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Re: What do folks use for long-term forecasting of their personal finances?

Post by heyyou »

What do folks use for long-term forecasting of their personal finances?
Living within our means, expecting to adapt our spending to our resources, starting with 25 multiples of spending for retirement without SS (treating it as a bonus instead of a necessity).

We are wary of any precision in long term forecasts, good or bad.
I do like how McClung tested more recent retirement dates for 30 years, by adding in data from 1926 forward to the years from 1985 through 2014 when his data ended (book written in and after 2015). Thus he tested the 1999 retiree for thirty years that included the 2008 Crash and the Great Depression. He also adjusts each initial WD rate with respect to current CAPE10 values, and boosts WDs by increments of reduced longevity as retirement progresses. We are not spending at his precisely calculated percentages measured in thousandths (tenths a percent), since we are happy, just living within our means.
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corn18
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Re: What do folks use for long-term forecasting of their personal finances?

Post by corn18 »

Excel as primary. I bounce that off a detailed plan in The Flexible Retirement Planner. Also use Firecalc as a backup. I also started using i-ORP as it has the best output for tax and Roth conversion planning. I also use a nifty SS planner: https://socialsecurity.tools/app.html#/nav-spouse

I have spent hundreds of hours running scenarios and finally decide to max my 401k, IRA (backdoor Roth), megabackdoor Roth and also save all of my bonus and RSU's. That leaves enough to live now and retire early.
Consistently sets low goals and fails to achieve them.
sandramjet
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Re: What do folks use for long-term forecasting of their personal finances?

Post by sandramjet »

Island John wrote: Tue Sep 25, 2018 12:26 pm I have used the Retiree Portfolio Model spreadsheet posted by BigFoot48. I think it's pretty comprehensive and flexible. You can use it to do “what if” scenarios. I also like the fact that, in addition to the Results information, it provides worksheets with the detailed information that allows me to make sure that I've entered my data correctly.

I found it a little difficult to understand the first time I used it but after a few tries, I found it very useful.

Here’s the link to the post: viewtopic.php?f=1&t=97352&p=1405885#p1405885

It’s described as being for people nearing retirement but it seems flexible enough that it could be used for longer term planning.
+1
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FiveK
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Re: What do folks use for long-term forecasting of their personal finances?

Post by FiveK »

Primarily Quicken's Lifetime Planner and Excel.
Traveler
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Re: What do folks use for long-term forecasting of their personal finances?

Post by Traveler »

I use Excel and also play with Firecalc. My Excel sheet really only goes to the estimated year I will retire for assets so I have an estimation of how much I will have then. I have another longer term forecast for expenses which is what I use in Firecalc. Healthcare between retirement and Medicare is the biggest unknown so it ends up being a swag at best.
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Re: What do folks use for long-term forecasting of their personal finances?

Post by tennisplyr »

“Those who move forward with a happy spirit will find that things always work out.” -Retired 13 years 😀
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