The Ultimate Guide to Using FIRECalc

Retirement Planning Made Easy: A Simple Guide to Using FIRECalc

Figuring out how much money you need to save for retirement can be a pretty complicated exercise. To simplify, most people use the 4% rule. The 4% rule is based on the famous Trinity study which says:

You have a 95% chance of success in retirement (aka not running out of money) if you withdraw 4% of the initial balance each year.
For a $1,000,000 million portfolio this equates to a $40,000 withdrawal each year, adjusted for inflation.

So if you know how much money you spend, you can multiply that number by 25 and get a rough idea of how much money you'll need to save for retirement.

But what if you want a more precise answer? What if you happen to retire right before a huge recession like 2008 or the Great Depression? Will you have enough money to last through your retirement? And what if you have a pension? Or Social Security?

That's where FIRECalc comes in. It gives you control over a TON of variables to get an idea of what your chances of success are in retirement.

FIRECalc also has some powerful scenario simulators. For example, you can look at the impact of fees on your retirement or how saving a little more money can move your retirement date up by years.

In this guide I'm going to walk you through every part of FIRECalc and make it easy to understand. FIRECalc can be overwhelming at first glance. I'm going to break down every part of the calculator so you can use it with confidence and trust the results.

This guide is really long. If you want to skip to a specific section you can use the table of contents below.

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Before We Start...

FIRECalc is a beastly program and isn't easy to pick up and use out of the box. This guide is going to be long and super in depth but it's important that you read all of this or FIRECalc won't work.

Garbage in = Garbage out!


If you get even 1 variable wrong, your FIRECalc results will be meaningless. It's SUPER important that you make sure all of your inputs are accurate in order for FIRECalc to give you a good answer.

The Basics of FIRECalc

The main goal of FIRECalc is to simulate how your portfolio would perform under every different type of stock market situation we've experienced over the last 100+ years.

So instead of plugging in a blanket 7% growth, 3% inflation and watching your portfolio climb every year, FIRECalc is using real stock market returns going back to the late 1800's.

The easiest way to visualize this is the graph output FIRECalc spits out. You can get a quick idea of this from the main page by entering 3 things:

  • Your annual spending
  • Starting portfolio balance
  • Time horizon
  • This quick start box assumes you're retiring today. We'll look at how you change your retirement date later on when we go through each section of the calculator but go ahead and click Submit and check out the graph it spits out.

    And right above the graph, FIRECalc spits out this useful summary:

    Here is how your portfolio would have fared in each of the 117 cycles. The lowest and highest portfolio balance at the end of your retirement was $-300,739 to $4,259,606, with an average at the end of $1,387,093.
    For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 6 cycles failed, for a success rate of 94.9%.

    There's a lot of info in the graph and the results summary.  The main thing to focus on is the success rate. This is the percentage of runs where you make it through your retirement time horizon with an ending balance greater than $0.

    Under the absolute worst market conditions we've experienced, you could end up running out of money and theoretically being $300k past running out. Yikes.

    On the flipside if we have a great run in the stock market, you could end up with $4.2 million; 5x your starting value!

    Neither of those tidbits are very helpful though. Knowing that the average is $1.4mm means that you'll probably see your portfolio grow during retirement and the 95% success rate is very reassuring. That's the basis used in the Trinity Study to come up with the 4% rule so this is a solid plan.

    You can test this by tweaking the numbers. Raise your spending by $10k per year and see what happens.

    Here is how your portfolio would have fared in each of the 117 cycles. The lowest and highest portfolio balance at the end of your retirement was $-1,758,324 to $3,354,031, with an average at the end of $569,886.
    For our purposes, failure means the portfolio was depleted before the end of the 30 years. FIRECalc found that 41 cycles failed, for a success rate of 65.0%.

    Raising your spending from $30k per year to $40k per year with a $750k portfolio reduces your chances of success from 95% to 65% and your ending average ending portfolio is about $200k less than you started with.

    Before we dive in to all of the options FIRECalc has under the hood, take a second to play around with the basic calculator and get used to reading the result graph and summary.

    Understanding Success Rate

    Since the main metric is success rate, it's important to understand exactly what that number means.

    Since FIRECalc uses historical market data, it takes your portfolio and spending inputs and models what would have happened to your portfolio based on every possible year.

    So one scenario is what would happen if you retired in 1922, then another for 1923, and 1924, etc etc until you get 100+ lines, each one representing your retirement beginning in a different year.

    So a 95% success rate means that out of 100 years, 5 of them would have ended with you running out of money.

    But a successful retirement for you probably isn't defined the same way. If you plan to retire at 50 and live to 100, then you have a 50 year time horizon. If you go to your deathbed with $9 in the bank, FIRECalc will call that a successful retirement! But imagine being 99 and seeing your portfolio at $30k, knowing that you need $30k per year to live on. That doesn't feel very successful...

    So take these numbers with a grain of salt. None of them are perfect and none of them are 100% precise. The percent chance of success gives you a good idea of how well your plan will work but they can't account for real world conditions. If the market tanks, you can probably cut some spending to help your portfolio recover. Being able to flex your withdrawal rate will give your portfolio a lot of resiliency so you can survive poor market conditions.

    With that out of the way, let's jump into the nuts and bolts of how FIRECalc does all of this analysis.

    Under the Hood of FIRECalc

    The layout in FIRECalc can be a little confusing if you're new to it.

    To start with, it's important that your annual spending, portfolio value, and time horizon from the example we covered earlier are filled out and accurate. These values are used as the basis for other calculations so even though they're kind of buried on the homepage, they're essential.

    The box next to #1 in the picture below is where you enter spending, portfolio value, and time horizon.

    Box #2 is where you access all of the detailed information.  We'll get to that in a second.

    Go ahead and enter your values for these 3 items now. Here's some more info on them and how to think about what you should enter.

    • Spending - This is your annual spending in today's dollars (no inflation adjustment needed). This should be how much you expect to spend each year in retirement. This should include everything; mortgage (if you'll still have one), health insurance and medical expenses, utilities, groceries, travel, etc. Don't just use your current expenses! If you have kids and pay for daycare right now, that's probably not something you'll be paying for in retirement. Take some time and make sure you get this number as close to reality as possible. It's the basis for ALL of the other calculations.
    • Portfolio - This is the current value of all of your investment accounts. A lot of people include the value of their home in their net worth but you should not include that here. The portfolio value will usually consist of your 401(k)/403(b), Roth IRA, traditional IRA, after tax accounts, etc. Later on we're going to define the growth rate of this portfolio. The reason you don't want to include the value of your home in this number is that it probably won't grow at the same rate as the stock market. Historically houses have not appreciated in value as quickly as the stock market.
    • Years - This is the time horizon for our entire analysis which is basically how long you expect to live from today. If you don't know what to put here I'd just enter however many years it will take to get you to age 100. I'm 30, so I'm going to enter 70 in this box. If you go too low or too high your results will show a higher chance of success than what's realistic. If I entered a 30, my money would only need to last until I'm 60 so I wouldn't really have to worry about running out. If I entered 100, then I'd have such a long time horizon that my portfolio would have so long to recover from any downturn that my success rate would be artificially high. We're trying to hit the Goldilocks zone on this number but we can always go back and adjust it later if we want to see the impact on our success rate.

    After you get these 3 numbers entered you can click Submit and see the results. They're not going to be accurate because they'll assume you are retiring today and not contributing to your retirement accounts anymore. My spending/portfolio/time horizon are on the right and my results graph is below:

    To get FIRECalc set up correctly we'll have to move to those other tabs. Go ahead and click on "Other Income/Spending" now and we'll get to work getting it filled out.

    Other Income/Spending

    Now we're getting into the real meat behind FIRECalc that makes it the best retirement calculator around. The 4% rule only gets you so far in figuring out how much money you need to retire. How do you factor in Social Security? What about a pension?

    One warning I want to throw out before we get into this section is that both Social Security and pensions have been getting some flak lately for possibly not having enough funding to last.


    I'm not going to go too deep into this topic because it's a whole 'nother issue (you can read about pensions here and Social Security here) but just be aware that it's not unprecedented for someone to retire expecting a pension only to find out a few years later that the pension fund is totally broke and that person will be receiving nothing.


    If you want to account for pension/Social Security failure in FIRECalc just change the values to 0 and rerun your simulation.

    How to Estimate Your Social Security Income

    Head on over to the Social Security Administration's official estimator by clicking here, then scroll down and click the blue button to get started.

    You'll have to enter a bunch of personal information:

    • Name
    • Mother's maiden name
    • Social Security number
    • Date of birth
    • State of Birth

    Check the box to agree to the terms of service and run the calculator.

    It will ask you for your income last year before showing your results. This number is very important! It is the basis for all of your future earnings.

    The SSA assumes if you made $100k last year then you'll continue making that much forever. If you made $100k last year and took a $50k pay cut to go to a new job, your results will not be accurate.

    After you enter your previous year's salary you should get your results and it will look like this:

    Don't close this window! We'll use it in a second.

    If you want to try some different salaries just click the 'Add a New Estimate' button and it will ask for the age you want to retire at and the new salary.

    For the purposes of this exercise we're just going to go with the full retirement age which is 67. This another area that has a lot of passionate debate but we'll try to keep things simple for now.

    Now hop back over to FIRECalc and enter your estimated annual income and estimated starting date.

    I'm 30 and plan to start withdrawing SS at age 67 so I'm looking at 37 years in the future, 2055 (wow that's far away).

    My monthly estimate is $2,700 so my annual number for FIRECalc would just be 12x or $32,400.

    Next up is your spouse's Social Security.  If you're single and expect to stay that way, leave this blank.

    To figure out your spouse's social security estimate, go back to the beginning of the SSA calculator and enter all of their personal information just like you did for yourself. Here's what I came up with for my wife:

    Using the same math, she's 29 so I'll be adding 38 years which puts her date to 2056 and her annual payments will be around $22,000. Enter those into FIRECalc.

    Right below the Social Security section is the Pension/Off Chart spending area. I'll just grab FIRECalc's explanation of this section since they sum it up perfectly:

    For example, you might enter an inflation-adjusted pension in the first line, future annual contributions/spending for the grandkids' college fund in line two, and a non-inflation-adjusted spending reduction once your mortgage is paid off in the third line.

    Take a second and think about what your future is going to look like. Will you be paying your mortgage off before you retire? If so, you need to account for that in the spending number you entered earlier. If you included your mortgage as an ongoing expense but you expect it to go away in the future, use the Off Chart Spending Reduction section to subtract it (assign a negative value to it).

    Here are a couple of examples:

    1

    Estimating Pensions

    My wife is a teacher and pays into a pension fund so I'm going to include her pension now. If you have a pension and think it will be around when you retire, enter it here. If you don't have a pension or don't want to rely on one for your retirement, just leave this blank.

    2

    Paying Off Your Mortgage

    If you included a mortgage payment in your monthly spending and want to remove it from the calculations later, you'll enter it here as a negative number and uncheck the inflation adjusted box.

    3

    Large, One Time Purchases

    If you plan to make a big purchase outside of your normal spending like a $200,000 RV the year you retire or paying for someone's college tuition, just enter that as a positive number and check the inflation adjusted box.

    After you've got all of this filled out, your page should look something like this:

    And now we'll move on to the next section, "Not Retired".

    Not Retired

    This section is nice and easy. Just enter the year you plan to retire and how much money you plan to add to your portfolio every year until you do retire.

    If you're like a lot of people, you probably don't know when you'll retire which is why you're using this calculator! But the way FIRECalc works is to tell you how likely your retirement plan is to succeed. 
    You don't have to get your retirement year "correct", just put in the year you want to retire and we can go back and adjust later if we find out that number doesn't work (aka your success rate is too low). You can fix this by either retiring later or saving/making more money now.

    What Year Will You Retire?

    My goal is to retire when my kids graduate high school. My daughter is 2 right now so she'll be done with school in 16 years which puts my retirement year at 2034.

    Future Contributions

    The future contributions number should be how much you plan to add to your portfolio every year in contributions. This should include ALL contributions to your portfolio, by you or your company. Here are some examples of what to include:

    • 401(k)/403(b) contributions
    • Company match contributions
    • Traditional IRA contributions
    • Roth IRA contributions
    • After tax investments
    • Other asset classes that will grow in value

    I am currently maxing out my 401(k) and my company matches that up to 4% of my salary. They also put in another 3% as a Safe Harbor contribution which is a requirement for some companies based on the IRS rules for equitable 401(k) plans.

    Make sure you understand all of the contributions you get from your employer before entering a number. Here's how my numbers break down:

    • 401(k) max = $18,500
    • 4% match = $4,800
    • 3% safe harbor contribution = $3,600
    • Total contributions = $26,900

    I also save some money in an after tax account on Robinhood but I generally end up losing it all so I treat it as play money and I'm not going to include it here since it will (most likely) not be growing like the rest of my portfolio which is all put into index funds 🙂

    Here's what the completed FIRECalc page looks like for me:

    At this point you have a pretty good retirement model set up and you can hit the 'Submit' button to get an idea of how your retirement plan looks. Let's stop and celebrate our progress so far with one of my favorite gifs.

    Alright, back to work.

    Here's what we've captured so far:

    • Current portfolio
    • Annual increases to the portfolio
    • Current spending
    • Future spending
    • Pensions/Social Security
    • Estimated retirement age

    Based on what I've entered so far, here are my results:

    Here is how your portfolio would have fared in each of the 77 cycles. The lowest and highest portfolio balance at the end of your retirement was $165,000 to $16,665,038, with an average at the end of $10,397,212. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.) (Caution: The portfolio failed, or went negative, during some of the years in your scenario, but scheduled adjustments brought it back above zero before the end of the 70 years.)
    For our purposes, failure means the portfolio was depleted before the end of the 70 years. FIRECalc found that 6 cycles failed, for a success rate of 92.2%.

    Cool. So as long as:

    •  I make at least my current salary every year,
    • My wife gets her full pension, and
    • Social security never changes

    then I have a 92%chance of success and will likely end up with quite a bit more money than I started with. But these aren't all safe assumptions.

    Later on I'll show you how to run some additional scenarios to evaluate changes to the stock market, the effect of fees, and delaying your retirement date to see the effect on your chances of success.

    For now we'll continue our march through FIRECalc and check out the next section, spending models.

    Spending Models

    So far the only thing we've looked at on our spending habits is how much we expect to spend each year in retirement and any large, one time expenses that we can plan for right now.

    This is a pretty simple way to view retirement spending but it's also the easiest which is why it's so popular. FIRECalc has a couple of different options for modeling spending so you can get a more realistic calculation on your retirement outlook. 

    The first spending parameter you can adjust is the inflation assumption.

    Inflation

    FIRECalc's default is CPI which stands for consumer price index. Investopedia defines this as:

    A measure of price changes in consumer goods and services such as gasoline, food, clothing and automobiles. The CPI measures price change from the perspective of the purchaser.

    When you hear news updates about inflation being at 2% or the fed targeting a certain inflation number, this is the number they're usually referring to.

    Unless you have a really compelling reason to change this number, I'd just leave it set to the default CPI.

    The next choice is PPI which stands for purchaser price index. Investopedia's definition again:

    A family of indexes that measure the average change over time in selling prices by domestic producers of goods and services. PPIs measure price change from the perspective of the seller.

    And here's a chart comparing PPI vs CPI starting in 2000:

    Long story short, since we are consumers in this scenario we should probably use CPI instead of PPI.

    Finally, FIRECalc offers one more option which is to define inflation yourself. If you're a gold bug/doomsday prepper you might want to plug in a higher number here. Here's a graph showing the US inflation by year going back to the American Revolution in case you want to see where we've been and where we seem to be heading:

    So unless you have a really good reason why you want to change the inflation number, I would recommend leaving it indexed to CPI.

    Spending Models

    FIRECalc has 3 different spending models.  Here's how each one breaks down.

    Constant Spending Power

    Constant spending power is the default choice in FIRECalc and the easiest to understand. It assumes that your future spending will remain the same as the number we entered back at the beginning of this exercise and it will be automatically adjusted for inflation. 

    This means your spending power remains the same throughout retirement. So if you drink 1 gallon of milk and buy 1 new t shirt every week right now, then you'll still be able to afford those purchases in 30 years when their price has likely doubled.

    If you want to keep things simple, this is the best spending option to choose.

    Bernicke's Reality Retirement Plan

    When I started using FIRECalc I had never heard of this option before but it's pretty interesting.

    Basically the idea is that as you get older, you spend less money. When you're a fresh young 40 year old retiree, you might want to tour the world and go on all sorts of adventures. But when you're 80 you probably won't be spending much on skydiving or mountain climbing.

    Here's a nice table showing the average annual spending by age bracket:

    • Age 45-54 - $61,179
    • Age 55-64 - $54,783
    • Age 65-74 - $41,433
    • Age 75+ - $31,692

    One thing to watch out for is that using the Bernicke's spending model will drastically increase your chances of FIRECalc showing a successful retirement plan.

    Using the numbers above, people age 45-54 spend $60k per year. The default spending model in FIRECalc assumes this $60k will continue forever.

    But if you cut your spending in half, like someone age 75 might do, you need half as much money to retire.

    Your choice in spending model has a HUGE affect on your chances of success and the size of portfolio you need to retire. The default spending model is more conservative (higher $ required to retire) and the Bernicke model is more aggressive (require less $ to retire).

    If you're not sure, try both and see what the results look like. FIRECalc only takes a second to refresh so you can easily compare different scenarios.

    Percentage of Remaining Portfolio

    As the name implies, this spending model assumes you'll spend a specific percentage of your portfolio each year.

    With this spending model you don't have to worry about running out of money because it will adjust your spending to match the amount left in your portfolio.


    Your main concern now is if your spending will drop below the lifestyle you want to maintain.

    The 4% rule assumes you'll withdraw 4% of the initial balance each year. So if you start with $1,000,000 you would withdraw $40,000 each year no matter what happened in the market.
    But there are some obvious flaws to this plan. If the market dropped by 20% your portfolio would decline to $800,000. Now if you're withdrawing $40,000 per year you're actually at a 5% withdrawal rate.
    If you used the remaining portfolio method and withdrew just 4% that year, you'd only have $32,000 to live off of.

    The remaining portfolio spending method is the best fit for people who have saved more than they need in retirement and could live a leaner lifestyle if necessary due to stock market conditions.

    I've seen people in /r/financialindependence who are planning to "leanFIRE" which basically means they'll retire with something like $500k saved up and a plan to live on $20k per year. If you're in this crowd then you shouldn't use the remaining portfolio spending model. $20k is a pretty barebones retirement as is and you probably won't have much fat to trim when times get tough.

    On the flipside if you have $2 million saved then the 4% rule says you can withdraw $80k; if the market tanked right when you retired, you'd probably be OK trimming your budget back to $50k or $60k until your portfolio recovered. 

    Which Spending Model Is the Best?

    For modeling purposes I'd recommend using the constant spending model. This is more conservative and probably more realistic for most people.

    I think in practice, most people who retire with more than $1 million in savings would be able to adjust their spending down if the market tanked. If you plan for constant spending but actually use portfolio adjusted spending, you'll have a much higher chance of success.

    One of the awesome things about FIRECalc is how quickly it can spit out results. Try each of the spending options and see how your plan holds up. 

    If you choose one of the adjustable spending models you'll also see a spending graph on the results page right below your portfolio value graph.


    Because your spending will adjust based on your portfolio, the graph of your savings becomes less useful and the one you'll want to focus on is the graph that shows what your actual spending would be.

    Be careful though when analyzing your results. Using the portfolio adjusted spending can lead to some weird results like this:

    No FIRECalc, I'm not going to spend $500k in 1 year and be at the poverty line a decade later...

    Next up we'll look at the portfolio section.

    Portfolio

    FIRECalc's default assumptions for your portfolio are:

    • 75% allocated to stocks (total market index), 25% allocated to bonds
    • 0.18% annual expense fees

    If you're fees on your portfolio are different, you can enter them here. If they're higher than 1% then you probably need to do some more investigation and figure out why because you're paying too much.

    Unless you have a compelling reason to change these next options, you should just leave them alone. If you're feeling adventurous, take a look.

    Option 1: Total Market

    The total market option uses historical market data and lets you define the year you want to start measuring from. The default is 1871 and you shouldn't change this. If you want to see sequence of returns in action, set your retirement date to be 1929, right before the Great Depression, and see how bad things would be. Losing half of your portfolio a few years into your retirement may be bad enough that your portfolio can never recover unless you stop withdrawing from it.

    Next up is the fixed income asset. The default is the long term interest rate. You can choose another option if you want but I'd advise against it. I'm not even going to explain what the other options mean because if you need an explanation of what they are, then you shouldn't be using them to model your retirement portfolio.

    Finally you can select the percent of your portfolio that stays in stocks. The default is 75% stocks and 25% bonds. If you want to see what a 50% stocks and 50% bond portfolio would look like you can change this number to 50.

    Keep in mind that longer time horizons for retirement will require more growth. Take this to the extreme and imagine that you're 99 and will only live to 100. You don't really care what your growth rate is so keeping everything in cash will be fine.

    On the other extreme, if you retire at age 30 and live to 120, you need your money to last 90 years. If you park that money in cash you'll be eaten alive by inflation. Obviously the right answer is somewhere in the middle so unless you have a really good reason, just stick with somewhere around 75/25.

    Option 2: Mixed Portfolio

    If you want to fine tune your asset allocation you can use this section to do so.

    This screen looks eerily similar to my 401(k) with the options they give you for allocating your money. Personally I don't think this section is worth the hassle but if you want to fine tune your asset allocation then you can do it here.

    Option 3: Consistent Returns

    This section lets you define a constant growth rate and an inflation rate. This option seems like it's intended for something like a life insurance/annuity/CD where you have a guarantee that the value will rise at the same rate every year.

    The consensus on the Early Retirement forum seems to be that the consistent growth portfolio is not very useful. I'm not 100% sure these results are accurate and I've never invested in anything that had guaranteed growth like this so I didn't find this option that useful. Here's what my graph looked like with 7% growth and 3% inflation.

    Option 4: Random Returns with Defined Variability

    The final option is the random returns section. I think this would be best suited for someone who invests in hedge funds or other alternative investment classes where the returns are less variable than the stock market.

    For example, if you had a good fund that returned 6% (lower than the market) but the variability is only 5% (also lower than the market). Here's what it looks like:

    So pretty...but most people won't have this in the real world, so sticking to the default 75/25 stock/bond mix is probably your best bet.

    On to the next section, portfolio changes.

    Portfolio Changes

    The portfolio changes section is for lump sum future adjustments to the value of your portfolio. Examples would be selling your house, inheriting money or any other large, one time events.

    You can add up to 3 one time events and they can either add or subtract from your portfolio.

    If you're planning to sell your house and get a lump sum of say, $300k, go ahead and add that here but make sure you've accounted for the change to your rent/housing expenses in the spending section.

    Now we'll move on to the final, and most interesting tab, the Investigate tab.

    Investigating Other Scenarios

    Now that you've got your base scenario set up and modeled, it's time to look at some of the most powerful features built into FIRECalc. Using the Investigate tab allows you to simulate other scenarios and evaluate some "what ifs" like:

    • How will my results change if I adjust my stock allocation somewhere between 0% to 100%?
    • How much of an impact do fees have on my retirement?
    • What happens if I delay my retirement for X years (or a range like 0-3 years or 5-10 years)?
    • How much sooner can I retire by reducing my spending?
    • How much sooner can I retire if I made a lump sum contribution to my portfolio?
    • What are my chances of leaving behind $X for my heirs?

    Before we begin, make sure you've returned all of the earlier settings to your preferred choice. 

    For me that means:

    • Including Social Security and pension
    • Using the constant spending power option
    • Using the CPI for inflation
    • Average index fund fee of 0.18%
    • Total market portfolio split of 75/25 stocks and bonds

    Do a quick run in FIRECalc and make sure the graph looks alright. You want to have a good baseline scenario before running these next optimizations.

    Finally, one piece of advice: if you don't see the chart in the results page you'll need to make sure you enable Flash in your browser. If you're on a phone or tablet, these probably won't work at all.

    Adjusting Stock Allocation

    This option lets you analyze your success rate with stock allocations ranging from 0% to 100%. If you remember earlier, my plan had a 92% success rate. Check the box for adjusting allocation and hit submit.

    Here's what my results look like for different percentages of stocks in my portfolio.

    Just a heads up, FIRECalc doesn't label the axes for you so rewind to your high school science class and remember that the X axis is the independent variable; the one you can change. 
    The Y axis is the dependent variable; so it depends on what your X axis is. Our chance of success depends on how much of our portfolio is in stocks.

    FIRECalc doesn't give specific values but you can kind of see the point of diminishing returns. Up until 50% stocks, your chances of success are pretty low. After 50% it starts to level off, with a success rate of 85% or so.

    Impact of Fees

    If you ever doubted that the fees on your portfolio could ruin your retirement, this will change your mind. Click the radio button for the impact of expense ratio then hit submit and check out the results.

    Remember, chance of success is on the Y axis and the expense ratio is on the X axis.

    My base scenario was 0.18% in fees and a 92% chance of success.

    Most people wouldn't bat an eye if they were paying 1% in fees since 1% sounds like a small number. But based on this graph, 1% in fees means my success rate drops to about 85%. If I pay 2% in fees my success rate will drop to 70%. 

    Fees are incredibly important which is why I recommend using Vanguard which has very low fees.

    Delaying Retirement Date

    If your base scenario gave you a chance of success less than 90-95%, it means you probably don't have enough money saved. So you have three choices:

    1. Save more money
    2. Reduce your spending
    3. Delay your retirement

    The delayed retirement analysis in FIRECalc lets you see your chance of success in every year from now until the number of years out you enter in this box:

    And here's the result:

    Unfortunately FIRECalc doesn't label the points on the graph so you'll have to read the axes as best you can.

    With my initial retirement date of 2034 I had a 92% chance of success. If I delay until 2036 this goes up to 100%. 

    If I wanted to retire 4 years earlier in 2030, my odds of success would drop to 50-60%.

    Let's run a new analysis to really show off the usefulness of this 'what if' tool.

    FIRECalc will keep your results alive in your browser as long as you don't close it so I'm going to open a new window to start a new scenario.

    For this new scenario I'll use these variables:

    • 40k annual spending
    • 800k portfolio
    • Looking to retire as soon as possible
    • Need 95% chance of success or higher

    And here are my results:

    Here is how your portfolio would have fared in each of the 97 cycles. The lowest and highest portfolio balance at the end of your retirement was $-4,425,950 to $11,467,083, with an average at the end of $738,220. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
    For our purposes, failure means the portfolio was depleted before the end of the 50 years. FIRECalc found that 49 cycles failed, for a success rate of 49.5%.

    A success rate of 50% is too low. But how do I get to 95%? I could try changing my savings or spending and rerunning the scenario. But maybe I just need to wait a couple years and let my portfolio grow. Using the delayed retirement option, here's the graph FIRECalc spits out:

    It looks like I need to delay my retirement to 2026 or 2028 in order to have a 90%+ chance of success.

    One thing to look out for when using this investigate option is that the number of years you enter for delaying retirement are starting from today.

    So in my example, I plan to retire in 16 years. If I tell FIRECalc to investigate delaying my retirement by 10 years, it's talking about 10 years from today.

    This means it's completely useless because I'm not even thinking about retiring for 16 more years. I'd want to change that to 26 years so that I make it 16 years to my planned date, then FIRECalc can look at the following 10 years after that date.

    How Much Earlier Can I Retire?

    This example is based on the same investigation tool that we just used to figure out how long we'd need to delay our retirement. If your odds of success in the original scenario were 100%, that means your portfolio is probably larger than you need and you could retire sooner.

    For this scenario we'll revisit my original base scenario which was:

    • $60k annual spending
    • $165k current portfolio
    • Social Security and pension included
    • Annual additions of $26,900
    • Goal retirement date of 2034

    We're going to change a couple of variables. The first is increasing the annual additions. I've got a couple of side hustles that earn me about $3,000 per month. What would happen if I diverted that money into savings instead of reinvesting it into my businesses?

    Let's bump the annual additions up by $3k per month or $36,000 per year so the new total is $62,900. Here's the result graph:

    Here is how your portfolio would have fared in each of the 77 cycles. The lowest and highest portfolio balance at the end of your retirement was $165,000 to $40,889,302, with an average at the end of $26,484,359. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
    For our purposes, failure means the portfolio was depleted before the end of the 70 years. FIRECalc found that 0 cycles failed, for a success rate of 100.0%.

    100% success rate and tens of millions in the bank seems a little too high. What if I just retired sooner instead?

    Going back to the investigate tab, we'll tell FIRECalc to look at retiring in the next 15 years.

    2028 is possible but it's probably only around the 85% success mark. If I wait until 2030 then I'll be at 100% success so the 95% threshold we're looking for is probably right in the middle in 2029.

    If I saved 100% of my side hustle income and put it in index funds I could retire 5 years earlier than I originally planned.

    Reducing Spending Levels

    Another FIRECalc analysis option will automatically adjust your spending levels to hit a 95% success rate. This will use the retirement date you selected earlier so in my case, 2034.

    Revert back to your base scenario and select this option in the investigate tab:

    The graph I got shows 100% success across the board so I'm going to move my retirement date up by 5 years to 2029. Here's what I get.

    If I decide to retire 5 years earlier, I'll need to reduce my spending to about $34,000 to maintain a 95% chance of success.

    Lump Sum Portfolio Increase

    Now we'll take a look at what would happen if you dumped a bunch of money into your portfolio right away. Some examples of this would be receiving an inheritance, selling a business or winning the lottery where you get a big lump sum of money.

    Change everything back to your base scenario again and choose the starting portfolio value.

    Here are my results:

    A starting portfolio of $519,539 provided a success rate of 96.1% (77 total cycles, of which 3 failed).

    The highest residual portfolio was $24,815,712. The lowest was $519,518, and the average was $12,596,118. 

    Sooo...I don't believe this. My current portfolio is $165k and this is telling me I need to add $519k. This would give me a total of $684k. Based on the 4% rule that would let me spend about $27k per year which is far below the $60k I defined earlier.

    Here's a way to verify. Change the investigate tab back to the top option which just dumps out the default scenario. Go over to the portfolio change tab and add a lump sum contribution of $519k (or whatever your result was) in the current year. Then go to the 'Not Retired' tab and set your retirement year to the current year.

    Rerun the calculator and look at the results:

    Here is how your portfolio would have fared in each of the 77 cycles. The lowest and highest portfolio balance at the end of your retirement was $-25,440,270 to $5,078,546, with an average at the end of $-7,477,418. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.)
    For our purposes, failure means the portfolio was depleted before the end of the 70 years. FIRECalc found that 72 cycles failed, for a success rate of 6.5%.

    Either I'm reading the results wrong or this section doesn't work correctly.

    I think the best option here would be to just change your starting portfolio value in the first tab and rerun the analysis. I wouldn't trust the results from this analysis. If I'm doing something wrong or if anyone knows what the issue is here please leave a comment!

    Leaving Behind an Inheritance

    The last option you can look at is to see the chances that your portfolio never drops below a specific value.

    FIRECalc won't actually change your spending to ensure this happens. It just gives you the percent chance of success but now instead of success being defined as staying above $0, it's defined as staying above whatever threshold you enter.

    Reset everything back to your base scenario and set a number for the minimum value. Ignore the graph as it won't change. Just read the text description above the graph.

    Here is how your portfolio would have fared in each of the 77 cycles. The lowest and highest portfolio balance at the end of your retirement was $165,000 to $16,665,038, with an average at the end of $10,397,212. (Note: this is looking at all the possible periods; values are in terms of the dollars as of the beginning of the retirement period for each cycle.) (Caution: The portfolio failed, or went negative, during some of the years in your scenario, but scheduled adjustments brought it back above zero before the end of the 70 years.)
    For our purposes, failure means the portfolio was depleted before the end of the 70 years. FIRECalc found that 65 cycles failed, for a success rate of 15.6%.

    This section would be a lot more useful if FIRECalc would figure out what your spending would have to be in order to leave behind X amount of money. As it stands now I don't find this feature super useful. If you know of some other way to use it please leave a comment below!

    Alternatives to FIRECalc

    There are a lot of other options on the market for doing retirement calculations. Some of them are more simplistic than FIRECalc and almost all of them are easier to use.

    Here's a couple options you can check out and compare your results to FIRECalc.

    Networthify

    Networthify is probably the best trade off between being easy to use and giving accurate results. I'm going to give a quick guide on how to use Networthify since I like it so much.

    Networthify only requires a few inputs:

    • Current income
    • Annual savings
    • Annual expenses (automatically calculated - WATCH OUT!)
    • Current portfolio value

    One thing you have to watch out for is that Networthify automatically tries to calculate your expenses/income/savings depending on which one you enter first. Once you enter your income and savings, it will just subtract savings from income and assume that number is your expenses.

    The issue is that taxes, daycare, mortgage and a whole host of other expenses will go away when you're retired. When I enter my income and savings into Networthify it calculates my spending to be somewhere around $120k. In reality it's half of that.

    The way you fix this is to go back and reduce your income until your savings and spending numbers are what you want them to be. That part was so important I'm going to say it again in a big blue box.

    In order for Networthify to work correctly, you need to adjust your income until your savings and spending numbers are correct. Don't worry about income being correct; just make sure your spending is accurate.

    Once your numbers look good you can scroll down and see how many years it will take you to hit your retirement number.

    Networthify also gives you a nice little table that shows you the value of your portfolio by year.

    Networthify will also let you define the market growth and safe withdrawal rates if you want. So if you prefer a 3% withdrawal rate instead of 4% you can enter that here. 

    cFIREsim

    cFIREsim is like a hybrid between FIRECalc and Networthify. It's more complicated than Networthify but easier to use than FIRECalc. 

    cFIREsim doesn't have a way to define how much you'll continue to contribute each year (at least that I can find) so you'll have to tell it what your expected portfolio value will be when you retire. I'll do an in depth guide on cFIREsim in another post to give it full due, but it's worth checking out and comparing to FIRECalc and Networthify.

    FourPercentRule.com

    FourPercentRule makes it easier to enter your inputs and it also updates the output in real time. Instead of running scenarios like FIRECalc, FourPercentRule (FPR from now on) has one graph that updates instantly.

    One of my favorite things about FPR is being able to use the slider to adjust your spending rate until you see a successful retirement.

    For example, here's my projected retirement with 60k per year in spending:

    And here's what it looks like if I drop my spending to $40k per year.

    There's a couple of things to look out for with FPR. Unlike FIRECalc which uses real market data from the last 100+ years, FPR's default is to use fixed percentages that you define.

    You have to manually choose the option to use real stock market data then let it rerun the calculation. The results look much different from the output I just shared above. Here are my results using the same inputs and only changing to use actual stock market history. Make sure to pay attention to the lower left corner vs looking at the individual lines.

    FPR also lets you create an account and save your results. It can also generate a table of the results showing all of these values by year:

    • Age
    • Portfolio value
    • Portfolio value in today's dollars
    • Withdrawals
    • Withdrawals in today's dollars
    • Interest earned on portfolio
    • Social Security/Pension wages by year
    • Other one time adjustments

    OnTrajectory

    OnTrajectory is a paid tool that seems to be the easiest to use and provide the most comprehensive results. Unfortunately to access the most powerful parts of the tool you need to be a paying customer so I'm not going to do a deep dive in this article; I'll cover OnTrajectory separately in a future piece.

    Many of the options (like having more than 2 sources of income in your lifetime) are locked behind the paywall, you'll have to pay the $7 per month membership if you want to use this tool.

    Since I can't enter all of the inputs needed for an accurate model I can't use OnTrajectory as much as I'd like. Here's a sample of what the output graph looks like. There's also a nice summary table of spending/success rate/etc (not shown).

    CalcXML

    CalcXML is very simple to use. There are 4 different tabs for entering income, spending, portfolio, etc. After that you click 'Calculate' and CalcXML basically gives you a pass/fail to let you know if your plan will succeed or not.

    If you've read this far you've probably noticed 2 things:

    1. If I cover a topic, I like to go in depth.
    2. This guide is focused on FIRECalc and all of these other tools will get their own separate deep dive in the future.

    So I'll cover CalcXML in more depth at a later date 🙂

    One thing I don't like about CalcXML, which I've seen in various calculators over the years, is that it calculates your retirement spending as a percentage of your current income. Because of all sorts of expenses like daycare, mortgages, taxes, etc, your current income/spending are not good barometers for what you'll spend in retirement. Just watch out for that when you're looking at the results and CalcXML is another fine option (and totally free!).

    Wrap Up

    I've seen FIRECalc mentioned on Reddit and Facebook for several years but never took the time to learn how to use it properly. I'd plug in a few numbers, get confused or disappointed with the results and walk away.

    After taking the time to learn how FIRECalc works I feel much more confident in the results it's giving me and I'd recommend it to anyone looking for a free way to model their retirement plan.

    Hopefully this guide made FIRECalc a little easier to understand. If you found this guide helpful please share it with your friends!

    Some links on this website may earn me a small commission if you click on them at no extra cost to you. For more information please click this text to see the full affiliate disclosure.

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