Idle Day Dreams

cobson

kangoora wrote: »

Because the Firecalc results are an average over 100 years, what if next year we get a 30% drop in global markets and your investments are now only worth £268k and not £400k.

Surely the whole point of firecalc is that it is not just taking an average, but is instead running a series of simulations based on historical returns, which includes all previous market crashes, and seeing what percentage of those simulations would have led to failure ?

You may think it is inaccurate if you believe that future returns will be lower than historical ones, but surely market crashes and sequence of return risk are something that the spreadsheeters need to worry about, as they *are* using averages, but tools like firecalc are designed to take them into account ?

numpty_dumpty

Thanks for the responses. It looks like its either work a bit longer or reduce my expectations.


Dropping to £1800/month pre-60 and £1400/month post 60 gives a requirement of £335870 and a buffer of £98k which gives a 30% buffer so how does that sound? (Assuming I could live happily on £1400/month, which would be tight so working for a while longer is more likely, maybe part time).

AnotherJoe

Do you want to live "tight" for the next 40 years?

kangoora

cobson wrote: »

Surely the whole point of firecalc is that it is not just taking an average, but is instead running a series of simulations based on historical returns, which includes all previous market crashes, and seeing what percentage of those simulations would have led to failure ?

You may think it is inaccurate if you believe that future returns will be lower than historical ones, but surely market crashes and sequence of return risk are something that the spreadsheeters need to worry about, as they *are* using averages, but tools like firecalc are designed to take them into account ?

Yes, I worded it badly using 'average' but the point still stands. 98% probability is great - until the 2% chance happens 1 year after you retire........

The way to avoid this is to hold cash investments sufficient for a minimum of 1 years spending (I lean towards 3 years spending) so in the case of a crash you don't cash in investments, you spend from savings waiting for the market to recover.

However, the OP indicated that £361k of their total £434k was in 'stocks & shares' with the potential of a further £48k similarly invested. Also, the OP was planning to spend all but 8.75% of their pots/savings just getting to SP age, this would be wiped out even with a 10% drop. Too risky for me and I'm not a belt, braces and string guy.