FIRECalc Retirement Calculator Review

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FIRECalc Retirement Calculator Review

May 11, 2008 – 7:02 am

A few days ago I reviewed an advanced retirement calculator at AOL.com, and today I’d like to discuss an alternative that is also worth a look. The “FIRE” in FIRECalc stands for “Financial Independence/Retire Early”, and this tool will help you figure out if you’re on the right path.

FIRECalc includes a standard and an advanced retirement calculator, and both are worth a look. I’ll be discussing the advanced version below.

Pros: There are too many to list! This calculator offers a variety of options, including:

The calculation starts with an input for what you spend, which is a much more accurate data point than what you need to earn during retirement (i.e. post-tax versus pre-tax).
Choices as to how you will draw down your portfolio, including a fixed dollar amount (adjusted for inflation) or based on the value of your portfolio each year.
Separate dates for you and your spouse’s social security
The opportunity to decrease your portfolio withdrawals if you have a pension starting later during retirement
Detailed inputs for your portfolio choices, ranging from expected rates of return to using historical averages based on your asset allocation.
3 choices for estimating inflation, including a number you input, CPI, or PPI.
Monte Carlo simulation of returns
Historical data back to 1871

Cons: I don’t love the interface, having to click through numerous separate pages in order to provide the inputs. With advanced features comes the need for advanced inputs though, so this “con” is not a deal-breaker. It’s just constructive criticism. J

FIRECalc provides a variety of outputs, including a Monte Carlo “success rate” percentage rate based on running your inputs against different sets of historical data. This should give you quite a bit more confidence in the analysis because it looks at historical returns to see how your portfolio would have done in both good and bad times. Retiring at the peak of a bull market, for example, could be devastating to your portfolio over the next few years, but by simulating results across good and bad time frames you can be (more) assured of the results.

The calculator also shows results based on a starting year (for graphical purposes). I chose 1927 (i.e. before the great depression) to see what it would look like. My scenario ran for 65 years, assuming 30 years to retirement and 35 years in retirement. If you’re a ways off from retirement, you might consider running two separate scenarios:

First figure out your portfolio total at the start of retirement
Rerun FIRECalc starting at retirement,, which means you’ll remove the accumulation years in the calculator. This will reduce the timeframe of the calculation, and will allow the FIRECalc to have more timeframes to evaluate from a Monte Carlo simulation perspective.

Lastly, FIRECalc provides choices in the result set, and can show you the impact of a different asset allocation and the impact of your portfolio’s expense ratio. It’s well worth spending an hour or so using this calculator and playing around with its features.