20 years ago, if you were interested in planning your retirement you had to sit down with a financial professional. Back in the 90’s and early 2000’s, meeting with someone with such financial experience was commonplace and expected. Fast forward to today and now people planning for retirement have a plethora of options to choose from. You can sit at your desk and pick stocks, you can set up an online investment profile, you can open a retirement account in as little as five minutes! With the ease of picking a retirement plan simplified, you can also simplify the math through several apps and online calculators. This FIRECalc review will show you that you, the investor, now have access to almost all of the tools that were once reserved for professional money managers.
What is FIRECalc?
FIRECalc is a new type of retirement calculator that factors in historical volatility into one’s retirement projection. Many used to think of retirement projections as the following: I have a $1,000,000 portfolio which I draw 4% from on an annualized basis, therefore I have $40,000 I am withdrawing. Unfortunately, retirement projections like this don’t always pan out. Think of the most recent financial disaster where many portfolios were slashed in half. What FIRECalc does is allow you to see all of the possible outcomes of your portfolio, whether it’s a market rally or another collapse.
The Benefits of FIRECalc:
FIRECalc can let you see a projected path of possibilities for retirement. The picture below uses the following example: Bob has a portfolio balance of $1,000,000. He needs to withdraw $50,000 a year for 30 years in retirement. The lines below indicate the vast array of possibilities that his money will last through all 30 years. With the red line signifying “Zero” you can see that the majority of lines end above. This means that based on historical factors, Bob more than likely will have enough funds to cover his spending requirement in his retired years.
What Else Can FIRECalc Do?
The premise that FIRECalc was built on was in dealing with historical market averages. FIRECalc uses this basis and expands it to many other calculator offerings. Around a third of all Americans rely on social security as their main source of income in retirement. Will your social security payments be enough for your retirement? FIRECalc will let you know what your chances of success are. Other calculators they have include ones for people who are looking to set up a future retirement, various spending models, along with a portfolio allocation model.
I hope this FIRECalc review shows you the many benefits the site can offer. While it is not entirely user friendly (it looks very simple and plain), it does provide you with something all other retirement calculators lack. Most retirement calculators assume a specific return every year during the duration of your investment horizon. FIRECalc is different in that it presents you all of the possibilities. Markets can go up by 20% in a year, and they can also go down over 30%. There are many fluctuations to take into account and that is exactly what FIRECalc does.
James Hendrickson is an internet entrepreneur, blogging junky, hunter and personal finance geek. When he’s not lurking in coffee shops in Portland, Oregon, you’ll find him in the Pacific Northwest’s great outdoors. James has a masters degree in Sociology from the University of Maryland at College Park and a Bachelors degree on Sociology from Earlham College. He loves individual stocks, bonds and precious metals.