When you retire you want your money to last. FIRECalc help you to answer this important question by simulating your portfolio in different market scenarios to see whether your financial plan is robust enough or not. First you need to tell FIRECalc how much you have, and how much you’ll be taking out each year. Then FIRECalc will show you how such a combination would have fared for the duration of your retirement. FIRECalc lets you play with different scenario using Monte Carlo analysis that utilizes historical investment returns back to 1871 to calculate the probability behind your investment returns.
You can also input pension, social security, asset allocation and other relevant data to fine tune the calculation. FIRECalc also allows you to add different assumptions depending on your unique circumstances beyond the three key factors: retirement spending, retirement nest egg, and, spending horizon. Even if you are young, you can still use FIRECalc to get a ballpark figure to plan out your early retirement. Once your success rate is close to 100% then you have a much better picture in your retirement planning. As Jonathan Clements in The Wall Street Journal put it, FIRECalc “analyzes what would have happened if you retired in 1871, in 1872, in 1873 and so on. It then calculates how often your strategy would have panned out historically.”
FIRECalc uses historical, not random data. Even though the historical data is certain not to repeat, but serves as an useful proxy as part of a Monte Carlo calculation.
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