BiggerPockets Money Podcast: Can You Retire…Now? This FIRE Calculator Will Tell You!

Hosts: Mindy Jensen and Scott Trench
Guest: Lauren Boland, Creator of Seafire SIM
Release Date: January 10, 2025

Introduction

In this episode of the BiggerPockets Money Podcast, hosts Mindy Jensen and Scott Trench delve into the intricacies of achieving financial independence and early retirement (FIRE) using the Seafire SIM calculator. With a mission to help listeners earn more, keep more, spend smarter, and grow wealth, the hosts bring on Lauren Boland, the mastermind behind Seafire SIM, to guide us through this powerful financial tool.

Guest Introduction: Lauren Boland’s Money Story

Lauren Boland shares her personal journey towards financial freedom, rooted in her upbringing in a lower-middle-class family with her parents divorced and facing financial instability. This early exposure to money struggles ignited her desire to understand and attain financial independence.

“At age 22, I met my now in-laws who had retired at 51. It was a revelation, showing me that early retirement was possible, unlike the norm I grew up with where people worked until they couldn’t anymore,” Lauren (02:12).

Her academic background in IT and systems engineering led her to explore programming, culminating in the creation of Seafire SIM in 2013—a project intended to improve upon existing FIRE calculators. This tool has since become a staple in the FIRE community, helping individuals visualize and plan their retirement strategies effectively.

Understanding Seafire SIM Calculator

Lauren explains that Seafire SIM is designed to help users visualize the sustainability of their retirement savings and spending plans. The calculator focuses on key inputs such as overall portfolio value, asset allocation (equities, bonds, gold, and cash), and various spending plans.

“The purpose of this is to visualize what it would look like for you to save some amount of money for a number of years and then stop saving and use that money for living expenses,” Lauren (06:33).

Key Features:

• Asset Allocation: Users input their portfolio’s distribution among equities, bonds, gold, and cash. Lauren emphasizes excluding assets like home equity and cryptocurrency, focusing solely on investable assets.

  “You don’t put your home equity or crypto in here because this calculator is meant to assess your investable assets,” Lauren (08:27).

• Data Methods: Seafire SIM offers two primary data methods—historical data and constant rates. Historical data utilizes the Robert Shiller dataset, allowing for simulations based on real market fluctuations since 1871.

  “If you're running a simulation that is 30 years long, it takes every string of data that's 30 years long... to see how your portfolio would perform,” Lauren (17:52).

Spending Plans & Inflation Types

The calculator provides various options for modeling spending over retirement:

• Spending Plans: Users can choose between inflation-adjusted and non-inflation-adjusted spending. Inflation-adjusted spending increases annually based on the chosen inflation rate, maintaining purchasing power over time.

  “Some people lower their expenses at different periods of time... that's also a choice,” Lauren (20:10).

• Variable Spending Plans: These allow for dynamic spending adjustments based on market performance, with set floors and ceilings to prevent drastic changes in spending levels.

  “In a good market, it allows you to spend more. In a bad market, it allows you to spend less,” Lauren (22:04).

Demonstration: Running Simulations

Scott and Mindy demonstrate the calculator by inputting their own financial data:

• Mindy’s Scenario: With a $1.5 million portfolio and a desired $100,000 annual spending, Mindy observes a 96% success rate, indicating a high likelihood of sustaining her retirement plans.

  “If you have crypto, throw that to the side... this simulation can tell you there's a zero percent chance of success,” Mindy (14:08).

• Scott’s Scenario: Scott experiments with increasing his portfolio to $2.5 million and adjusting his spending to $100,000. He notes the tool's ability to reflect changes in success rates and portfolio balances accurately.

  “The failure rate only drops by 0.8 percentage points and then the ending portfolio balance increases by nearly $2 million,” Scott (27:37).

Advanced Features: Adjustments and Customizations

Seafire SIM allows users to incorporate various financial scenarios through adjustments:

• Contributions and Expenses: Users can add multiple income streams or expenses, such as part-time work, inheritance, or downscaling property.

  “You can add either an income and savings adjustment... or a spending adjustment which takes away,” Lauren (30:18).

• Rental Properties: By modeling rental income and property sales, users can enhance their retirement simulations, providing additional income streams.

  “You can add rental income minus maintenance expenses... and also include a one-time capital gain from property sales,” Lauren (47:12).

Portfolio Allocation Discussions

The episode highlights the impact of different asset allocations on retirement success rates:

• 100% Stocks vs. Diversified Portfolios: Lauren advocates for diversified portfolios over 100% stock allocations, citing research and literature that support higher success rates with diversified investments.

  “We’re not doing 100% bonds, no 100% stocks. It's basically the reverse of traditional thinking,” Lauren (37:32).

• Success Rates and Ending Balances: Higher stock allocations can lead to greater portfolio growth but also come with increased volatility. Variable spending plans can mitigate risks by adjusting spending based on market performance.

  “The higher stock percentage doesn't significantly change the success rate but greatly increases the ending portfolio balance,” Scott (43:55).

Tax Implications

A critical consideration is the exclusion of taxes in the Seafire SIM calculations. Lauren advises users to manually account for taxes based on their specific financial situations to avoid inaccuracies in retirement planning.

“Taxes are not included in this. If you’re using this tool without paying attention to taxes, you're going to have a bad time,” Lauren (28:04).

Incorporating Social Security

While Seafire SIM doesn’t automatically include Social Security, Lauren guides listeners on how to estimate and integrate it into their simulations:

“Visit myssa.gov to get your Social Security benefits estimate and potentially subtract 25% for a conservative approach,” Lauren (51:47).

Conclusion: Empowering Financial Planning

The episode wraps up with Lauren encouraging users to explore various adjustments within Seafire SIM to tailor the tool to their unique financial situations. She emphasizes the importance of flexibility and continuous monitoring in achieving financial independence.

“I wish I had the ability to dynamically adjust for part-time work during market downturns... this tool allows you to do that effectively,” Lauren (48:42).

Where to Find Lauren and Seafire SIM:

• Website: CfireSim.com
• Social Media: Available on Bluesky and the Financial Independence subreddit.
• Contact: Username “Lauren_knows”

Key Takeaways:

• Seafire SIM is a versatile tool for retirement planning, offering various features to model different financial scenarios.
• Asset Allocation and spending plans are crucial in determining the sustainability of retirement savings.
• Adjustments such as rental income and part-time work can significantly impact success rates.
• Tax and Social Security considerations must be manually integrated for accurate planning.
• Flexibility and Continuous Monitoring are essential for adapting to changing financial landscapes.

By leveraging Seafire SIM, listeners can gain a comprehensive understanding of their retirement readiness, enabling informed decisions towards achieving financial independence.