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BiggerPockets Money Podcast
Can You Retire…Now? This FIRE Calculator Will Tell You!
00:57:55
“Do I have enough to retire?” is a question most people in the FIRE community grapple with, but today, we’re sharing a FREE tool that will help you put this issue to bed! If you’re concerned about running out of money later in life or developing “One More Year Syndrome,” you won’t want to miss this episode! Welcome back to the BiggerPockets Money podcast! Software engineer Lauren Boland has developed a FIRE calculator that predicts whether your nest egg will be able to support you in retirement. This powerful tool takes dozens of key data points—such as your financial independence number, retirement age, annual expenses, portfolio mix, and historical returns—to simulate multiple retirement scenarios. In this episode, Lauren, Scott, and Mindy are going to walk you through this powerful tool, step-by-step! Does the four-percent rule still work in 2025? How much do you really need to save for retirement? Whether you’re just starting your quest for FIRE or looking to tweak your inves...
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- [00:00]
Mindy Jensen
Will my money last in retirement? It's the ultimate question for anyone chasing financial freedom and absolutely the biggest question at the heart of the fire movement. Whether you are just starting out or you are fine tuning your path to early retirement, we'll explore what it really takes to ensure your money not only lasts, but continues to grow in retirement. If you have ever wondered how to achieve true financial freedom, this episode is for you. Hello, hello, hello and welcome to the Bigger Pockets Money podcast. My name is Mindy Jensen and joining me just a little bit later is my Not a Simulation co host, Scott Trench. Normally this is the part of the show where he would insert his own little pun, but he's not. We'll get back to that next week, but for right now, BiggerPockets has a goal of creating 1 million millionaires. You are in the right place if you want to get your financial house in order, because we truly believe financial freedom is attainable for everyone. No when or where you're starting. Today we are bringing on Lauren Boland. She is a dear friend of the podcast and integral to the fire community through her Seafire sim calculator that she created way back in 2013. This is an episode that relies a lot on video, so if you are not watching this on our YouTube channel, you might want to hop on over there and watch it there. You can also open up the Fire SIM calculator. It is at the letter C as in cash C fire sim S I m dot com. Follow along, input your own numbers, look at what we're actually talking about. It is an excellent tool and we are going to be discussing it on the show today using screen sharings. If you would like to fire along, hop on over to our YouTube channel, which is YouTube.com biggerpockets money. Lauren Boland from the Seafire sim.com Welcome to the Bigger Pockets Money podcast. I am so excited to talk to you today.
- [02:01]
Lauren Boland
It's always great to talk to you, Mindy and Scott. I'm sure it's gonna be great by association.
- [02:06]
Mindy Jensen
Love that. Okay, so Lauren, let's jump right in. What is your money story? What does that look like?
- [02:12]
Lauren Boland
Oh, that's a tricky one, I think. So I, I'd say that my money story starts off when I was a kid. I grew up in sort of a lower middle class family. My dad, my parents were divorced so we sort of had money issues in that fashion. And I think money was always hard when I was growing up. We definitely ran to times where I was maybe not going to be able to pay the mortgage or it was going to be hard to get a car repair and things like that. And that really stuck in my brain for all the way through adulthood, honestly, till now, which is kind of, you know, that's a whole other therapy issue to talk about. But when I got to college, I, you know, worked hard, worked toward the end. And when I met my now in laws for the first time at graduation, I had learned that they retired at age 51. And I didn't know that that was really possible. Like where I grew up, people worked until their bodies gave out. People worked until they died. So that really sparked a knowledge in me that I just needed to go find out how that was possible. And at the time when I was 22 or whatever, I didn't really want to ask them. It seemed like an embarrassing thing, like how did I not know this? And so I really took my early 20s to try and figure that out. And so since then I'd say we really focused on hitting pretty high savings rate numbers until we had kids and then things leveled off, but was we're still pretty good compared to the average American. And I'd say right now we're probably five. Um, we both work and I have it in my crosshairs to figure out when to pull the trigger there on retiring early. But we're in a great, great place because of early decisions we made.
- [04:09]
Scott Trench
Can you give us a little bit more context about your career and what you did or what you do during?
- [04:14]
Lauren Boland
Yeah, absolutely. So I, my undergrad was sort of a generic IT degree type thing and I got a master's in systems engineering. And so I did a lot of different jobs around those things in the defense contracting world. And then sometime around 2011 or so, I started to learn programming, computer programming on my own. I didn't really get much of that during my undergrad and eventually I actually wrote CIFARSIM as a project to sort of get more real world examples of large code bases under my belt and try and do something of a passion project. And it turned out to be a long lasting project that was in 2013.
- [05:06]
Mindy Jensen
This is 11 years old.
- [05:08]
Lauren Boland
This is 11 years old. And it is what launched me into becoming a software engineer. So I'm currently, currently a software engineer with big university.
- [05:16]
Mindy Jensen
So that's awesome. Okay, so you created this as a project. When did you release it to the world?
- [05:23]
Lauren Boland
Yeah, so I created it as a project, I released it in 2013. And really like this is, this is gonna. If you haven't heard this, it'll be A good surprise, but it was intended as a better Fire Calc. If you're familiar with the old site, FireCalc, it's still out there. It is attached to a site like, called earlyretirement.org, it's like forums. And I had learned on those forums, I was hanging out in those forums, I learned that people were like clamoring for new features on this thing. Like, why can't we have this? Why does it work this way? Why can't we add this thing? And I learned behind the scenes that they didn't have anyone that was developing it. They had bought that Fire Calc from someone who had literally sailed off into the sunset as an early retirement on a boat. So I tried to fill that gap.
- [06:21]
Mindy Jensen
Okay, so let's walk through the Seafire sim.com calculator. For somebody who has never seen this before, what numbers are you running? Like, what is this? What is the purpose of this?
- [06:33]
Lauren Boland
Yeah, I mean, on a, on a larger scale, 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. I think personally, one of my big things about retirement projections like this is that humans are really bad at trying to think about things that are more than a few years in the future. They're not really good at thinking in compound interest. And so showing people visually what would happen if you were to retire and use your money for expenses is sometimes a daunting task for the brain. So I want to show them visually. So my good friend Chris Mamula over there, who is a blogger out there, he has written about retirement calculators a ton and he classifies Cifar Sam as a medium fidelity sort of retirement calculator. Which means you're not going to put in individual account balances and things like that. You're going to be putting in sort of rough numbers and giving it some historical guidance. And then it's going to give you sort of an output that will point you in the right direction. So for this you're putting in just sort of an overall portfolio value. So the default is a million dollars. And then you're giving it an overall sort of asset allocation based on equities, bonds, gold and cash. I use those particular things because the data is readily available from the Robert Shiller data set. So that is why those four people have asked me, why not crypto, why not this? And that's the answer to that.
- [08:26]
Scott Trench
Where do I put my Home equity.
- [08:28]
Lauren Boland
That is a great question. You don't. Oh man.
- [08:31]
Scott Trench
Wow. For not including that in our net worth And I was discussion the other day on our Mindy, you and I and look at that. Lauren doesn't even. There's not even a field to enter it on this calculator. I love it. There shouldn't be because that doesn't have anything to do with your retirement. So love it.
- [08:48]
Lauren Boland
Exactly. And we can get into this a little later, but there are ways to model taking some of that equity out, downsizing your property. Like those are all things that do add to your investable assets.
- [09:03]
Scott Trench
And once you do that, I think you should include that in your calculation. But until then, nope.
- [09:08]
Lauren Boland
100%. 100%.
- [09:10]
Mindy Jensen
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- [11:31]
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- [13:12]
Mindy Jensen
All right, let's get back into it with Lauren Scott. I'm really glad that you asked that question. I, it gives me the opportunity to say anybody who is using the C fire sim calculator or simulator or whatever, I'm going to call it a calculator throughout this whole episode. And if you have a problem with that, listeners, then I'm really sorry. I'm not trying to offend you, but there is a, an about link right up at the top left hand corner. About questions. Click on that and read through it. This is a free resource that offers a whole lot of information. Is it going to cover absolutely every single situation out there possible? No, because it's a free resource. Lauren likes to sleep sometimes. Lauren has a family and a job. It is a great starting point. It is a great. Let me see if I can do it. Because if you run your numbers and Lauren's beautiful calculator says you have a zero percent chance of success, well then something has to change or you are just going to work for your entire life. So I love that this gives you a starting point. It gives you some reassurance or it gives you some things to work on. Oh, I guess a 100% bond portfolio at age 25 isn't really the best choice or you know, all cash. Lauren, you brought up that there's no crypto. That was actually the first thing I looked at in here. But also, okay, there's no crypto. So if you have crypto, throw that to the side just like Scott's home equity. Put that to the side and run this with all of the options that there are here. I have zero percent of my net worth in gold. So that's just going to say zero on here. But if somebody had way more net worth in gold then their, their simulation would change. And it can, it can tell you, oh, you know, the bond portfolio isn't such a great option at your age or maybe you've got such a high period of success, there's such a high potential for success that you could, you could add a little bit more bonds into, into your portfolio for some, some rebalancing. But I want to point out before anybody starts listening and like, oh, well, it doesn't say this and it doesn't say that. This is a free resource. That's really flipping awesome. What is that number up at the top? How many simulations have been run? Oh, as of right now, 35,476,501. I would say that people like this.
- [15:30]
Scott Trench
I would say that about 600,000 of those are Mindy as well. We got about 34, eight in other people doing this. Let's get into the tool here. Let's go through these, these fields and talk about these things. These are self explanatory. Retirement year, the year your retirement starts, the year retirement ends. What is data method?
- [15:49]
Lauren Boland
Yeah, so I would say, I would put a caveat on the self explanatory because I think the self explanatory for a lot of data and finance nerds having experience in software engineering and user interface design, things like that, people don't necessarily know that. And I think it's tricky sometimes to put this much data on one page and make it super understandable. So to your question, data method essentially is the. You're choosing whether or not you're going to use historical data for this or sort of a constant rate. So like if you're in a spreadsheet making your own thing, you're probably going to use a constant rate. You're going to say, I don't know, stocks make 9% or whatever and inflation is 2.5% and bonds make 4%, something like that. I'm just making these numbers up. That's a constant rate of return using data. It's going to use this equity data, bond data and cash data from the Shiller data set that goes all the way back to 1871. So fundamentally, the way I like to explain this is if you're running a simulation that is 30 years long, okay, so say you're trying to retire by 60 and you're being conservative and you're like, I'm going to make the simulation till 90, it's 30 years long. The way that this works is it takes every string of data that's 30 years long. So starting, let's say 1871 to 1901, and it plugs your portfolio numbers along with your expense ditcher numbers into it and see how would your portfolio do over that 30 year chunk. Then it does it again over the 1872 to 1902, again over 1873 to 1903, so on and so forth, all the way to the current data. And that's why you see these lines. Mindy is now on the output page. And you see these lines that are vastly different. Okay? If you hover over one of those lines, it will make it sort of bold and it will show you the entire track of that particular 30 year chunk or whatever you choose, which tells you when you retire it really matters. Like, look at that. Depending on when you retire, you could end up with $6 million in the scenario that she set up or it fails in a couple of those blue ones in the bottom. Right. So yeah, that is essentially what this historical data method gives you.
- [18:27]
Scott Trench
Awesome. That's the default option and the one I always use. I haven't even bothered with some of these other ones. But you're saying you could also just say I want to look at what happens if I just do a 1966 and now I just get one of those lines.
- [18:39]
Lauren Boland
Yeah. So the individual one is definitely a feature that people were asking for. And the reason it defaults to 1966, as I'm sure maybe, you know, because of the data implications. It's probably one of the worst times in history you could have retired because massive inflation and a down stock market or sort of a sideways one. So.
- [19:01]
Scott Trench
So it's the most conservative possible. You take the. One of the, one of the most horrific times to retire in the history that we have data for and you say let's start with that one. And if we pass that, we're probably pretty good. And that's why you pick from.
- [19:15]
Lauren Boland
Right. Something like that.
- [19:17]
Scott Trench
Awesome. Well, let's do this. Let's change this number to 2.5 million. And the reason I'm going to change to 2.5 million for the rest of our. Our, our discussion here is because about. We have polled our audience about how much it takes to be considered rich in America. And 50% of the audience said a number up to 2.5 million and 50% said above 2.5 million. Maybe the rest of people in America don't think that's accurate, but that's what the bigger pockets money audience thinks. And that at a 4% rule should equate to about $100,000 in spending.
- [19:46]
Lauren Boland
So it's great you're doing this because I've thought for years that I need to change that number. I really only have it at that number because the sort of original Trinity study had those as sort of the default numbers.
- [19:59]
Scott Trench
Well, I'm going to email you some feedback then. You know, this is the complete right here. Right. Exactly our default numbers for this. So, okay, so we have. And then we have. Walk us through what the spending plan and inflation type mean here.
- [20:11]
Lauren Boland
Yeah, so I'm gonna go in the opposite order since inflation type's sort of easier to talk about. So inflation type is essentially, I think there's only two choices, but it's been a while since I've clicked anything other than the historical. So CPI or historical just uses our US CPI data set from. For inflation. So it has its ups. It has its downs. And just like the data on the equities, you get a random sampling based on the 30 years that that particular simulation is. I tend to like to use that because it shows, you know, some periods of deflation. Actually, in the late 1800s, it shows some periods of massive inflation, and it shows some, like, sort of flat line sort of area. So I like to use that. You can also use a constant number, which is like, you know, you can choose 3% or 2.5%, which sometimes is better. Like maybe you change your data set to be a smaller amount of years, and you just want to do a constant number. So that's the simpler of the two. So, spending plan. I could talk for an entire hour just on spending plan. But basically, this is going to determine how your spending number changes over time. So the very two basic, most basic ones are you're either gonna have it inflation adjusted or not inflation adjusted. So not inflation adjusted means if you're spending $100,000 this year, next year you're spending exactly $100,000, not a penny more. The year after that, you're spending $100,000 again, even though what that $100,000 is worth isn't paying for as many goods. So that's not inflation adjusted. If you choose inflation adjusted, it is going to slowly increase your spending along the lines of inflation, whichever you pick in the inflation type. So if you choose CPI historical, and one year, it's 3.5% inflation, your spending is going to be raised by that much. So typically, people choose that because you know you're going to try to have the same buying power through a certain period of time. Some people lower their expenses at different periods of time, and that's. That's also a choice. Now, if you go beyond that, there is a lot of options in there. So if you choose, if Mindy's controlling it, you choose the variable spending plan, it will highlight sort of one of the other features in here, which is a spending floor and a spending ceiling. So there, I'd say, I guess I can't remember the last count, but there's a handful of what are called variable spending plans that change your spending based on certain market conditions. So the variable spending plan right there will change your spending based on how well the market is doing. In a good market, it allows you to spend more. In a bad market, it allows you to spend less. However, from a data standpoint, when you allow that to happen, you get weird things that happen. Like if you start off at 100,000, like, you might have one year where it dips down to like $60,000 worth of spending. And realistically maybe you can't do that. So you can sit, set a floor that is the lowest it'll ever go and you can set a ceiling to be the highest it will ever go. Those floor and ceilings are active for any of the variable types of spending.
- [23:52]
Scott Trench
Awesome. This is super powerful. I mean this is something that we could go into all day because it looks like you have six different other options here. Can you give us an overview of what these other options are for those who want to truly nerd out the next level in using these tools? I just stick with the inflation adjusted spendings. I think it's the most simple way to run the calculation.
- [24:11]
Lauren Boland
Yeah, the short elevator speech is essentially some of these are methods that are developed by different financial planners or financial analysts out there that have spent time researching this. And then some are community based. Like VPW is one that I believe was developed by people in the boko hats community. And that's essentially the Dai with 01 where it will change your spending based on trying to have a life, certain life expectancy and you end up with zero dollars at the end.
- [24:45]
Scott Trench
Awesome. And then these other ones are further research opportunities for our listeners since we need to keep moving because there's so many powerful parts of the tool here on that.
- [24:55]
Lauren Boland
Absolutely.
- [24:56]
Mindy Jensen
If you are wondering what we're talking about, Scott is showing his screen on our YouTube channel and he is running various numbers all throughout this whole scenario. And I'm doing my own numbers that are a little bit different. And Lauren, what do you consider to be a sick a good success rate? There's like I'm at 90%. I'm like, oh, you know, some of these, some of these portfolios are pretty high. And if I would have retired in 1922, boy would I be wealthy.
- [25:30]
Lauren Boland
Despite being a person who has developed a tool like this. I will tell anybody who asks that that is not a simple question. That is a much more complex question than you think. And there is wild debates about what is a good success rate. Some people will only accept 100% success rate in all of their different simulations across different tools. That is way too conservative in my opinion. Some people have written, I know Michael Kitces has written a paper about Monte Carlo simulation and essentially says if you have any sort of flexibility in your plan, as long as any given year you have a 50% success rate, you're probably going to be fine. Like and you redo that every single year you have a 50% success rate going fine. Going forward, you'll probably be fine. What do I think? I mean, I personally look to see if it's above 80% to feel good. I'm not going to go for 100%. I think that that will end up making people work too long. And if you ask anybody who's used tools like this, you can really easily have a false sense of precision by just tweaking certain things to make it, you know, do what you want it to do well.
- [26:48]
Mindy Jensen
And I think that's really important to note. You can get yourself all, you know, oh, well, what if I. I think I call it eraser math, or I think I've heard it called eraser math. Oh, well, I did it this way and I didn't like the number. So let me erase something and try over. Well, what are your actual numbers? This only works with your actual numbers or your goal numbers. Like, if your goal is a million dollars and you only have 500 right now, that doesn't mean you run it at 500 to be like, oh, I guess I'm never going to retire. You run it at your goal numbers. And if the goal numbers work, great, if the goal numbers, like, what is it on? Just 1 million? 1 million with 40,000 spending.
- [27:28]
Scott Trench
The million with 40,000 spending and the 2.5 million with $100,000 in spending should be identical, right? Mathematically? Is that right, Lauren?
- [27:37]
Lauren Boland
That is right. That is right. Should be identical.
- [27:40]
Scott Trench
I actually have a question on that, Lauren, because I've been thinking about this and I think, and I haven't, I haven't gone and modeled it out myself. I would have to do it in a spreadsheet because I'm not the superstar engineering programmer that you are here. But there's something about how. So it's harder, it's not linear. Right. To generate $100,000 in income on a $2.5 million portfolio because there's taxes that are involved. Is that factored into this simulation at all?
- [28:04]
Lauren Boland
That is a great point, Scott. And I want to definitely tell people, and I tell people in the about section and tutorials. Taxes are not included in this. This is meant to be more of a simple gut check situation. And if you are using this tool to actually try to set your retirement plans without paying attention to taxes, then you're going to have a bad time. And I suggest that you factor that in. So if you've done calculations of your own for any amount of time, you could probably guess some sort of tax rate that you're going to have based on your particular assets. And I would add that in. So in your case, like if you're, if you have $100,000 income and you think that some amount of it is capital gains and some amount of it is, you know, whatever other income, like add on 10 or 15% to, you know, account for that. Now to be clear, the Trinity study Banken study doesn't really account for taxes either. So it's like, you know, it's a balancing act. And I'll also, I want to double back to what Mindy said is what's important to know about this kind of tool is you don't necessarily have to just go off of your goal numbers. You can set up a period of time where you're accumulating and then tell it when you are going to retire. So if you set the retirement year into the future and add sort of an adjustment down below about how much you're going to be adding to the portfolio every year, you can sort of have a two phase situation. Things you know are different when you do it that way, but you can, you can make that happen.
- [29:41]
Scott Trench
Okay, let's, let's do it. I got $1.5 million portfolio today. I want to spend $100,000 in retirement starting at 2035. And we're gonna have that be a 40 year retirement because I'm gonna live be. I'm gonna live until 2075. So.
- [29:56]
Lauren Boland
All right, you're gonna live till 22. 20,027 is what you wrote.
- [30:03]
Scott Trench
That's right. 2075.
- [30:04]
Advertisement Voice
Yeah.
- [30:05]
Scott Trench
Good for typo for that. That puts me at a 85. So I'm gonna be 85. I'm gonna take care of myself, eat right, you know, all that kind of good stuff. Okay, so now how do I add in more? How do I add in how much I'm going to add to the portfolio?
- [30:18]
Lauren Boland
Yes, that's a great question. So honestly, the, one of the most powerful things about Seafire SIM is something that I have left up to people for their imagination a little bit and trying to figure out how to best use it. So the bottom section of cfire SIM has this little section and it says add adjustment on it. And every time you click add adjustment it sort of dumps in another section of where you can put in something that adjusts your portfolio. Okay, this is going to sound very simple, but there's a lot of applications. So you can add either an income and savings adjustment which adds to your portfolio or you can add spending adjustment which takes away so any sort of Situation in which you think you can think about that will add money for any period of time, like one year or five years or 10 years or forever or any sort of situation you can think about that spends for any period of time you can add in here and add a label. So if I were you, I would type in something like under label I'd type in contributions or working time, you know, W2 job or something like that. And you can put in how much you're going to add to your portfolio every year. So he's typing in 10,000. And then what's important is you choose a period of time that lines up with your retirement. So starting year is 2024, ending years, whatever you put up above for your retirement date. And just like a lot of the numbers above, you can choose whether or not to inflate this number with inflation numbers or constant numbers or just not. There you go. So you're getting a different kind of number situation.
- [32:04]
Scott Trench
I like that number. 40 million.
- [32:06]
Lauren Boland
Yeah. Good Lord. The timing on that is amazing. It's like if you.
- [32:12]
Scott Trench
What year does it say 1921. You started 1921.
- [32:16]
Lauren Boland
See what's happening there is your working period is right during the Great Depression and you're dumping money into it.
- [32:23]
Scott Trench
Ah, nice. I like it.
- [32:25]
Lauren Boland
You're hitting the lows perfectly.
- [32:27]
Scott Trench
Okay, awesome. So, okay, so this, this sell and then if I want to, if I want to say I'm also going to get a inheritance of or a gift from a family member of 50 grand here, I could just add that, right?
- [32:39]
Lauren Boland
You can add that and you can uncheck the little box that says recurring, which will then just allow it to happen for one year, whichever year you choose.
- [32:46]
Scott Trench
Awesome. So I can put that in, you know, 20, 20, 26 or whatever. Right, okay. And then I can just keep adding these as far as I want to go, essentially.
- [32:57]
Lauren Boland
As far as you want to go, Yeah. I add things like college tuition for my two children who are going to be going to college at two different four year periods. I sometimes create scenarios where I'm going to downsize my home. Like we live in a very, a high cost of living area. What would it look like to sell our house, pocket half of the equity and move somewhere cheaper? Lots of different scenarios like that exist and it's great to put those things into your simulations. And I highly recommend people in general to do different calculations, whether it's on a spreadsheet or with a tool doing a conservative one sort of median sort of simulation and an optimistic one and making your decisions Based on that.
- [33:46]
Scott Trench
Awesome. Now I can add my home equity because I'm actually going to downsize in 2028. And that then gets, it allows me to add a one time contribution here. So that's where you add home equity on there, which I think is just a fantastic. Okay, so we have these adjustments, right?
- [34:03]
Lauren Boland
And so like I've told people before, there's some other like higher fidelity tools that do a better job at giving you sort of frameworks for all the different situations that these might occur. But really in the back end, it's just doing an adjustment like I am. It's just changing your income stream or your spending stream for some number of years.
- [34:25]
Scott Trench
I think I always want to call it like this is a fantastic tool, 35 million use cases. But if you are planning for a number that is much higher than $100,000 per year in annual spending, you need to start being pretty careful because that's when taxes really throw this out. And I'm working on this concept. I haven't, I have not gotten there yet, like I said. But it's geometrically harder. It's way harder to generate a high income and sustain it for a long period of time and then generate a low one. Not just because the asset base but because of that dynamic tax situation with full pull in there. So this is probably not, this is. You probably be very conservative with these numbers, which I think you would agree, Lauren, if you're trying to generate like 250k for example, like a fat fire level of retirement wealth.
- [35:07]
Lauren Boland
Absolutely.
- [35:07]
Mindy Jensen
Okay. What I like is playing with the numbers. So I have my actual portfolio value in here right now and I am playing with, okay, what if I spent $100,000, which feels really rich to me, and I make 100%, I'm never going to run out of money. Okay, then I bump it up to 200,000, it says you're gonna do it. I bump it up to 300,000, it says now you've got some problems. So then you can play around with this a little bit. I can't fathom a year that I spend $300,000, but I certainly can't fathom multiple of those years in a row where that would, that would come and wipe out my portfolio. But it's still above 50%. Michael kitces 50% number here. So that's when I think you can really start having some fun with this. I mean, this has to be a fun thing. This shouldn't be stressful or you know, am I ever going to retire? Look at where you where what you're at now and where you want to be. And you know, like I could see people using this to potentially avoid one more year syndrome. Lauren she says from her own job.
- [36:23]
Scott Trench
Let's also talk about something here because I've talked to a lot of people along with Mindy on Finance Fridays and BiggerPockets money and I don't see very many fire people with the 7525 stock bond portfolio. It's all 100 0, right? Mindy, what's your bond portfolio look like?
- [36:40]
Mindy Jensen
Pretty similar to maybe even less than yours.
- [36:43]
Scott Trench
Scott, what's yours at mine's 100% equities, unless you count my one hard money note which matures this month that I have. So it's all, but it's all all stocks. Lauren, what's yours?
- [36:53]
Lauren Boland
Ours is probably around 9010 and it fluctuates obviously. But yeah, we, I feel like ever since I was in my 20s I had to sprinkle in some sort of bond because going 100% felt weird. But honestly like from all the literature I've read and things and I mean I've pored over big earns website, I mean not, you know, 100% seems great to me and there's a lot of, you know, papers that say if you're not 100% once you retire, you should slowly work your way to 100 and that's a better success rate. 100 bonds, no 100% stocks. It's basically the revert reverse of traditional thinking.
- [37:32]
Mindy Jensen
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- [38:25]
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- [39:02]
Mindy Jensen
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- [42:01]
Mindy Jensen
Thanks for sticking with us. Let's jump back in. Okay. Yeah, I am 100 stocks when it comes to things that I can enter in my portfolio on C fire sim. I've got some random syndications and random, you know, private notes and things like that. But I'm zero gold, zero cash, zero bonds, zero crypto. If you had that, there's no field.
- [42:27]
Scott Trench
For crypto, which I think is great. I think that, you know, I, I would not consider any crypto part of my retirement plan. So I love the fact that it's not even an option in your spreadsheet. That's that or in your, in your calculator here. That's fantastic Lauren, great forward thinking from you. That's a sharp, sharp thinking. That's pun for my crypto. One thing I wanted to, to to ask about here is like how does that change? So we had a 96% success rate by the way, I think this is a key output here, right? The success rate is the one of the first outputs below this big nice pretty graph rainbow chart Here and, and it was 96% percent success rate. When we have a 6040 stock bond portfolio it drops by 0.8%. But the average ending portfolio balance goes from. Let's see what it was. What we have here is a 96% or success rate for a 4% withdrawal on a $2.5 million portfolio. And the average ending balance is 5.2. What I think is interesting and why most people perhaps are, are right to have a 1000 equity and 0, you know, stock bond portfolio, at least from historical data perspective is because the failure rate only drops by 0.8%.8 percentage points and then the ending portfolio balance increases by nearly $2 million over these time periods. So I don't know. Have you found that that is the case for a lot of people who use the simulator that they're assuming 100% 0% stock bond portfolio?
- [43:56]
Lauren Boland
I think that that is true that a lot of people go for 100%. And what's great Scott, is that if you play around with this enough you'll realize that that what you just demonstrated the higher stock percentage being like not really a different change in success but much higher portfolio rate that is amplified when you start to do sum up the variable spending methods and you set like a hard floor and a hard ceiling. Because what that ends up doing is it gives your portfolio extra breathing room during down times to sort of recover and then when things go back up it will increase it. So yeah, if you're, you're using variable spending. Yep. So exactly. That's exactly what you should do there. So but so what Scott did is he had the hundred thousand dollar sort of base spending and he set a floor of 75,000 and a ceiling of 25,000. Now you got to make sure that your own personal values will allow you to drop 25% in your spending if in a down market. But that is a, you know, decent, decent chunk to do. But doing that will often highlight some of these sort of allocation changes.
- [45:09]
Scott Trench
Okay, reminder us for our non engineering whiz is what is a Z value?
- [45:13]
Lauren Boland
Yeah. So in the about or the tutorial section it'll tell you essentially that is just how much the variable spending changes. So for instance, if the market's up 10% one year, if the Z value is 0.5, it's going to increase your spending by 5%. It's going to use half of the increase of the market it and if it's down it's going to do the same thing. So if the Z value is one it's going to perfectly follow the market. Like market's up 20%, your spending is going to be up 20%.
- [45:44]
Scott Trench
You thought of everything. This is fantastic. This is a really, really, really, really strong tool here. Now big let's ask another question here. I got rental properties, right? This is bigger pockets. You know, a lot of folks listening are going to have a rental property or two. And let, let's, let's just, for the sake of our argument, let's not factor in a mortgage amortization. Let's assume the rental property is paid off and I'm going to get, you know, let's say I got a $500,000 in paid off rental property portfolio generating $35,000 a year in cash flow that I'm willing to count on at retirement. How would I model that in here?
- [46:22]
Lauren Boland
Yeah, absolutely. And honestly, this is one of the more asked like features or like additions that people say, like, hey, you should add stuff regarding real estate rentals. And my current answer to that is like, hey, this is sort of a medium fidelity sort of tool. And we're not, you know, it's not super detailed. However, you can do a pretty good job at doing that. So what I would do if I were you is I'd have probably two different adjustments. One is going to be your rental income minus whatever maintenance expenses, whatever for, for whatever period of time you're going to hold that property. And then a second adjustment would be probably your best guess at when you're gonna cash out of that if you're going to. So like you could have a sale date and figure out what you're gonna sell that property for.
- [47:13]
Scott Trench
Okay, so I would just add these in. This would not be a rental property sale would not be a recurring item. It would be inflation adjusted. Rental property housing is a one third of the cpi. So it is by definition and inflation adjusted stream of income for the most part, you know, puts and takes in there. So I, I would, I would do that. I would do the same thing. I would also consider a rental cash flow estimate, inflation adjusted, more or less, especially over a long time perizing for 30 years. And that's how you would add these to it. And I'd say, okay, 500,000 in capital gains at some point in the future. Let's do that in 2065. And then I'll have this one goes from 20. When did I retire here? I retired 2024. Okay, 2024 through 2065.
- [47:59]
Lauren Boland
Exactly.
- [48:00]
Scott Trench
Awesome. And now my portfolio is going to 100 succeed every single time because that's the power of adding real estate to the calculation here.
- [48:08]
Lauren Boland
I mean it's, it's like it's just adding another income stream. You've got yourself a job just by owning that asset.
- [48:13]
Scott Trench
That's also a wonderful thing here. You know, may, maybe that's a way to think about it is that 0.8% offset is failure rate for the portfolio is more than offset by a rental property which in some ways provides an income stream similar to what the bond portion of a portfolio might do. So there's some, there's some, you know, that's an interesting learning. I wasn't expecting to come up with that on, you know, to go through that today on this, but that's the cool about this tool.
- [48:43]
Lauren Boland
Yeah. One of the things I like to encourage people to do is use the adjustments to simulate like part time work because that's a very common thing in the fire community. Like oh, I'm going to, I'm going to drop to part time for some number of years and you can do that like you can set, you know, you can say you're retiring this year but you can add like five years of part time work and see how that affects your success rate. And you know, frankly it's, it's nice to see that I, you know, I wish a long time ago I was able to have a little more dynamic and fancy situation where if the market drops, you know, within first five years of retirement you can like put in a dynamic sort of part time job that you go back into the workforce and see how that affects your portfolio. Because that's one of the fears of a lot of fire folks is sequence of returns, risk. So but anyway, in general a part time job, adding it in there, adding in an income screen stream for some period of time, seeing how that affects your success rate is a great exercise.
- [49:41]
Scott Trench
Awesome. And if you want a more a different way to insert rental property cash flow and rent, rental property equity, you can keep that to yourself and send compliments to Lauren via the email me button at the top of the screen.
- [49:53]
Lauren Boland
So I like the theme here, Scott.
- [49:55]
Scott Trench
Yeah, awesome. Are there any other sections? So we've gone through, we've gone through the kind of core sections here. We have a basic section which allows us to talk about the dates we want to retire portfolio value and how we want to assume we're going to withdraw which I think are very, very, there's very, very clever setup here but it requires folks to educate on this. We've got the portfolio which has very simple and effective mechanism of excluding all of your home equity, all of your cryptocurrency, all those other good things, and just including the assets that you probably should be depending on for your, your retirement here. And then we have the ability to add adjustments and you have a major placeholder here for Social Security, which is not something you can edit. We have not covered this yet. But did you want to add anything?
- [50:45]
Lauren Boland
Yeah, just real basic. Like I'd say that before I mentioned some other tools. Do a good job at trying to show users what sort of different adjustments they can come up with without just trying to be creative. And one of the things that was most asked for when I was developing this is please put in a placeholder that already shows Social Security. And yes, that does make this more US Centric. But I'm using US Data and I am in the US So there you go. But really behind the scenes, all that is, is just an, another income adjustment. So, and maybe that's, maybe that's a theme here. Like you can think of a lot of these things as just an inflow and outflow and like, hey, that's, that's what this game is. So.
- [51:30]
Scott Trench
Lauren, I'm, I'm, I'm. What am I, 30? 30? I'm 34 right now. And so Social Security is, is, you know, way, way off in the distance. How would you teach someone to get these values like in here, make, make accurate assumptions for someone far away from retirement?
- [51:47]
Lauren Boland
Great question. So my goal, my suggestion to people is to visit the myssa.gov website. It is tied to your Social Security number. Sometimes it takes a couple weeks for you to like fully register there. I believe that you have to get like a piece of actual mail, snail mail and have a pin for them to verify you. But once you are verified on that website, it has your working record from the very first time you had an actual W2 job all the way back to then and shows every year your adjusted gross income and will calculate your benefits and what it's going to give you when you retire. I personally like am on the side that thinks that people that are below, actually I can't remember the age below their mid to late 50s are going to have less benefits. So I tend to take my number and you know, say that I'm going to get 75% of it. That's the latest sort of estimate that younger folks are going to get out of the Social Security program. So I take the number from the government and subtract out 25%.
- [52:58]
Scott Trench
So for, for the most part this number, I mean, I mean for the most part, for practical purposes, I just ignore, I've never even put the number I never put value in at all into that category when I'm running these simulations. I probably should, but it's like, why, why would I, you know, because that's so far off in the future. I, I personally wouldn't be comfortable allowing a portfolio to dwindle to nothing without Social Security coming into play. And for my intensive purposes, I'll leave it there. But if you don't, if you don't want to do that, you can go through the work product of going to my or going to the Social Security ssa.govof to go and get that information.
- [53:34]
Lauren Boland
Yeah, that's very conservative you, Scott, but I respect it.
- [53:37]
Mindy Jensen
Could we run over to the, the results page, Scott, on any one of.
- [53:43]
Scott Trench
These that you've done, this has all the assumptions we just talked about. 2.5 million dollar portfolio, $100,000 spending. We've got our Z value defined at 0.5 ceiling spending floor spending ceiling, super realistic here, 35,000. Oh, nope, I, I, I do have the 35,000 in rental income that's added in there. And that puts in 100% stock portfolio. No, no bonds. So this is the output tab that you're asking for, Mindy.
- [54:07]
Mindy Jensen
Yes. I just want to run through what these numbers mean. So the success rate, 100%. Okay, that's real easy to understand. The spending over time, that just shows the spending that you've been doing that particular year that corresponds with the portfolio on to the left. Is that correct?
- [54:25]
Lauren Boland
That is correct. So the spending over time, it's important, important to note to people that number one, this entire page is inflation adjusted dollars. So this is in today's dollars, which highlights, I think honestly one of the things that Scott said before is when you're not adding taxes in there, also like your portfolio can run away. Well, it's even, it's even like bigger and a bigger effect than you think because the nominal dollars is actually higher. So all this is inflation adjusted. And what that means is the spending over time chart. If you just use inflation adjusted spending, it should be flat. Okay. It'll look like just a line and that's sometimes confusing to people. But over time you're spending the same amount. Scott right now has one that has like crazy lines on it. And that's because it's using the variable spending plan and it's changing the spending every year based on the market and it very visibly is hitting the ceiling and the floor that he put in in the inputs page. So, yeah, overall, you have a portfolio chart that shows the value. Overall value of your portfolio. And then you have the spending side that shows what your spending is.
- [55:36]
Scott Trench
Lauren, I obviously, as you could tell, had a tremendous amount of fun going through the spreadsheet. It's not a spreadsheet. I'm sorry, I keep referring to a spreadsheet. It is a. The tool that you've built here that is absolutely fantastic. Really well researched, tons of great data link ups. Thank you so much for sharing it, building it, and sharing all of the ways to use it with us today. This was a lot of fun.
- [55:57]
Lauren Boland
I'm always happy to talk to people this and nerd out and it brings me lots of joy to hear people who have used it and retired because they've looked at the numbers and felt safe about it.
- [56:07]
Mindy Jensen
All right, Lauren, this is fantastic. I so appreciate your time walking us through this calculator so people can, or simulator whatever so that people can see all the different ways that they can check out their, their numbers and, and run all the numbers, click on all those things and change everything and see how it, how it can best suit you. Where can people find you and where can people find their calc. Your calculator?
- [56:33]
Lauren Boland
Yeah, that's right. Now you can go to C Fire sim. So the letter C fire sim dot com. I'm also on Bluesky. I'm trying to give up Twitter. Like that's, that's tough. And those are the primary places you can find me. You can also find me in the financial independence subreddit, which I recently started being the, one of the moderators for again for my, for my, for my second stint. I'm a big fan of Community and I really enjoy that place. So those are the places you can find me. So on Blue sky, my, my tag is just Seafire Sim. And then in on Reddit you can look me up. My username is Lauren. Underscore knows. Lauren knows and I do know.
- [57:22]
Mindy Jensen
Like knowledge knows.
- [57:23]
Lauren Boland
Like knowledge knows. Not face knows.
- [57:26]
Mindy Jensen
Lauren. K N O W S. Okay. Awesome. I am again so thankful for your time today. This was so much fun and I will talk to you soon. I'll see you in, in Cincinnati at Economy.
- [57:38]
Lauren Boland
Yes. I can't wait to see you in Cincinnati. I love Economy so much and I will be going as much as I can.
- [57:44]
Mindy Jensen
Yeah, the Economy Conference is super awesome. It's sold out this year, but stay tuned for tickets for next year. All right, Lauren, thanks again and we will talk soon.
- [57:52]
Lauren Boland
Thank you so much, Mindy.
- [57:53]
Mindy Jensen
All right, that wraps up this episode of the Biggerpockets Money podcast. He is the Scott Trench, and I am Mindy Jensen, saying if I don't see you around, I'll see you a square.