Compute the success of various withdrawal rates with different portfolios.

## How does this work?

The FIRE calculator is calculating the success rate of a withdrawal rate for a given situation. The calculator will try a retirement simulation starting at every possible month in the given period between the start and end year. Here is what happens during the simulation:

- You start with a certain amount of money.
- Your portfolio value is adapted based on the returns each month.
- Money is withdrawn each month from your portfolio.
- The withdrawal is based on the withdrawal rate and the initial portfolio.
- Your withdrawal is adjusted for inflation every month.
- The portfolio is not rebalanced.

For instance, if you simulate between 1950 and 2000 with 20 years of retirement, the calculator will try to a retirement simulation starting from every month between 1950 and 1980.

The data being used is the same data as the data from the Trinity Study. I am using U.S. Stocks and Bonds.

## How to increase my retirement chances?

There are several ways you can **increase your chance of success in retirement**.

First, you can choose a better portfolio for your case. Ideally, you want a large allocation to stocks if your risk tolerance permits it. This will allow your portfolio to grow more. Then, you want broad index funds with very low fees.

Another way is to choose a better withdrawal rate. Simply said, a lower withdrawal rate will increase your chances of success. This means lower returns will not hurt your portfolio too much.

## Using this FIRE calculator

First, choose how much money you have in your portfolio (the initial value). And, choose the period you want to consider for simulation by choosing the start and end year.

Then, choose how many years you want to simulate retirement. And choose how much of your initial portfolio you want to withdraw each year (your withdrawal rate).

Finally, choose your investment portfolio. Once you are done, click Simulate. After a short moment, the result should be presented to you.

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How do you calculate the withdraw rate? Is it annually or monthly?

The withdrawal rate is annual. It’s the percentage of your initial portfolio that you are allowed to withdraw each year.

For instance, with an initial portfolio of two million CHF, you can withdraw 80’000 CHF with a withdrawal rate of 4%.

Then, each year, the amount is adjusted for inflation.

Thank you for publishing such a wonderful tool Baptiste. I am curious about how to tie back into the original Trinity Study. For example a 4% withdrawal rate 50/50 equity/bond mix for 30 years should be a 95% success rate per the Trinity study. Your Fire calculator shows 93.7% while the Early Retirement Now SWR 2.0 toolbox shows 99.4%. Any help here would be greatly appreciated. Tony

Hi Tony,

You are welcome.

The difference with the original trinity study does not bother me since there are many differences. The original study was using much fewer years and yearly returns instead of monthly returns. So that could explain the differnce.

With ERN’s spreadsheet, you have to be extremely careful on all the parameters. There are many different things you can do inside the spreadsheet that my calculator can’t do.

I have used 50/50 stocks/bonds 10y, 30 years on his spreadsheet and I get 94.02% success rate (with all cohorts). This is extremely close to my result of 93.7% and the difference may be explained by differences in rabalancing.

Question regarding the SWR – this value should be adjusted (reduced) for any passive income one has that partially offsets expense? For example, the dividends from stocks and coupons from bonds will provide some income that will reduce the amount that I need to withdraw from the portfolio.

Conversely, withdrawals are likely to be at least partially taxed, in which case one’s gross withdrawal may need to be higher to net to an after tax figure which is spendable.

Hi Ricky,

Yes, and no!

Dividends and bond returns are already taken into account into the simulation, don’t take that out of the withdrawals, otherwise you will fail for sure.

On the other hand, if you get some payments like social security, you can indeed offset the simulation. You can reduce your planned expenses, which will reduce your FI number (target) so that you will have to accumulate less. This is what I consider the safest way to account for extra earnings.

Thanks for building and sharing this fabulous tool, Baptiste! I’ve wondered if a modified rule of thumb could increase my withdrawal rate while reducing my failure rate. For example, what if I set a withdrawal rate of 5%, but when the inflation-adjusted principal dropped below the original amount in any year, I would reduce my withdrawal to 3%. Thoughts?

Hi Hunter,

Any flexibility rule could help, but I have not simulated how much it would help.

The problem is that most people cannot be flexible enough. Going from 5% to 3% is almost cutting your expenses in half, this makes a huge difference to your expenses and this can potentially last a few years. Most people would not be able to achieve such level of flexibility.

Thank you for the calculator, Baptiste.

Could you please an input for inflation value, so we can adjust as well?

And maybe the social security estimation per years?

Appreciate it

Hi Andres,

This is already using historical inflation value, I don’t think having a “fake” inflation would make it any better.

Include social security is something I want to include in the future, great suggestion!

Hi. Great tool. Excellent work! Quick question: when is the portfolio rebalanced to the selected original stock/bond allocation? I assume it is done annually but wanted to double-check as I did not see that clearly mentioned. Thanks!

Good question, I forgot to mention that. In that tool, no rebalancing is done. But my code supports it, do you think I should make it an option?

Yes, I think it should be mentioned and how the withdrawal is proportioned based upon the allocation as the methodology is different than the Trinity study. An option to select a different allocation method would indeed be nice.

For instance, if there is no rebalancing does that mean if you start with a 50/50 allocation you always withdraw the $ amount in a 50/50 proportion regardless of the current portfolio allocation *OR* do you withdraw from the portfolio in the same proportion as the current portfolio (ie., if portfolio has changed to 60/40 you now withdraw 60% of the amount from stock and 40% from bond).

Thanks for the quick response! You are doing great work!

Hi again,

The withdrawal is done proportionally to the asset allocation, I will mention this as well.

Improving this calculator is on my TODO list but not very high currently.