
Show HN: Stochastic Retirement Simulator Weekend Project - scottfr
http://www.letscrunchit.com/retirement_calculator
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RockyMcNuts
I did a little hack in this space a couple of years back, called it the 'Cat
Food Calculator' -

[http://blog.streeteye.com/calculator/](http://blog.streeteye.com/calculator/)

The issue with OP's calculator is, one has to enter an assumption for the rate
of return after taxes and fees.

Also you can average 7% return in retirement, but you have a big market drop
early in your retirement, you run out of money even if the market makes it up
10 years down the road. You can't spend an average.

I was trying to deal with the question of a safe spending rate based on
historical returns.

Enter a stock/bond allocation, spending rate, couple of other assumptions,
will show you, if you had retired using that gameplan in each year, 1928 up to
the present, how long would it take to run out of money. And based on an
actuarial life table, how likely you were to run out of money.

That should give some idea of how big a portfolio you need to have to spend
the amount you want without running out of money. And then next step would be
to figure out how much you need to save to get there.

If you hit the 'Visualize' button after running an initial simulation, you can
drag some sliders around and see what happens...used Google's visualization
API. Maybe I'll take another crack at a proper design.

~~~
_dark_matter_
Well really, as soon as you hit retirement, your savings should NOT be in such
a volatile place where you'll eventually go bankrupt. Sure, some of it still
in stocks, but you should be moving over to less return/lower risk portfolio
options even as you start nearing retirement age. (In fact, this should be a
gradual change as you rebalance your portfolio every year. You are
rebalancing, right?)

~~~
RockyMcNuts
yes, assumes annual rebalancing, but static allocation eg. 60/40 stocks/bonds.

you're retiring for 30 years so you generally do better with a hefty
allocation of stocks. try it, that's what the calculator is for :)

given an average return over your retirement, the order and volatility of
returns has a significant impact on the amount it's safe to spend.

by choosing a less volatile portfolio you reduce risk allowing you to safely
spend more, but you also reduce the return forcing you to spend less.

that's why I did the calculator, how to allocate and how much is safe to spend
is not a question with an obvious answer.

there's a tradeoff between desire to spend as much as possible, on the one
hand, and shortfall risk, on the other. interestingly, approaches that reduce
equity allocation as you get older don't really improve the tradeoff much v. a
static equity allocation.

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nsxwolf
This says I'm totally screwed and will be out of money in 5 years after I
retire, while my retirement planner says I'm golden.

Oh well. This calculator also fails to take into account the effects of the
singularity which everyone says is coming certainly before my retirement date,
so I'm not sure if I should care.

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gommm
Very nice. One small nitpick though, the retirement income should be adjusted
for inflation I think. Because otherwise, the retirement income in 40 years
would pay for much less than at the time of retirement.

~~~
scottfr
The retirement income is adjust for inflation. All contributions and
withdrawals are specified in today's dollars.

Internally, I model this be decreasing the Savings each time step to
compensate for inflation.

~~~
stevenmays
I think this is the wrong way to do it. I think you should probably increase
spending. Decreasing savings reduces the income earned on compound interest,
whereas spending has no effect.

Cool project though.

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kittenfluff
This is actually very cool! It's interesting to play around with strategies
for using your retirement income, e.g.

    
    
      0.02 * [Savings]
    

with the idea of making your overall income path as stable as possible.

~~~
scottfr
Yep, that's why I built it!

There are some great retirement calculators out there (e.g. firecalc), but I
wanted a sandbox where I could explore different strategies and heuristics.

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bkjelden
Very cool! I love it!

A couple small things:

* hitting the backspace key while editing any of the numbers seems to clear the entire box

* a cool expansion on this project would be to allow one input to be a variable - e.g. my current contribution rate, and draw some graphs showing how the value of that variable effects the the numbers in retirement - e.g. when I will run out of money.

* if you're looking for more audiences, /r/personalfinance and /r/financialindependence would love this.

~~~
aggronn
Hopefully you've seen this:

[https://networthify.com/calculator/earlyretirement](https://networthify.com/calculator/earlyretirement)

OP's tool is great, but this tool might address your second bullet point.

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elviiis04
Great work. Thank you for sharing it. You'd be surprised how hard it is for
big companies to make a tool like this.

Ideas to play with: 1) Have one of the outputs be a box and whisker output
showing the percentiles of ages the person will run out of money.

2) Have a way a person could easily code a transition from an S&P500 portfolio
to a fixed income portfolio over 5 to 10 years.

3) Add a generational mortality table on the back end and include a
probability of death.

edited to clarify (2)

~~~
ForEnglandJames
>1) Have one of the outputs be a box and whisker output showing the
percentiles of ages the person will run out of money.

This is essential, and I wish it hadn't been overlooked. The only power of
stochastic modeling over deterministic modeling is in quantifying the
likelihood of outcomes in the outcome space.

Unfortunately, this requires either crazy stochastic math, or multiple
computations (monte carlo methods). I suspect the op is a great guy and just
hasn't been exposed to these ideas yet. When he does, he's going have that
head-slapping moment we all have when we first encounter it.

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Bostonian
Thanks for sharing. You allow the user to set the expected return (default of
7%) but assume zero volatility, which is unrealistic. I suggest adding an
annualized volatility input -- for stocks you could use a default of say 18%.
Ideally the output should show a range of outcomes, since stock returns are
stochastic.

There is a forum called Bogleheads for financial planning by individual
investors. I suggest presenting your calculator there.

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inetsee
There doesn't seem to be any place in the calculator for continuing income
like pensions or Social Security payments. When I first ran the calculation I
put what I'm drawing from my 401K plan and what I expect to get from pensions
and Social Security into the retirement income field, and the calculator said
my income will drop down to $0 by the time I am 70, which is incorrect.

~~~
vonmoltke
Defined benefit plans like that largely are what they are. Pensions are based
almost entirely on how long you worked for the place offering the pension.
Social Security is a bit more complicated, but is still based on how long you
worked and how much you made.

This calculator is about modelling the effects of your savings rate,
inflation, and return rate on the portion of your retirement income that is
based on your savings. The defined benefit payments are constants for the
purposes of this model.

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Nicholas_C
Very neat. What is interesting is how the market return affects the amount you
have from retirement to 100. For the specifications I put in a 6% rate of
return on the market would put me at about dead broke at 100, a 6.5% rate of
return would put me at about even savings at 100, and at 7% I would gain
savings from retirement until 100.

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stygiansonic
Nice, great work! I liked the ability to use various random variables for a
Monte Carlo simulation. I think this should be the default, like FIRECalc. [0]

0\. [http://www.firecalc.com/](http://www.firecalc.com/)

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pkaye
Very nicely done. What kind of tools does one use to create this.

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icu
Hi, great job. Would you be so kind as to discuss your stochastic modelling?

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abourbaki
Have you thought about a way to gather the data entered by users?

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scottfr
The share button will embed your data in a url (Base64 Encoded JSON) that you
can save or share with others. Your changes are also saved to local storage
(use the Reset button to wipe that).

If you mean data harvesting for some sort of lead gen or analysis; absolutely
not. I think this data is very private.

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akshat_h
It is refreshing to see data not being collected for what is a free service.
But as far as I know you are not collecting any personal information that may
be used to identify a specific person. Can you clarify more on why you think
data collection here is unethical?

