How believable is Portfolio Visualizer?

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uthendo
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How believable is Portfolio Visualizer?

Post by uthendo »

I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
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FiveK
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Re: How believable is Portfolio Visualizer?

Post by FiveK »

Portfolio Visualizer is very believable - as a recap of what has happened in the past.

Up to you to decide what qualifies as your personal safe withdrawal rate,
dbr
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Re: How believable is Portfolio Visualizer?

Post by dbr »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
FI is a range along a span of probabilities. Each person has to judge for themselves what odds they are happy with.

If it were me contemplating those results I would not retire now with a possible 10% chance of having no assets left at age 70 and I might very likely accept the second proposition at the lower spend.

As to PV, it is perfectly reliable at generating what its method generates from the data it uses. I don't think it is prone to mathematical glitches or errors. To expect any attempt at modeling to make predictions of the future with a guarantee that the future will actually do what the model projects is unrealistic. Lots can happen. You already did one of the things you want to do, which is to vary the input and see how much it matters. There are lots of other inputs and choices which to select.

Even so, a model is still just an estimation under assumptions. Real life requires re-evaluations and adjustments. So the thing to do is think about what you are going to look at to see how things are going and what adjustments you might make accordingly.
chassis
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Re: How believable is Portfolio Visualizer?

Post by chassis »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
Porfoliovisualizer is 100% believable as a mathematic forecasting tool based on past performance.

Download and use the RPM spreadsheet. It gives a chart of withdrawal rate by year. When SS kicks in you will see your WR drop. RPM is roughly 50pctile relative to portfoliovisualizer. I have tried the Monte Carlo version of RPM and it does not deliver greater utility for me.

Bottom line is that WRs above 4% are without question valid, usable and can be successful. Under the right conditions. Future conditions are unknowable so as always LBYM and invest as aggressively as your stomach allows.
Last edited by chassis on Tue May 30, 2023 8:28 pm, edited 1 time in total.
000
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Re: How believable is Portfolio Visualizer?

Post by 000 »

I think there is a non-trivial probability that the future will not be highly similar to the period from 1972-present.
ShaftoesSpreadsheet
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Re: How believable is Portfolio Visualizer?

Post by ShaftoesSpreadsheet »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
I have certainly dwelled on the odds of running out of money. At the same time I consider the more risk averse I am, the more it goes to my kids. Hopefully my daughters don't marry idiots.

Here is a more generalized calculator I like, which might give you some different figures to think about. I filled in your numbers:
https://www.wealthmeta.com/calculator/r ... StartYear=

Looks like your withdrawal rate is pretty high at around 7%, So if you really want to retire now you'd be much safer at 4% which is closer to $116k / year. Then you'd get a big raise when you start drawing social security.
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HomerJ
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Re: How believable is Portfolio Visualizer?

Post by HomerJ »

As far as I know, it's an accurate portrayal of what happened in the past.

The problem is that it only goes back to to 70s, which really isn't long enough...

You can't count on the 1900s - 2020s repeating... But that's pretty long, and it's somewhat likely.

But I would have far less faith on the 1970s-2020s repeating.

1982-2023 was an EXTREMELY good time for BOTH bonds and stocks. It could happen again, but no one should count on it.
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rkhusky
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Re: How believable is Portfolio Visualizer?

Post by rkhusky »

There are tools CFireSim and FireCalc that go back to the 1920’s.

The https://earlyretirementnow.com/ website uses similar data to look at retiring early.
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Re: How believable is Portfolio Visualizer?

Post by watchnerd »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
The past is such a bad indicator that it is legally required as a warning in certain situations:

"Past performance is no guarantee of future results."
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Re: How believable is Portfolio Visualizer?

Post by nisiprius »

I trust PortfolioVisualizer's calculations, and whenever I've crosschecked their basic data with other sources they've always matched.

I don't "believe" any withdrawal rate calculations as guides to the future unless you stick maybe ±2% around the withdrawal rate.

In your example, the fact that there's a difference of 10X between median and 25th percentile is more useful than either of the numbers. What the exercise shows is the large amount of variability and uncertainty. These calculations and presentations increase, not decrease, my uncertainty.
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WoodSpinner
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Re: How believable is Portfolio Visualizer?

Post by WoodSpinner »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
What happens when you reach 70 and start taking SS? What is your anticipated draw after SS begins?

You may be spending down a huge portion of your portfolio before 70 …..

WoodSpinner
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halfnine
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Re: How believable is Portfolio Visualizer?

Post by halfnine »

000 wrote: Tue May 30, 2023 8:26 pm I think there is a non-trivial probability that the future will not be highly similar to the period from 1972-present.
This.

Especially when one considers these non-trivial probabilites have shown up in many other countries.
vrr106
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Re: How believable is Portfolio Visualizer?

Post by vrr106 »

I don't think PV has a tool that lets you model future SS inflows, at least I haven't seen one. But it looks like you are using a "simulation period" of 20 years going until you are 70. I don't think that's the best way to use it - your simulation period should be based on your life expectancy (so 40 if you are 50 today and have a 90 yr life expectancy). Some of the other tools like cfiresim let you do this and also add SS inflows.
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Re: How believable is Portfolio Visualizer?

Post by erp »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
The odds are defined by portfolio survival, ie that you don't run out of money in 20 years in many of the simulations. What does your number say? If your odds are only in the 75% range, imo that's not saying you are FI.

Also, SS will not cover 200k in spending, so you actually need some left after 20 years, so the odds are even lower.
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Re: How believable is Portfolio Visualizer?

Post by dbr »

vrr106 wrote: Wed May 31, 2023 11:17 am I don't think PV has a tool that lets you model future SS inflows, at least I haven't seen one. But it looks like you are using a "simulation period" of 20 years going until you are 70. I don't think that's the best way to use it - your simulation period should be based on your life expectancy (so 40 if you are 50 today and have a 90 yr life expectancy). Some of the other tools like cfiresim let you do this and also add SS inflows.
Yes, tools that allow income to start or stop, expenses to change, or that allow lump sums added to or taken from the portfolio are a more realistic fit to many typical situations.
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Re: How believable is Portfolio Visualizer?

Post by DSBH »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.
Portfolio Visualizer is believable, assuming historical data.
I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
You can keep working / saving / investing for 10 more years if you want to be sure - won't even have to cut expenses to 150K ...
John C. Bogle: "Never confuse genius with luck and a bull market".
stan1
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Re: How believable is Portfolio Visualizer?

Post by stan1 »

$200K/year is a lot of spending for someone who does not have employment or business income (even in 2023). Can be done, but need the assets to back it up. You get to chose whether you want 20x expenses or what some here will say is 50x expenses. 20x is $4M, 50x is $10M so you can pick maybe somewhere in the middle. There's no formula to predict the future so its as much a decision with your emotional heart rather than your logical brain sometimes.

Perhaps you have a little more trade space on your spending needs. What is mandatory? What is discretionary.
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Re: How believable is Portfolio Visualizer?

Post by Wiggums »

dbr wrote: Wed May 31, 2023 12:00 pm
vrr106 wrote: Wed May 31, 2023 11:17 am I don't think PV has a tool that lets you model future SS inflows, at least I haven't seen one. But it looks like you are using a "simulation period" of 20 years going until you are 70. I don't think that's the best way to use it - your simulation period should be based on your life expectancy (so 40 if you are 50 today and have a 90 yr life expectancy). Some of the other tools like cfiresim let you do this and also add SS inflows.
Yes, tools that allow income to start or stop, expenses to change, or that allow lump sums added to or taken from the portfolio are a more realistic fit to many typical situations.
+1
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Re: How believable is Portfolio Visualizer?

Post by arcticpineapplecorp. »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
if you're a very cautious person, do you consider 80/20 (total US/total bond) to be considered cautious?
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chassis
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Re: How believable is Portfolio Visualizer?

Post by chassis »

vrr106 wrote: Wed May 31, 2023 11:17 am I don't think PV has a tool that lets you model future SS inflows, at least I haven't seen one.
It does.

Spend some time populating all of the input fields in porfoliovisualizer's "Financial Goals" tool. It is nearly as high-fidelity as the RPM spreadsheet, and has the added advantage of actual asset (ticker) historical performance and percentile projections.
jumbo shrimp
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Re: How believable is Portfolio Visualizer?

Post by jumbo shrimp »

It can show historical results with fees, correct? Is there a button to show results without fees?
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Re: How believable is Portfolio Visualizer?

Post by muffins14 »

uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
Doesn’t seem like great odds. You said that you have a 10% chance to run out of money within 20 years when withdrawing 200k.

To me, that’s too risky.
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Re: How believable is Portfolio Visualizer?

Post by Dottie57 »

ShaftoesSpreadsheet wrote: Tue May 30, 2023 8:35 pm
uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
I have certainly dwelled on the odds of running out of money. At the same time I consider the more risk averse I am, the more it goes to my kids. Hopefully my daughters don't marry idiots.

Here is a more generalized calculator I like, which might give you some different figures to think about. I filled in your numbers:
https://www.wealthmeta.com/calculator/r ... StartYear=

Looks like your withdrawal rate is pretty high at around 7%, So if you really want to retire now you'd be much safer at 4% which is closer to $116k / year. Then you'd get a big raise when you start drawing social security.
Let’s hope you taught your daughters well and that they have strong back bones.
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uthendo
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Re: How believable is Portfolio Visualizer?

Post by uthendo »

ShaftoesSpreadsheet wrote: Tue May 30, 2023 8:35 pm
uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
I have certainly dwelled on the odds of running out of money. At the same time I consider the more risk averse I am, the more it goes to my kids. Hopefully my daughters don't marry idiots.

Here is a more generalized calculator I like, which might give you some different figures to think about. I filled in your numbers:
https://www.wealthmeta.com/calculator/r ... StartYear=

Looks like your withdrawal rate is pretty high at around 7%, So if you really want to retire now you'd be much safer at 4% which is closer to $116k / year. Then you'd get a big raise when you start drawing social security.
The linked site shows an average resulting balance, after 20 years, of $3M, roughly the same as what I started with.
WoodSpinner wrote: Wed May 31, 2023 10:20 am
uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
What happens when you reach 70 and start taking SS? What is your anticipated draw after SS begins?

You may be spending down a huge portion of your portfolio before 70 …..

WoodSpinner
Hopefully living on the remaining $3M.
arcticpineapplecorp. wrote: Wed May 31, 2023 2:39 pm
uthendo wrote: Tue May 30, 2023 7:43 pm I've got 2.2M in liquid assets and another 0.7M in illiquid assets that I could sell (after tax amount). 2.9M is 14.5X (X=$200,000). According to Porfolio Visualizer, if I withdraw $200,000 per year (inflation adjusted) I'd end up with $3.9M at the 50th percentile in 20 years (when I'd qualify for SS@70). It's only $323k at the 25th percentile and $0 at the 10th percentile. If I cut expenses to $150k (more frugal but very comfortable) then the 50th percentile results in $7.2M and the 25th percentile results in $3.1M.

I have no plans to retire (I'm a very cautious person) but am I FI? Despite what the odds say, I don't think I am...
if you're a very cautious person, do you consider 80/20 (total US/total bond) to be considered cautious?
I should have stated the original question better. When I asked if I was possibly FI, I didn't mean it in the actionable sense (i.e. can I retire), it was more of a mental exercise (i.e. if things go bad will I be ok). I'm self-employed so monthly income fluctuates quite a bit. In down months it's nice to think I'm doing fine in the big picture.

As many of you have noted, a 7% withdrawal rate *might* work but leaves me a fair chance of running out of money. I won't consider retiring until at least 25X and more likely 33X-50X (X might get revised down if I can't make it). So the 80/20 allocation is because I'm still in the accumulation phase. If I make it to 50X then I could cut expenses in half and still be fine, so a large drop in equities wouldn't bother me. My ultimate goal is to leave the original balance intact for my children, so a 4% withdrawal won't cut it either.
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