This page is intended to be a roadmap to learning all of the skills you need to use cFIREsim effectively. I'll go over the basics, the more advanced stuff, and even some individual examples and use-cases. At first glance, cFIREsim is just one GIANT form, and is kind of scary. But behind all of that, it can be as simple or as complicated as you make it out to be. So, let’s get started!

Click on a link below to see more information on that topic!

The Roadmap

  • The Basics
  • The Output Tab
  • Spending Plans (Coming Soon)
  • Portfolio section - (including Rebalance Annually, Keep Allocation Constant, Glide Path allocation changes) (Coming Soon)
  • Social Security Inputs (Coming Soon)
  • Adjustments - (Basic pre-retirement savings examples, one-time income/expense items, mortgage ending, college savings, etc) (Coming Soon)
  • Adjustments - (Modeling pensions, including the Freeze Value checkbox) (Coming Soon)

The Basics

At the very top of the cFIREsim site there is a block of inputs labeled “The Basics”. Here are the inputs that we see in this section.

  • Retirement Year - This is the year that you expect to retire. It can be the current year, or any year in the future. If you have already retired, just leave it as the current year.
  • Retirement End Year - Time to get real grim here… this is when you’re expecting to not need your retirement fund anymore. Put in a different way, it is when you expect to die. There are a number of factors that play into this, but I would suggest looking at the Social Security Administrations chart here. As of the date that I wrote this post, I am a 39 year old female, and that chart tells me that on average I can expect to live 43.41 more years. So, I personally would set the Retirement End Year to 2072 (2021 + 43.41 = 2062.41 + 10 years of padding just to be sure).
  • Data Method - As of the date that I wrote this post, there is currently only 1 choice here: Historical Data - All. This means it uses Stock, Bond, and Gold data from 1871 until present day. In the future, you will be able to select specific years within this data set, if you want to simulate only certain years.
  • Portfolio Value - This number represents that amount of investable assets that you have today. This is the total of what you might have in Stocks/Bonds/Gold/Cash throughout your entire portfolio. You should NOT include home equity or other investments, as the simulator will not plot their gains. You might be asking “But Lauren, if I own my house, I have equity. Isn’t that worth noting?”. Yes, yes it is worth noting. But we’ll do that in a later post on the Adjustments section of the site.
  • Initial Yearly Spending - There could be an entire blog post on how to figure this number out, but for the sake of keeping to the basics, this number represents your yearly spending at the beginning of retirement. When figuring out what number to put here, don’t include any spending changes that might occur in the future. We’ll go over any individual spending change circumstances when we talk about the Adjustments section. Important Note: You should budget for some amount of "taxes" in your spending. cFIREsim does not take into account taxes in any way.
  • Spending Plan - In general, this dropdown menu represents how your spending will change over time. Will you inflate your spending each year so that your spending power never decreases? Will you want to increase your spending during up market years? Decrease it during down market years? In future posts, I’ll go over the in’s and out’s of all of the spending plans. For now, we’ll talk about the default: Inflation Adjusted. This choice will ultimately take the inflation data for each year, and increase/decrease your yearly spending to match that inflation. This makes sure that your spending power never wavers from your initial numbers.

I’ve given some brief explanation into each of the inputs in the Basics section, but what HAPPENS when you hit “Run Simulation”?

On a basic level, cFIREsim is just taking stock market data (along with bond and gold data) from 1871, and steps through each year seeing what your hypothetical inputs would have resulted in. So, if you’re talking about the default values of a 30 year simulation, imagine that it’s taking the inputs and looking at all of the data from 1871 through 1901, and seeing what your spending plus the stock market changes would have resulted in each year. Then, it does it again for the data 1872 through 1902… all the way until the data of this year. For the default values, this will result in 119 separate 30 year chunks of data that it goes through, seeing if your portfolio would have survived in the past!

The Output Tab

After the calculations are made, an output page pops up with graphs and charts. Holy smokes that’s a lot of lines! What exactly is going on here? Each one of those lines represents 1 of the aforementioned 119 “cycles” of data! This shows the trajectory of what your portfolio would have done in real dollars (Definition: Real vs. Nominal dollars). It is import to realize: EVERYTHING on this page is in inflation-adjusted dollars even if you selected options related to non-inflation-adjusted things on the input page. If you hover your mouse over any one of the lines (as shown in annotation E), you’ll see at the bottom it shows data about that line (as shown in annotation F).

The Output Graphs

Annotations from Output Graphs:

  • A: A link back to the inputs tab. Your previous inputs are stored here, and you can jump back and forth.
  • B: The current tab you're on, from the last simulation run. You can have many tabs open for each different simulation you run.
  • C: A link that will send you back to cFIREsim and automatically populate the same inputs that you just ran, and will run the simulation. This is a way to "save" your progress for later, by bookmarking these links.
  • D: Download a year-by-year CSV file of all of the inputs involved in a simulation (every cycle)
  • E: Hovering over a line on the chart, you will see the data for that simulation cycle listed on Annotation F.
  • F: The information for what simulation point that you're hovering on. If shows the Start Year of that particular line, the exact data point of that point "Year", and what your portfolio would have been in that historical simulation at that time in inflation-adjusted-dollars.
For annotation F, let's dissect this a little more. “Year: 1992” is the specific year within one of those 30 year windows that you’re hovering over. “Cycle Start Year: 1982” means that this 30 year section of data was 1982 through 2012. And, lastly “Portfolio: $2,543,937” means exactly what you think it might, that your portfolio would have been exactly that in real dollars.

All of these same things applies for both of the charts shown. The chart on the left is the "Portfolio" chart, showing the value of your simulated portfolio over time. And the chart on the right shows your "Spending" over the course of the simulation. For this example, I am showing the default scenario, which is $40,000 per year spending, always adjusted for inflation. This is why the Spending chart remains a flat line (or a bunch of flat lines on top of each other). They're all $40,000. When we go over variable spending plans, this chart will change dramatically.

Success Rate

The most basic, and arguably the most important statistic, is the “Success Rate”. In cFIREsim, “success” is defined as your portfolio never reaching $0 in the time span that you provided on the form. In the case of the above chart, you can see “Success Rate: 96.67% - Failed 4 of 119 total cycles”. Out of ALL of the 30 year time chunks from 1871 to present, 4 of those chunks would have occurred in a period of stock market change and inflation that would have resulted in your portfolio running out! In later blog posts, we’ll talk a great deal about the “success” metric and how your personal risk profile matters to these calculations. But for now, let’s talk about the other items in this chart.

The “Average Portfolio at Retirement” is fairly self explanatory. On your retirement date, how much money did you have in your portfolio? Because we’re looking at the default scenario (which is retiring in the current year, with a $1,000,000 portfolio and $40,000 per year spending), we see that out of the 119 cycles, we always have $1,000,000 in our portfolio. This number will change if we set our retirement date in the future, because cFIREsim will be calculating all of the potential market gains/losses that portfolio might have between now and that future date.

Below the “Success Rate” and the “Average Portfolio at Retirement” row, we have an even bigger chart. This chart takes ALL of the portfolio and withdrawal information for all 119 cycles, and tells us the average, the median, the standard deviation, the lowest and the highest values. For the sake of keeping to “The Basics”, I will talk about the first row which talks about the averages. The first row, first column, is the “Average Ending Portfolio”. This takes all 119 cycles and averages out what the portfolio value would be after all 30 years have passed, in real dollars (insert link of definition of real vs nominal). In the next column, we have the “Average Yearly Withdrawals”. This is a pretty straight-forward number, because we chose $40,000 spending and made sure that the spending value never changed. The next column should be also just as straight-forward. The “Average Total Withdrawals” tells us the average of how much money was “spent” over the course of the entire 30 years of the simulation. Because we chose an unwavering $40,000 spend over 30 years: $40,000 x 30 = $1,200,000. In future posts, we’ll talk about spending plans that vary over time, which can greatly affect this number.