I think this will be a useful feature, even with a simple implementation. Obviously there are many ways you could implement the flex % logic.
I just had a random idea for a method - for a each iteration of the monte carlo, after every sim year a “mini monte carlo” would be computed for the remaining years to determine probability of success status for a target goal. Flex spending would be implemented for years when future probability of success fell below a threshold.
This method would be (n^2 + 3n)/2 more computationally costly (n= # of sim years). It would be less costly if fewer iterations were used for the mini monte carlos.
This would be neat and I think could be added to expenses as a normal feature (by which I mean, not exclusive to the Monte Carlo analysis).
Add an option to expenses to decrease by a % amount if there is insufficient funds, similar to the drawdown % on cashflow priorities.
For instance, I would add my annual vacation expense as able to have a 100% reduction, but my healthcare expense might be 0% and living expenses might be 10%.
Sounds like what is included with this calculator. Good idea.
See “Spending Models” tab in https://firecalc.com/ for some ideas on how the models can work.
My two cents. 1. could this be setup as a Discretionary Spending cash-flow priority instead? This way it wouldn’t be limited to Monte Carlo mode. 2. It could also just be a special type of expenses, that can be reduced to 0. You’d just need a way to signify in the projection when it is reduced. Partial and Abandoned Goals seem like a decent fit, but it could also be in it’s own category.
A global flex % for all expenses doesn’t feel specific enough.
I love the idea of using it as a cash-flow priority!
Jackie from discord also brought up the point about needing to specify things like line of credit with a minimum payment option. e.g. a line of credit with a $500/month planned amount, but with minimum payment option of $100/month.
+1 for this feature, particularly useful for FIRE where you often have discretionary spending early on. There is a good article here about discretionary spending and how it relates to FIRE and the 4% rule: https://www.madfientist.com/discretionary-withdrawal-strategy/?ck_subscriber_id=90800745&utm_source=convertkit&utm_medium=email&utm_campaign=The+Problem+with+the+4%25+Rule+%28and+Why+You+Could+Retire+Even+Sooner%29%20-%2010861788
Jumping in here at Kyle’s suggestion as I had a similar request.So like in my case, I really like cars, so I’ve modeled owning two and alternately replacing one of them every 4 years. But what if the market is bad or a big random expense pops up, I want to simulate deferring that discretionary purchase until things get better. Maybe even with a limit to how long to defer since buying a fresh new car every 8 years is a want, but eventually replacing transportation can be a need for safety/on-going MX costs.
Practically speaking I think the answer would be delaying the sale of the (as entered in the UI) and subsequent recurrent purchase, until some condition is met such as last year’s withdrawal rate, or trailing average of last x years; or market based with a floor to trigger delay followed by a required rebound to trigger sale and repurchase. Or maybe there’s a practical way to control a discretionary fund I haven’t figured out that’s filled for a single purpose based on certain conditions that can trigger the car purchase and would only fill based on certain model conditions.
As you can see I’m not sure the best way to model something like this so hopefully everyone here has ideas to help Kyle out :)
IMHO, this is probably the single biggest missing component in PL.
A good example of how this is handled is found in the link below.
https://engaging-data.com/will-money-last-retire-early/
You basically have a spending flex and flex threshold allowing you to auto modulate large ongoing expenditures each year to stay balanced. For example, I plan to go on yearly vacations, but setting an arbitrary yearly expense of $50K keeps that expense static even in downturns. A savvy retiree (which anyone using PL likely is!) would of course adjust these large expenses down to avoid a shortfall.
I hope to see this soon!
As a new user, I agree “IMHO, this is probably the single biggest missing component in PL” as a new user.
If 1929 happens, I am not spending big $$$ on vacations. And would reduce my expenses.
I’m voting this up, but more for the plan and cash flow prioritization changes than for Monte Carlo simulations.
This feels like one of the bigger missing pieces to me, so would be great to it land in some form, even if it’s not super configurable.
I would like to see a “Guardrails” system as described in Kitces article Implementing Retirement Income Guardrails to model how income/withdrawals could be adjusted based on Monte Carlo results. Perhaps PL could optimize for the most effective guardrails.
I think this feature is really important for simulating how people actually invest in real life. When the market’s not doing great, most budget-conscious investors cut back on spending, which is a key part of responsible investing. Adding this behavior to the simulation would make it way more realistic and useful, especially for those with smaller portfolios. This should definitely be a top priority.
This one is gets me excited to look forward to! I’d love to have the ability to set criteria for how much to adjust ($ and %) during down years and see how the success rate shifts as a result of my expense/withdraw tweaks within the same monte carlo analysis section so that I can assess if/what/where I need to make the official changes in the expenses section.
Took me a while to navigate around discord and find this spot - but I want to echo others comments that this will be a big help. I have spent a lot of time trying to to figure out how to model with with the various withdrawal strategies and think the simplest solution is to do something like Matthew suggested above. Allow the expense category to have an option to toggle for “discretional” with perhaps a defined Minimum spend.
For example Vacations and dining out are categories that some of us would elect to reduce in “bad” years but mortgage payment or healthcare costs would not be.
Glad this is on the roadmap!