4 years away

[wrichards58]

my husband in 4 and myself in 5 or 6 years away from retiring. We meet with our cpa who is looking at all of our stuff. My thing is how do you know what your expenses are going to be in 4 or 5 years...like elec, gas, water .etc.
He gave us a list of stuff to bring back to him to be able to draw up a plan.
Could anyone tell me what the main stuff we should be looking at now... looks like we will have 2500 in ss, 4000 in pension a month. 500,000 in 403b, 70,000 in a roth.. I will only have 1500 a month but if I keep working 60,000 a year.
The only debt we will have is our house in which we owe 115,000 and market is 325,000. It is hoped that we would have at least 70,000 to 80,000 a year. We plan to try to save more from now until then. hope to hear from you ERs

 

[rescueme]

"how do you know what your expenses are going to be in 4 or 5 years...like elec, gas, water .etc."

In our case (retired 5+ years), we planned upon 100% of current pre-retirement expenses, along with an inflation factor (pick your own).

Any "free" retirement forecast tool (if it is of any value) will include an inflation factor.

It's not that hard to calculate.

Just don't fall for the idea that you will not spend as much in retirement as pre-retirement (due to many factors). That's not necessarily true (as was in our case).

As far as the value of your home? It dosen't matter, IMHO. The question is how are you going to "retire" that debt you still have, attached to it. Pay it off before retirement (thus reducing your monthly expenses) or carry it into retirement. That's your option, based upon your way of thinking of the situation. Many on this forum (including me/DW) desire to entire retirement free of any long term financial commitments. Others (most of whom I believe have pensions or other income vehicles, which we do not) don't have a problem with carrying debt into retirement. It all depends on your situation, your beliefs of managing debt.

 

[wrichards58]

"how do you know what your expenses are going to be in 4 or 5 years...like elec, gas, water .etc."

In our case (retired 5+ years), we planned upon 100% of current pre-retirement expenses, along with an inflation factor (pick your own).

Any "free" retirement forecast tool (if it is of any value) will include an inflation factor.

It's not that hard to calculate.

Just don't fall for the idea that you will not spend as much in retirement as pre-retirement (due to many factors). That's not necessarily true (as was in our case).

could you tell me where I can find a free retirment forecast tool thanks

 

[Midpack]

my husband in 4 and myself in 5 or 6 years away from retiring. We meet with our cpa who is looking at all of our stuff. My thing is how do you know what your expenses are going to be in 4 or 5 years...like elec, gas, water .etc.
He gave us a list of stuff to bring back to him to be able to draw up a plan.
Could anyone tell me what the main stuff we should be looking at now... looks like we will have 2500 in ss, 4000 in pension a month. 500,000 in 403b, 70,000 in a roth.. I will only have 1500 a month but if I keep working 60,000 a year.
The only debt we will have is our house in which we owe 115,000 and market is 325,000. It is hoped that we would have at least 70,000 to 80,000 a year. We plan to try to save more from now until then. hope to hear from you ERs

Welcome aboard and congrats on nearing the FI milestone.

Only way I know to "know" what your expenses are going to be in 4 or 5 years is to

a) quantify what you are spending now (surprising how many people don't know what they are spending now overall or in any detail),
b) determine which expenses you'd expect to increase or decrease in retirement (some people expect to spend more on travel & medical and less on clothes/cleaning for example),
c) determine a general rate of inflation (based on past history and your expectations) and
d) consider a higher or lower rate of inflation for some of your major expenses (many people expect health care/medical costs to increase faster than inflation in general, or certain taxes/fees for example).
​

With the numbers you show, have you entered it all in FIRECalc: A different kind of retirement calculator to see roughly where you stand based on past market history? Good place to start IMO...

 

[rescueme]

could you tell me where I can find a free retirment forecast tool thanks

FireCalc, Retirement Income Planner (FIDO - Fidelity, AKA RIP), Financial Engines (FE, offered by Vanguard), ORP, and others.

There are many. You just have to select one that is available (some requre that you are a customer, at a defined asset investment base) and that makes sense to your situation.

For instance, FE (Vanguard) allows you to forecast an expected income rate for retirement, based upon your assets and expenses. However, it does not allow you to forecast a certain age (like age 100, for me and DW). It uses "standard" life tables, and does not give you a year by year breakdown of expenses, taxes, withdrawl rate, etc.

The Retirement Income Planner (AKA "RIP") from Fidelity will give you a more "robust" plan, with options to allow you to forecast outside the norm (as VG FE tool, will not).

FireCalc? If you are on this forum, you probably know about it (the link is on the home page). While I use it, I don't depend on it other than to match against the other tools I personally use (RIP & FE) just to do a "double check" of the numbers. It has its limitations, but since it is a perfered tool of a lot of folks on this forum, I'll keep my thoughts to myself ...

ORP Retirement Calculator - Parameter Form is also used by a lot of folks. I don't use it personally, but you may find it of some value.

 

[wrichards58]

FireCalc, Retirement Income Planner (FIDO - Fidelity, AKA RIP), Financial Engines (FE, offered by Vanguard), ORP, and others.

There are many. You just have to select one that is available (some requre that you are a customer, at a defined asset investment base) and that makes sense to your situation.

For instance, FE (Vanguard) allows you to forecast an expected income rate for retirement, based upon your assets and expenses. However, it does not allow you to forecast a certain age (like age 100, for me and DW). It uses "standard" life tables, and does not give you a year by year breakdown of expenses, taxes, withdrawl rate, etc.

The Retirement Income Planner (AKA "RIP") from Fidelity will give you a more "robust" plan, with options to allow you to forecast outside the norm (as VG FE tool, will not).

FireCalc? If you are on this forum, you probably know about it (the link is on the home page). While I use it, I don't depend on it other than to match against the other tools I personally use (RIP & FE) just to do a "double check" of the numbers. It has its limitations, but since it is a perfered tool of a lot of folks on this forum, I'll keep my thoughts to myself ...

ORP Retirement Calculator - Parameter Form is also used by a lot of folks. I don't use it personally, but you may find it of some value.

could you give me the link for fidelity thanks

 

[pb4uski]

my husband in 4 and myself in 5 or 6 years away from retiring. We meet with our cpa who is looking at all of our stuff. My thing is how do you know what your expenses are going to be in 4 or 5 years...like elec, gas, water .etc.......

Here's what I would do in that situation:

1) Go through your checkbooks, bank statements, etc and do an analysis of what your living expenses were for 2010, 2011 and 1H2012

2) Do a "budget" for a year of expenses based on 1) above and adjusting as appropriate for unusual items in the past or in the future.

3) Further adjust the "budget' for any changes you expect in retirement, pretending that you pulled the trigger tomorrow. For example, we sold our house and made our former vacation home our primary residence, so all of our expenses for the house we sold no longer apply. When I ER'd I went from employer subsidized health insurance to a small group health insurance policy so those numbers were different.

4) If your're looking for expenses in 4-5 years, take the result from 3 above and adjust for 4-5 years of inflation.

In terms of retirement projections of income, investment results, etc. I think Quicken's Lifetime Planner tool is pretty intuitive and a good place to start and organize your information. You plug in your investments, future savings from now until you retire, future pensions and SS, expenses (from what you did above), etc and it does a year-by-year projection of your nestegg.

YMMV

 

[wrichards58]

Here's what I would do in that situation:

1) Go through your checkbooks, bank statements, etc and do an analysis of what your living expenses were for 2010, 2011 and 1H2012

2) Do a "budget" for a year of expenses based on 1) above and adjusting as appropriate for unusual items in the past or in the future.

3) Further adjust the "budget' for any changes you expect in retirement, pretending that you pulled the trigger tomorrow. For example, we sold our house and made our former vacation home our primary residence, so all of our expenses for the house we sold no longer apply. When I ER'd I went from employer subsidized health insurance to a small group health insurance policy so those numbers were different.

4) If your're looking for expenses in 4-5 years, take the result from 3 above and adjust for 4-5 years of inflation.

In terms of retirement projections of income, investment results, etc. I think Quicken's Lifetime Planner tool is pretty intuitive and a good place to start and organize your information. You plug in your investments, future savings from now until you retire, future pensions and SS, expenses (from what you did above), etc and it does a year-by-year projection of your nestegg.

YMMV

Is it in the quicken premier program?

 

[rothlev]

It is hoped that we would have at least 70,000 to 80,000 a year. We plan to try to save more from now until then. hope to hear from you ERs

if I understood you correctly you will have an income of 6500 a month, is the pension adjusted for inflation? You want to have income of 80000 a year? (6600 mo) correct. Sounds like you are fine especially if the pension has an inflation adjustment.

 

[pb4uski]

Is it in the quicken premier program?

Yes, I believe so. I have Q Home & Business and it is under the Planning menu, "Lifetime Planner". If you already have your investments in Quicken it will be easier.

 

[wrichards58]

It is hoped that we would have at least 70,000 to 80,000 a year. We plan to try to save more from now until then. hope to hear from you ERs

if I understood you correctly you will have an income of 6500 a month, is the pension adjusted for inflation? You want to have income of 80000 a year? (6600 mo) correct. Sounds like you are fine especially if the pension has an inflation adjustment.

how do I calculate the inflation adjustment

 

[wrichards58]

Yes, I believe so. I have Q Home & Business and it is under the Planning menu, "Lifetime Planner". If you already have your investments in Quicken it will be easier.

so do i get the Q home and business program

 

[Livefree]

You can purchase Quicken Deluxe and it has the Planner feature.

 

[Midpack]

how do I calculate the inflation adjustment

There is no pat answer, depends on your spending habits, your outlook for inflation in the future and how much of a safety factor you want to build in (if any). Those are decisions you have to make. The historical rate of inflation has been about 3.3%, though you will find people (here and elsewhere) who will argue for more or less than that for all sorts of valid reasons, which comes back to your expectations.

https://www.google.com/search?q=ret...rlz=1I7DKUS_en&ie=UTF-8&oe=UTF-8&sourceid=ie7

Read away...

 

[walkinwood]

If you don't already have your finances in Quicken, it will not help you much, so don't waste your time & dollars on it - at least for this exercise.

As another poster said, you need to go back over the last few years - use your checkbook, bills etc, and figure out how much you spent per year, figure out what categories will increase (say travel) and what may decrease (commuting costs for eg) and then make a guess. That will give you an idea whether you will be able to continue your current lifestyle in retirement, live it up or have to cut back.

Living retired means living within a budget. It means making decisions everyday to keep your spending within that budget. If the cost of your utilities goes up, you need to use less or reduce spending some place else. If you spend less in one area, you can spend more in another. It really is that simple.

 

[pb4uski]

If you don't already have your finances in Quicken, it will not help you much, so don't waste your time & dollars on it - at least for this exercise.....

I'm not sure what "exercise" you are talking about above. There are two things we have been talking about.

One is doing a retirement budget to answer the question of how much OP's retirement living expenses are. For this exercise, I would agree that it would be a lot easier if OP's finances are already in Quicken, however Quicken does have a pretty good budget development tool but it would be just as quick to use Excel.

The second exercise is an overall retirement projection. For this exercise, it wouldn't matter much whether or not OP's finances are already in Quicken. Lifetime Planner is pretty much a stand-alone module within Quicken, however it does draw off of investment information so if someone tracked their investments in Quicken it would make it easier. If someone doesn't track their investments in Quicken, it would be relatively simple to plug in tickers and share counts in most cases.

 

[wrichards58]

I'm not sure what "exercise" you are talking about above. There are two things we have been talking about.

One is doing a retirement budget to answer the question of how much OP's retirement living expenses are. For this exercise, I would agree that it would be a lot easier if OP's finances are already in Quicken, however Quicken does have a pretty good budget development tool but it would be just as quick to use Excel.

The second exercise is an overall retirement projection. For this exercise, it wouldn't matter much whether or not OP's finances are already in Quicken. Lifetime Planner is pretty much a stand-alone module within Quicken, however it does draw off of investment information so if someone tracked their investments in Quicken it would make it easier. If someone doesn't track their investments in Quicken, it would be relatively simple to plug in tickers and share counts in most cases.

we are checking if my husband gets a pension inflation increase, he does not think so but i am a teacher so I think we do....we will find out on Monday

 

[rothlev]

definely find out if, how often, and what % inflation adjustments your pension(s) have. It makes a big difference. My pension for example goes up 3% per year, and my DH's federal has a COLA that varies, but goes up with the cost of living . So, as a rule of thumb I do not factor inflation in our expenses as most of our income is inflation adjusted. ( as is SS)

So, I use our current expenses in figuring out our future expenses. Fidelity has a retirement calculator that does this. Retirement Income Planner (FIDO - Fidelity, AKA RIP),

 

[obgyn65]

To answer your comment below, I would download all my debits from my primary bank account, add all these debits over 12 months, and divide by 12. Then apply an inflation rate. The result is my monthly expenses in the future.

My thing is how do you know what your expenses are going to be in 4 or 5 years...like elec, gas, water .etc.

 

[pb4uski]

To answer your comment below, I would download all my debits from my primary bank account, add all these debits over 12 months, and divide by 12. Then apply an inflation rate. The result is my monthly expenses in the future.

I'm not sure this would be the best way because not all debits are necessarily expenses - debits could include transfers to other bank accounts, non expense expenditures (new car, furniture, etc). I think the unfortunate reality is that you need to comb through the detail and weed the non expense debits out.

 

[wrichards58]

I'm not sure this would be the best way because not all debits are necessarily expenses - debits could include transfers to other bank accounts, non expense expenditures (new car, furniture, etc). I think the unfortunate reality is that you need to comb through the detail and weed the non expense debits out.

I found out that my husband pension does not get a cost inflation increase..but I do with my teacher money...that is not good so when I calculate instead of our salary going up each year it will go down.