Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Do these numbers look right?
Old 08-18-2014, 10:19 AM   #1
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
Do these numbers look right?

I ran ER on 3 different calculators. They are all giving me about the same answer but wanted to check with the board. I'm backing into how much annual spending I can afford.

ER at 55 years old, live to 90

Tax deferred assets $2.2MM
Tax free (Roth) $0.15MM
Fully taxable $0.5MM
Total $2.85MM

Assumed Return 5.5%
$23k of my SS at age 62
$9k of my wife SS at my age of 67

Flexible Planner calculator says I can spend $110k per year
Fidelity calculator says $110k
ORP says $107k

I didn't run Firecalc because it does not handle taxes.

Those numbers sound about right from your experience?
__________________

__________________
bulbar is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 08-18-2014, 12:18 PM   #2
Thinks s/he gets paid by the post
Senator's Avatar
 
Join Date: Feb 2014
Location: Eagan, MN
Posts: 3,050
How much do you actually spend? Then add a buffer as it will always be more.
__________________

__________________
FIRE no later than 7/5/2016 at 56 (done), securing '16 401K match (done), getting '15 401K match (done), LTI Bonus (done), Perf bonus (done), maxing out 401K (done), picking up 1,000 hours to get another year of pension (done), July 1st benefits (vacation day, healthcare) (done), July 4th holiday. 0 days left. (done) OFFICIALLY RETIRED 7/5/2016!!
Senator is offline   Reply With Quote
Old 08-18-2014, 12:33 PM   #3
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
I was actually just asking if the numbers sound right. Would about $3MM last you 35 years if you spent around $110k a year, assuming you had some SS coming in?
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 01:06 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
 
Join Date: Jan 2008
Location: Chicagoland
Posts: 11,974
Yes, with the partial assumptions provided a 3.8% WR for 45 years with small SS (relative to total spending) kicking in later is in the ballpark. But retirement calculators 'are axes, not scalpels.' And since there's no predicting future tax rates (another axe), some of us would rather calculate taxes and include in spending on our own so we know what's assumed.

Some people would be completely comfortable at a 4% WR and a relatively risky asset allocation where others might need a 2% WR and a very conservative allocation to sleep at night once retired. There is no "right answer" - having a plan B is essential for almost all retirees.

Quote:
Originally Posted by FIRECALC before taxes
Looking for a spending level that will result in 95% success rate . . . . . . . . . . . . . . .

A spending level of $122,628 provided a success rate of 96.0% (99 total cycles, of which 4 failed). This spending level is 4.30% of your starting portfolio. (Your spending is assumed to come from any Social Security and pensions you entered, as well as from the portfolio.)
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 60% equity funds / 35% bond funds / 5% cash
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 08-18-2014, 01:23 PM   #5
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
It's only 35 years. thanks for looking at it. I actually had a FP do a model including all taxes. I was just checking his work with these on-line calculators to see if he was right. The big question is if we can spend less than $110k/year. We spend more than that now and 2 kids go to college next year. I did include the college costs tho and it still says we can spend $110k/year.
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 01:35 PM   #6
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
I'd be comfortable as long as the $110k included taxes, which it sounds like it doesn't. I'm also assuming retire at 55 means "now", and the portfolio won't be growing for a few years without withdrawals. Your assumed return is OK for planning, but meaningless when it comes to portfolio survivability. That's where FIRECalc comes in.

$110k/$2.85M = 3.9% to start
($110k - $32k)/$2.85M = 2.7% to the end

Those percentages are on the optimistic side for ER IMHO, and if you add tax costs to that it is worse. Not that my plan doesn't look kind of similar, but I have some ability to trim expenses and some funds outside the plan that I could use if needed. If you have comfortable margins elsewhere, then you're probably OK. If this is it and expenses are pretty firm I'd consider building up the portfolio a little more.
__________________
Animorph is offline   Reply With Quote
Old 08-18-2014, 02:07 PM   #7
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,397
Quote:
Originally Posted by bulbar View Post
It's only 35 years. thanks for looking at it. I actually had a FP do a model including all taxes. I was just checking his work with these on-line calculators to see if he was right. The big question is if we can spend less than $110k/year. We spend more than that now and 2 kids go to college next year. I did include the college costs tho and it still says we can spend $110k/year.
We have 2 kids in college now (DH retired 4 years ago and I semi-retired at the same time). I find that our expenses while they are in college are much more than they will be when they are out of college. That is, I've tracked our expenses and can see clearly those that are attributable to the kids. I do retirement modeling based upon what our expenses will be for the next 2 years (kids should be out by then) and then showing the expenses going down after that.
__________________
Katsmeow is offline   Reply With Quote
Old 08-18-2014, 02:12 PM   #8
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
Taxes are included in the $110k. It looks like taxes run about $15k-$18k per year, so I guess our pure spending would have to be around $95k.
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 02:15 PM   #9
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
Thanks Kats. I'm thinking we'll have to wait until they get out of college so at least another 5 years. By then hopefully we'll have more money too.
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 02:30 PM   #10
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,397
Quote:
Originally Posted by bulbar View Post
Thanks Kats. I'm thinking we'll have to wait until they get out of college so at least another 5 years. By then hopefully we'll have more money too.
Basically we realized when DH retired that our portfolio would go down while we were sending kids to college. We modeled how much we could afford to have it go down and modeled the higher spending over a period of several years. We set aside part of the portfolio to basically account for the higher spending until the kids get out of college (I didn't want to have to sell equities to pay their expenses if there was a downturn over this time). So far, 4 years into it (2 more to go) things have gone well. Portfolio returns have been higher than what we anticipated so we are ahead of where I thought we would be. That said, I recognize that our portfolio 2 years from now will be smaller than the one we started with. Of course, we have run Firecalc and other calculators so we feel we can afford to have that reduction.
__________________
Katsmeow is offline   Reply With Quote
Old 08-18-2014, 02:32 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
braumeister's Avatar
 
Join Date: Feb 2010
Location: Northern Kentucky
Posts: 8,601
Quote:
Originally Posted by bulbar View Post
I didn't run Firecalc because it does not handle taxes.
Quote:
Originally Posted by bulbar View Post
Taxes are included in the $110k.
FireCALC assumes your taxes are just another item in your spending, so in that sense it "handles" taxes. You say you are including taxes in your spending, so I would guess it would give you similar results.
__________________
braumeister is offline   Reply With Quote
Old 08-18-2014, 02:42 PM   #12
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
Yeah, I guess that makes sense Brau. So I can run firecalc at $110k per year and see if my $2.85MM runs out.
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 02:47 PM   #13
Recycles dryer sheets
 
Join Date: Aug 2010
Posts: 359
Quote:
Originally Posted by bulbar View Post
Thanks Kats. I'm thinking we'll have to wait until they get out of college so at least another 5 years. By then hopefully we'll have more money too.
My numbers are very similar to yours. I have 2 kids in college (one will be freshman next month). We are 59/53. Sounds like you are younger than us.

My college funds are set aside, and I also set aside 200K to prepare market downturn or large purchase. I own 2 homes.

Therefore, I am using 2.5M nest egg, and $105K/yr expenses (tax, heathcare all included) to calculate, and I feel comfortable that we can ER next year.

If yours is similar to mine, adding 5 more years will give you a much larger cushion. Good luck.
__________________
fh2000 is online now   Reply With Quote
Old 08-18-2014, 02:53 PM   #14
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
We are 53/48. My $2.85MM is a projection for 55. It's about $2.6MM now. My college savings are in the $2.85MM. Can you live ok on $105K/year spending?
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 02:55 PM   #15
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
If I run Firecalc at $2.85MM and the SS income and 30 years, it says I can spend $125k/year with a 94% success rate. If I deduct $15k/year for taxes, that means I can spend $110k per year to live, which seems to match the other calculators. So I guess if we can stay under $110k per year, we'd be ok.
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 03:04 PM   #16
Recycles dryer sheets
 
Join Date: May 2014
Posts: 109
What the heck - If I run 30 years I get 94% success. If I run 35 years I get only 75%??
__________________
bulbar is offline   Reply With Quote
Old 08-18-2014, 03:39 PM   #17
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Quote:
Originally Posted by bulbar View Post
What the heck - If I run 30 years I get 94% success. If I run 35 years I get only 75%??
Yeah, the longer time periods generally require a lower withdrawal rate. The real glitch is if you do 45 or 50 years, since that starts dropping off some of the worst scenarios and the success rate starts to rise. FIRECalc uses historical data in its correct sequence, so if you want 50 years of retirement then the last period it can calculate starts with 1964.
__________________
Animorph is offline   Reply With Quote
Old 08-18-2014, 06:21 PM   #18
Recycles dryer sheets
 
Join Date: Mar 2012
Posts: 102
Quote:
Originally Posted by Senator View Post
How much do you actually spend? Then add a buffer as it will always be more.
This, IMO, is the most important part of the equation. How much do you spend? If you have some loose assumption of what you expenses are that can spell trouble. Most here would recommend that you track everything, and I mean everything, you spend money on for two years. My DW and I are almost complete with this exercise and it really helps you understand where your money is going. This will give you a better understanding of what your nut will be and how much cushion you will have based on your portfolio income assumptions.

For me, I am shooting for a 30% cushion over my current spending habits. Others may want more some may be comfortable with a lot less. The cushion is for the known unknowns and the unknown unknowns.
__________________
tdv2 is offline   Reply With Quote
Old 08-18-2014, 06:30 PM   #19
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,397
Quote:
Originally Posted by bulbar View Post
We are 53/48. My $2.85MM is a projection for 55. It's about $2.6MM now. My college savings are in the $2.85MM. Can you live ok on $105K/year spending?
I think a point that you have to consider is that how much you may need to spend will vary over time particularly if you have kids in college. For example, right now we are spending more than $105k a year and have two kids in college. After they are out of school and gone from the house I project our spending will drop to about $70k a year. Then a couple of years later (when I get to Medicare age) I project spending around $65k to $68k a year (depending on discretionary spending).

To refine it even more, this year we will have higher spending than next year and then still less the year after.

I do Firecalc using variable spending (I am a supporter) and I think that gives more valid information than assuming we will spend the same amount now when we have 2 kids at college versus what we will spend 5 years from now which is a different situation.
__________________
Katsmeow is offline   Reply With Quote
Old 08-18-2014, 06:55 PM   #20
Thinks s/he gets paid by the post
Free To Canoe's Avatar
 
Join Date: May 2008
Location: Cooksburg,PA
Posts: 1,738
Quote:
Originally Posted by bulbar View Post
I ran ER on 3 different calculators. They are all giving me about the same answer but wanted to check with the board. I'm backing into how much annual spending I can afford.

ER at 55 years old, live to 90

Tax deferred assets $2.2MM
Tax free (Roth) $0.15MM
Fully taxable $0.5MM
Total $2.85MM

Assumed Return 5.5%
$23k of my SS at age 62
$9k of my wife SS at my age of 67

Flexible Planner calculator says I can spend $110k per year
Fidelity calculator says $110k
ORP says $107k

I didn't run Firecalc because it does not handle taxes.

Those numbers sound about right from your experience?

Common sense double check:
35 years left into $2.85M gives about $81k per year of your money back. Not counting SS. Not counting earnings on the investments.
I think $110k "sounds" right. Might even be a little low.
__________________

__________________
Free to canoe
Free To Canoe is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
A Look At The Numbers: The market/economy over the last year thefed FIRE and Money 16 11-24-2009 02:04 PM
How do these withdrawals look? utrecht FIRE and Money 8 04-27-2007 05:15 PM

 

 
All times are GMT -6. The time now is 12:40 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.