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FIRECALC - "Spending" column question
Old 12-10-2008, 03:07 PM   #1
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FIRECALC - "Spending" column question

I just started looking at numbers with FIRECALC. I know this is a stupid question but let me ask anyway...

On the first page, you enter
Spending:
Portfolio:
Years:

For Spending:, I read somewhere here that you enter how much you want to spend in one year (including taxes).

My annual living expenses is currently about 42K-45K (single). The 42K-45K does not include savings or healthcare. Just bare bone housing, household expenses, vacation and discretionary items. And it doesn't include taxes. Let's say I want to spend 55K /yr once I retire (up 10K-13K from what I am spending now). How do I calculate the "Spending" with taxes? Do you just add 30% to 55K to get the spending number?

Of course, taxes will change depending upon what bracket, what year, which state you live in, etc, etc, so I just don't know how much I should put there. Any rule of thumb to figure out the numbers?

Thank you!

tmm
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Old 12-10-2008, 04:07 PM   #2
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Quote:
Originally Posted by tmm99 View Post
I just started looking at numbers with FIRECALC. I know this is a stupid question but let me ask anyway...

On the first page, you enter
Spending:
Portfolio:
Years:

For Spending:, I read somewhere here that you enter how much you want to spend in one year (including taxes).

My annual living expenses is currently about 42K-45K (single). The 42K-45K does not include savings or healthcare. Just bare bone housing, household expenses, vacation and discretionary items. And it doesn't include taxes. Let's say I want to spend 55K /yr once I retire (up 10K-13K from what I am spending now). How do I calculate the "Spending" with taxes? Do you just add 30% to 55K to get the spending number?

Of course, taxes will change depending upon what bracket, what year, which state you live in, etc, etc, so I just don't know how much I should put there. Any rule of thumb to figure out the numbers?

Thank you!

tmm
Using the same software you use to do your taxes (TurboTax, TacAct, etc) plug in what you imagine your retirement income scenario to be and let the program calculate the taxes. It would be impossible to give you a percentage to use because each case is different, sometimes very, very different.

Remember that earnings on non-deferred investments will be taxable whether you spend them or not. So, estimate your taxes based on your estimate of your future income, not your future spending budget.
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Old 12-10-2008, 08:00 PM   #3
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Wow, thank you youbet. I was afraid someone might say something like that, but it makes sense.

tmm
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