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Old 03-07-2015, 04:55 AM   #41
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Hi bob,
Let's get to the important stuff: post a pic of your bike!
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Old 03-07-2015, 05:25 AM   #42
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Originally Posted by pb4uski View Post
I'm traveling and on my tablet so I don't have access to the spreadsheet but if the $38,194 of income includes any LTCG or qualified dividends then the tax rate will be nil on those so they can be excluded from the TI used in the tax calculation shown above.

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Good point. Looking into the spreadsheet further leads me to think that this is not the case but it certainly could be. Also, in looking back at the spreadsheet, in the early years, the money is coming from a column titled brokerage account. I would think that is primarily after tax money and would likely have capital gains. Therefore, I think the tax that has been added in the early years is overstated due to those issues.
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Old 03-07-2015, 06:00 AM   #43
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Originally Posted by racy View Post
Hi bob,
Let's get to the important stuff: post a pic of your bike!
Oh, no . . . . I just hate to show off my bike!

2300cc Triumph Rocket III Touring (insert Tim Allen grunting here)
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Old 03-07-2015, 09:36 AM   #44
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The second one. I already am saving what I consider to be a significant amount towards retirement and don't want to cut my expenses to pull in or make the date of retirement "firm". The actual date of retirement will depend on the account balances reaching what I consider to be a "safe" level.

I don't thing that the change would be as accurate for two reasons:
1. The budget I have for retirement is padded already and attempting to apply inflation to already padded numbers would get somewhat out of hand.
2. The whole accumulation phase is academic until I think I am ready to retire. At which time I will have updated the budget with accurate recent numbers and the application of inflation to the start of the drawdown is mute. The spreadsheet lets me predict when I might be able to retire, but it is set firmly in jello until all the numbers check out with updated budgeting data.

Inflation is already backed out of the assumed investment return. The S&P 500 100 year compound annual growth rate annualized without inflation included is 10%. So if you take off my 3.5% inflation assumption should be a net return of 6.5%, and my return for the accumulation phase is 6%.
I'd say that you're making an overly optimistic assumption (that inflation won't increase your spending over the next 13 years), but you feel okay about that because you've got an overly pessimistic assumption regarding your basic spending.

My style would be to move both of them toward the "most likely".

I'd also feel that if I've already backed inflation out of my investment returns, then I don't need any inflation assumption in my spending.

But it's your spreadsheet. You get to decide what makes you comfortable.

I've got one like this. It's fun to go back periodically, look at what I assumed then, and see how that compares to what really happened. I expect that you'll enjoy that, too.
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Old 03-07-2015, 06:30 PM   #45
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bobebob,
I think you might want to check the tax calculation in your spreadsheet. Given the brackets in your spreadsheet, the results are too high. I think you're missing the personal exemption (which I don't see in your spreadsheet or the formula) and I think you're using the brackets incorrectly.

Here's how I calculate 2029's taxes:

Total income labeled taxable ($3,183 x 12) = $38,194
Subtract the personal exemption 4,000
Subtract the standard deduction 6,200
Equals Taxable income $27,994

Tax on the first $9,225 is 10% 923
Tax on the rest (($27,994-$9,225)*.15) 2815
Total Tax $3,738

Versus your spreadsheet of ($428 x 12) $5,140

Difference is $1,402. You can verify my calculation by going to the IRS table for a single person and see that with taxable income of $27,994, the tax is $3,743. The small difference is due to using your 2015 brackets and the IRS table I used is for 2014.

Unless I'm missing something, I think you'll like your numbers even better when you make that adjustment.
You are quite correct. I overlooked the personal exemption entirely.

Thank you very much for bringing that to my attention. I will fix that along with some other changes and roll out Version 2.0 next week some time.

Another thing that might be throwing off your numbers is that the tax is 1/12th of the previous years calculation based on the previous year's taxable income. So I don't know if that offsets what you're looking at by 1 year or not. Until there is enough data at the beginning to have a full year of taxable income in retirement, I just estimated $400/mo. I'm sure I won't be sending the IRS monthly checks, but didn't want to go through the hassle of doing quarterly estimated payments on my spreadsheet. I just wanted to make sure I captured my tax liability.

Quote:
Originally Posted by pb4uski View Post
I'm traveling and on my tablet so I don't have access to the spreadsheet but if the $38,194 of income includes any LTCG or qualified dividends then the tax rate will be nil on those so they can be excluded from the TI used in the tax calculation shown above.

Sent from my KFJWI using Tapatalk HD
For simplicity's sake, I just considered everything I was taking from the brokerage account to be taxable. That doesn't take into account cost basis on my investments or LTCG. It simplified calculations and also makes my planning that much more conservative.

I actually put a note to that effect on the second "drawdown" sheet at the top of the "taxable" header. I'm not faulting anyone for not seeing it. It wasn't obvious.

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Originally Posted by Independent View Post
I'd say that you're making an overly optimistic assumption (that inflation won't increase your spending over the next 13 years), but you feel okay about that because you've got an overly pessimistic assumption regarding your basic spending.

My style would be to move both of them toward the "most likely".

I'd also feel that if I've already backed inflation out of my investment returns, then I don't need any inflation assumption in my spending.

But it's your spreadsheet. You get to decide what makes you comfortable.

I've got one like this. It's fun to go back periodically, look at what I assumed then, and see how that compares to what really happened. I expect that you'll enjoy that, too.
That's about right. I've got $25,000 every 5 years for vehicle purchases. I doubt I'll fully use that. But if I inflate it between now and when I'm looking to retire, it will make my expenses pretty astronomical.

If I go back and try to get very accurate expenses for my budget, I would inflate it for the drawdown sheet.

I'll be re-visiting this every month or so just to update my actual account balances and see how the accumulation tracks. So I'll keep the budget updated constantly. And until the account balances matches the amount I feel I need to retire, it's just something nice to look forward to.

I'm not taking any actions based on this sheet (besides bumping up my contributions this year) until I'm ready to retire. And then the budget will be current numbers.

I'm thinking about leaving in inflated numbers for my accumulation phase because then the numbers should approximate what the account balances should show. Otherwise I'm just looking at buying power in today's numbers. But my budget and drawdown account balances will be in inflated numbers. So I will make the change to have an apples to apples comparison. The new assumption will be 9% (slightly pessimistic from the 10% return over the past 100 years).
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Old 03-07-2015, 08:04 PM   #46
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I did not see any health insurance, health bills, etc in the expenses... or gas for the bikes or cars. If you use a credit card for most of your bills... see if you can get a year end spending report. I usually plan to pay my insurance and max out of pocket each year... not that this will be the case most years.. but this provides some buffer in my budget.
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Old 03-07-2015, 09:32 PM   #47
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.....For simplicity's sake, I just considered everything I was taking from the brokerage account to be taxable. That doesn't take into account cost basis on my investments or LTCG. It simplified calculations and also makes my planning that much more conservative.....
Probably way too conservative depending on the composition of the investments in your taxable account. I know for me, if I sold everything in my taxable accounts in a way that I kept within the 15% tax bracket, since qualified dividends and LTCG are 0% tax my expected tax liability is nil rather than 10-15% since I am taking dividends in cash rather than reinvesting them.
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Old 03-09-2015, 05:41 AM   #48
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I did not see any health insurance, health bills, etc in the expenses... or gas for the bikes or cars. If you use a credit card for most of your bills... see if you can get a year end spending report. I usually plan to pay my insurance and max out of pocket each year... not that this will be the case most years.. but this provides some buffer in my budget.
Like the commercial for Prego Spaghetti sauce says: "It's in there."

All those health-related expenses are in the assumptions and come out of the second sheet (Drawdown) columns "Y" through "AE". Also included are Vision and Dental. All the maximum out of pocket amounts are used, like you said.

I generally take gas out of my "spending money" vs putting it as a budgeted expense. Maintenance is included for the motorcycle but not the car. Although some of the padded budget for a new car every 10 years will likely be used for maintenance and repairs as the car gets older.

Quote:
Originally Posted by pb4uski View Post
Probably way too conservative depending on the composition of the investments in your taxable account. I know for me, if I sold everything in my taxable accounts in a way that I kept within the 15% tax bracket, since qualified dividends and LTCG are 0% tax my expected tax liability is nil rather than 10-15% since I am taking dividends in cash rather than reinvesting them.
I figured that "way" conservative was the way to go to start with. But in the next version, I will include a setting for percentage of brokerage account that is taxable too.

From what I can estimate, I'll likely be in the 25% tax bracket most of the time.

Any guesses on what might be a good estimate for the percentage of the brokerage withdrawals that will be taxable taking into account cost basis and LTCG? I realize that that could vary wildly, but I've got to make some guesses or else err on the side of "way" conservative.
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Old 03-18-2015, 09:28 PM   #49
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bobebob - I am hoping to see Spreadsheet 2.0 posted soon!
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Old 03-19-2015, 08:37 AM   #50
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(Holy Moly...this thread is an ISTJ explosion! As an INTJ, I much prefer to run my assumptions and data through ESPlanner and have it calculate my annual discretionary income. Then I compare this number to my $30,000 annually that I've been spending the past three years leading up to ER. Of course, I run my scenarios through FireCalc, Fidelity RIP, i-Corp, and Financial Engines as a check. Hats off to all of you who can get this granular! )
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