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New use for FIREcalc, Fidelity Retirement Income Planner
01-22-2010, 11:40 AM
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#1
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Recycles dryer sheets
Join Date: Dec 2009
Posts: 215
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New use for FIREcalc, Fidelity Retirement Income Planner
Forgive me if this has been posted before, but I have learned so much over the last few weeks from this community that I want to share something I've just figured out.
I am planning to retire this year at 55. Ideally I would like to live off my DB pension and taxable assets until I am 70, and then (and only then) tap SS and my tIRA's.
So in Fidelity RIP I put in a planning horizon of 15 years, deleted all my 401(k), 403(b), tIRA and Roth accounts, put my and DW's SS starting at 70, pushed the button and voila! I got the likelihood of running through my taxable accounts before age 70. Obviously can do the same exercise in FIREcalc, although haven't tried it yet.
Turns out I only have a 34% chance of this working, but worst case (90% confidence) I would run out of taxable assets at 65 and this is assuming my company stock price goes nowhere for a decade as I put all my options in at the current in-the-money value.
Hope this tip is useful to someone.
Hmmm maybe I should be taking some tIRA withdrawals before RMD's required or at least doing some Roth conversion while I am in low bracket before SSx2 kicks in - but that is another topic. Maybe need to consult ORP tool to answer that one.
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01-22-2010, 11:43 AM
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#2
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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And if you had told the program that you put your taxable assets in cash or TIPS, would they run out in 15 years? That is, do you have 15 years worth of expenses in your taxable assets?
Did you see that thread about Bob's research of TIPS, SS and SPIAs combined to give guaranteed stream of retirement income?
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01-22-2010, 12:41 PM
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#3
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Moderator Emeritus
Join Date: Feb 2006
Location: San Francisco
Posts: 8,827
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Quote:
Originally Posted by LOL!
Did you see that thread about Bob's research of TIPS, SS and SPIAs combined to give guaranteed stream of retirement income?
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Do you mean here, or over at Bogleheads? I saw such a discussion over there not long ago.
__________________
Rich
San Francisco Area
ESR'd March 2010. FIRE'd January 2011.
As if you didn't know..If the above message contains medical content, it's NOT intended as advice, and may not be accurate, applicable or sufficient. Don't rely on it for any purpose. Consult your own doctor for all medical advice.
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01-22-2010, 02:00 PM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Both forums had discussions.
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01-22-2010, 03:16 PM
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#5
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Full time employment: Posting here.
Join Date: Jan 2007
Posts: 582
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Interesting - hadn't thought to use the tools that way. Thanks, chemist! I'll have to try it.
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01-23-2010, 02:55 AM
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#6
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Thinks s/he gets paid by the post
Join Date: Sep 2008
Posts: 2,171
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I used FireCalc this way to see whether the money I plan to set aside from sale of my house will be enough to meet the shortfall between pension and expenses for the 11 years between my planned quit date and SS eligibility.
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01-23-2010, 07:10 AM
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#7
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Administrator
Join Date: Apr 2006
Posts: 22,973
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Quote:
Originally Posted by Rich_in_Tampa
Do you mean here, or over at Bogleheads? I saw such a discussion over there not long ago.
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Here is the thread
http://www.early-retirement.org/foru...bob-47984.html
__________________
Living an analog life in the Digital Age.
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01-23-2010, 09:24 AM
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#8
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,588
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A side note:
Bob and Otar use annuities in their analyses.
Always remember, the issuer of an annuity CAN default. See Baldwin United. Annuities are NOT guaranteed. Especially in times when financial institutions are collapsing due to high-risk shenanigans.
__________________
I have outlived most of the people I don't like and I am working on the rest.
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01-23-2010, 09:46 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Jul 2006
Posts: 1,901
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Quote:
Originally Posted by Ed_The_Gypsy
A side note:
Bob and Otar use annuities in their analyses.
Always remember, the issuer of an annuity CAN default. See Baldwin United. Annuities are NOT guaranteed. Especially in times when financial institutions are collapsing due to high-risk shenanigans.
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They are guaranteed by most States up to a certain amount. Nothing is really guaranteed in life. Personally, I have never heard of anyone losing money on an annunity due to company default. Overall, it's bad for the annuity business so usually someone comes in and picks up the pieces.
__________________
“I guess I should warn you, if I turn out to be particularly clear, you've probably misunderstood what I've said” Alan Greenspan
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01-23-2010, 04:29 PM
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#10
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Administrator
Join Date: Jul 2005
Location: N. Yorkshire
Posts: 34,056
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Quote:
Originally Posted by chemist
Forgive me if this has been posted before, but I have learned so much over the last few weeks from this community that I want to share something I've just figured out.
I am planning to retire this year at 55. Ideally I would like to live off my DB pension and taxable assets until I am 70, and then (and only then) tap SS and my tIRA's.
So in Fidelity RIP I put in a planning horizon of 15 years, deleted all my 401(k), 403(b), tIRA and Roth accounts, put my and DW's SS starting at 70, pushed the button and voila! I got the likelihood of running through my taxable accounts before age 70. Obviously can do the same exercise in FIREcalc, although haven't tried it yet.
Turns out I only have a 34% chance of this working, but worst case (90% confidence) I would run out of taxable assets at 65 and this is assuming my company stock price goes nowhere for a decade as I put all my options in at the current in-the-money value.
Hope this tip is useful to someone.
Hmmm maybe I should be taking some tIRA withdrawals before RMD's required or at least doing some Roth conversion while I am in low bracket before SSx2 kicks in - but that is another topic. Maybe need to consult ORP tool to answer that one.
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It is interesting, but should you change your plans? You know that at 70 you suddenly have a huge increase in wealth - SSx2 plus all the money in your tIRA's suddenly appears. Sounds like it gives you a high chance it will last 'til 65 so you could re-evaluate closer to the time.
I'm assuming that when you run it for 30 years including SS and your tIRA's that you have a 90% success rate.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Enough private pension and SS income to cover all needs
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01-23-2010, 04:58 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2005
Posts: 10,252
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Quote:
Originally Posted by Ed_The_Gypsy
A side note:
Bob and Otar use annuities in their analyses.
Always remember, the issuer of an annuity CAN default. See Baldwin United. Annuities are NOT guaranteed. Especially in times when financial institutions are collapsing due to high-risk shenanigans.
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If you read Bob's stuff, you saw that he covered that possibility rather nicely and in detail. I forget what Otar did, but he is rather careful as well, so I would not be surprised if he had a contingency for that as well. In any event, Bob's stuff can apply to Otar's stuff.
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01-23-2010, 07:46 PM
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#12
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Recycles dryer sheets
Join Date: Dec 2009
Posts: 215
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Quote:
Originally Posted by Alan
I'm assuming that when you run it for 30 years including SS and your tIRA's that you have a 90% success rate.
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Yes!
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01-27-2010, 06:32 AM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2004
Location: the City of Subdued Excitement
Posts: 5,588
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Quote:
Originally Posted by Bikerdude
They are guaranteed by most States up to a certain amount. Nothing is really guaranteed in life. Personally, I have never heard of anyone losing money on an annunity due to company default. Overall, it's bad for the annuity business so usually someone comes in and picks up the pieces.
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I once worked for a company owned by Reading and Bates ("an inconsequential S&P 500 company"). R&B made national news by buying dirt cheap annuities for their retirees. The annuity company couldn't produce and the annuitants lost half of their income in retirement.
Maybe things have changed in the last 15 years or so, but once burned....
__________________
I have outlived most of the people I don't like and I am working on the rest.
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01-27-2010, 07:10 AM
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#14
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gone traveling
Join Date: Apr 2009
Location: Eastern PA
Posts: 3,851
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Quote:
Originally Posted by Ed_The_Gypsy
Maybe things have changed in the last 15 years or so, but once burned....
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The contracts through Baldwin were single premium deferred annuities, not single premium immediate annuities, which are a different product.
The SPDA is similar to a 401k in function and is designed for a long term (e.g. pension funding) goal, whereas the SPIA is primarily used for distribution of assets with a much higher funding amount, at a specified rate (e.g. monthly payment).
They are two different vehicles, and two of many in the family called "annuities".
I believe that you will find that most conversations these days (including Bob & Otar) are referring to the SPIA (inflation adjusted or not, fixed term or not).
BTW, I have a SPIA (non-inflation adjusted, fixed term), purchased at my retirement (before the age of 60). I'm pleased on how it has worked in my retirement income plan, to primarily gap the period from my retirement till age 70, when I'll file for SS.
Just a note from someone who is actually using the process ...
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01-27-2010, 04:40 PM
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#15
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
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Does not matter what the specifics of the product are. If you lend money to an insurer by buying a policy/annuity from the, you have just bought yourself some credit risk. This can be an acceptable risk, but be smart about it and manage the risk as best you can. Never put too much with one company and choose your insurer carefully. Personally, I will generally deal only with large, highly rated mutual companies for this sort of thing.
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"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
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