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Re: Should I Do After-tax Contribution?
Old 08-27-2004, 08:58 PM   #21
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Re: Should I Do After-tax Contribution?

Thanks for the feedback guys. *Here are some of the details I'd left out.

Age = 28
Current investment totals = $147 K
6% company match on 401-K...

Future wife and I plan to live on $3000/mon *all expenses*--target saving 50-57% of gross. *

She has about $7,000 saved/invested---25 years old.

Targeting kids when she is 27/28....

TD
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Re: Should I Do After-tax Contribution?
Old 08-27-2004, 09:20 PM   #22
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Re: Should I Do After-tax Contribution?

Great savings! I'm amazed.

Good to do it now! It won't be quite so easy when the kids come along.

Anne
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Re: Should I Do After-tax Contribution?
Old 08-28-2004, 09:17 AM   #23
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Re: Should I Do After-tax Contribution?

Hyperborea,

Ok, you used firecalc, that's great. It isn't the definitive tool of how a portfolio will grow in the future. It isn't any more accurate than using one of the old "how $100/mo grows when invested" and handicapping the return by subtracting inflation which is what I did. I never played around with firecalc as an accumulation tool. It sounds interesting. I'll have to tinker some day.

I can't speak for Azanon, but from where I stand you are making some leaps concerning what he wrote. Take a look at the posts in order and maybe you can see this. Then again, maybe I'm reading it wrong. Azanon mentioned his pension when you poo pooed his plan. He replied to your post, that's all. As I mentioned before, if the details aren't there, good advise is hard to administer. Maybe Azanon remembers facts about TD's previous posts. It just seemed unusually harsh to call Azanon irresponsible.

As far as pensions go, the days are mostly gone of leaving in ER with 60% of your high salary. Maybe a 40 year worker, but this starts moving away from the early part of ER.


--------------
TD,

Didn't mean to pick on you about not posting details. Hope you didn't take it that way. Nice totals and savings rate - great job. I'm sure you'll get some good input. Azanon makes some good points about diminishing returns on extra savings in his first post. I'm see this in my own projections now that I'm getting a little closer to ER.

Cheers to all,

Chris
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Re: Should I Do After-tax Contribution?
Old 08-28-2004, 04:35 PM   #24
 
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Re: Should I Do After-tax Contribution?

Hey, I agree that FIRECALC is not necessarily the be all-end all predictor, but I enjoyed running the numbers.
I waited for a while and then plugged in some data.
The results were pretty interesting, although I am not
planning my future around them. I'm a simple guy
like unclemick. Interest and dividends is real money.
Future stuff is all "maybes"

John Galt
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Re: Should I Do After-tax Contribution?
Old 08-29-2004, 11:10 AM   #25
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Re: Should I Do After-tax Contribution?

Quote:
Ok, you used firecalc, that's great. *It isn't the definitive tool of how a portfolio will grow in the future. *It isn't any more accurate than using one of the old "how $100/mo grows when invested" and handicapping the return by subtracting inflation which is what I did.
Actually, I think it is a lot more informative. *The simple compound interest exercise ignores volatility and you get overly optimistic results. You might be close though still a little high for the average but you'll be way too high in perhaps 25% of the cases.

Quote:
I can't speak for Azanon, but from where I stand you are making some leaps concerning what he wrote.
Look, I don't want to get so wrapped up in this but let's look at his first post where he made the recommendation to not save the money.

azanon:
Quote:
Unless you just really really hate your job, i dont advise exceeding 401(k)s + Roths.
And then later on he said:

azanon:
Quote:
My guess is, that for most people (except for those that really hate their job), they'll find a sweet spot within the realm of the allowable tax-advantaged savings.
So unless I was misreading he really did mean that nobody (unless they really hate their job) should save more than they can fit into tax advantaged accounts.

Quote:
It just seemed unusually harsh to call Azanon irresponsible.
Fine, I can chose another word. *How about "misguided"?

Quote:
As far as pensions go, the days are mostly gone of leaving in ER with 60% of your high salary. *Maybe a 40 year worker, but this starts moving away from the early part of ER.
Well, ok what would a 20 or 30 year worker get these days? *My dad's got a pension but very few people of my age (Gen-Xer) or younger (the boomer echo / Gen-Y) are going to see one unless they have a government job. *However, even getting 25% of my current salary in a pension would be great as that's about what I plan to retire on (unless I decide on an even lower amount - see the "Costs of a Perpetual Traveller Lifestyle" thread). *For others who want/need a higher %age of their salary in retirement a pension can be a big step towards that. *In fact it provides such a great advantage that one can probably get by with only saving whatever they can fit into their tax advantaged savings accounts.
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Re: Should I Do After-tax Contribution?
Old 08-29-2004, 04:16 PM   #26
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Re: Should I Do After-tax Contribution?

The point in azanon's post I enjoyed most was the last one:

Quote:
What i'm suggesting though is that what are we all after here? In a narrow sense, yes I know, retiring early. But why? To maximum pleasure of life and/or minimizing pains of life, right? My point was that I think you can get to the point that maybe you can save so much that you're causing yourself more pain now than will be balanced out with the pleasures of retiring that much earlier later for having done so. So.... the trick is finding that right point for you. My guess is, that for most people (except for those that really hate their job), they'll find a sweet spot within the realm of the allowable tax-advantaged savings.
Now that I have no debt and am still at least 15 years from ER I've struggled with how much to save. I wanted to retire ASAP, but I'm tired of budgeting so tightly. After some thought I realized that I wanted to ER to enjoy myself and have more freedom, so instead of just saving as much as I can over the next 15-25 years I'm going to try to find my personal balance of enjoying myself and some freedom now while still saving for the future.
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Re: Should I Do After-tax Contribution?
Old 08-30-2004, 08:51 AM   #27
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Re: Should I Do After-tax Contribution?

Hyperborea,

Firecalc, Monte Carlo, and simple compounding projections should all be tools that we use to plan. Each brings a different element to the table. Firecalc ignores DCA with itís yearly input/output. Nothing is prefect. Another benefit of doing your own calculations is that you see what happens between the time you ER and the time SS or a pension kicks in. If you ER at 45 with 25 years of savings, you need to support yourself for 15-17 years at a minimum. When I was running the numbers by hand, I got a good feel for the fact that I needed to plan as if the pension and SS wasnít going to come at all. 15-17 years is a long time hang on for JUST a SUPPLIMENT. Sorry to yell. Iíd like to see a thread on projection tools, I kinda started one that didnít go too far. It was a while back I think.

Simplified, a typical pension is 1% of your high salary for each year worked and you can start to collect it after age 60. So 25 years at XBM gives you 25% of, say $75k. If you leave early, your high salary is eroded by inflation. If you leave at age 50, you loose about 25% to inflation until you reach age 60. Then a pension might be COLAed or it might not. So your XBM pension might only be $14.5k/yearly. It has a present value of about $280k and you need to wait 10 years to collect it. So at age 50 it has a present value of about $152k. The earlier you go the less of a factor pension are. (No guarantee on the math here)
-------------
BMJ,

Amen! Put your money to work and go play with whatís left.
-------------------

TD,

Is this your 19k figure Ė 13k 401k, 3k your roth, 3k her roth, then you add the 6% match to that? Any target retirement age?

Cheers to all,

Chris
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Re: Should I Do After-tax Contribution?
Old 08-30-2004, 12:31 PM   #28
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Re: Should I Do After-tax Contribution?

Quote:
*Firecalc ignores DCA with it?s yearly input/output.
The difference with end of the year contributions and monthly/weekly/daily/hourly/continuous contributions should be small. *You are missing an average of 6 months growth (or loss) on each years contributions. *Over say a 20 year savings plan you are then missing 10 years growth on a single years contributions. *You can bias it the other way by having the contributions occur at the beginning of each year. *If you were to average these then the effects cancel out and you should get very close to an even contribution rate.

Quote:
Nothing is prefect.
And some are much less so than others. *A Firecalc-like calculation will give you an understanding of how far from the average your results can be. *Intercst also had a neat little savings spreadsheet like this somewhere on his website before too. *Simple compounding-type calculations are ok for running in your head while riding the bus or taking a shower but I wouldn't use them for serious planning.

Planning for the absolute worst returns scenario is probably too extreme and will likely require that you deprive yourself of too much living now for future safety. *However, planning as if you will get the avearage results will likely give a 25% of being unable to retire. *That might even be a higher percentage depending on how "tight" you are on the safety line (i.e. planning for the average and taking a 4% withdrawal on a low budget).

One way to use this might be to take the average ending balance from Firecalc and maybe the ending balance somewhere down around the 25th percentile and then run those through Firecalc again as portfolio values to use for a retirement plan or maybe stuff those through some of your spreadsheets. *You may want to see how long you will need to save to get that 25th percentile high enough to create a reasonable sized portfolio for retirement. *I'm planning on bad returns (though not the absolute worst) and hoping for the best.

Thanks for the info on pensions. *I've not really bothered to learn anything at all about them other than what appeared to be standard %age numbers. *Nobody of my generation is getting one except for government employees. *Oh yeah, some of the unionized folks at large employers still get them (e.g. auto makers) but I wouldn't put a lot of trust in those remaining viable. *A number of those have already fallen by the wayside and I expect that a lot more will collapse in 10-20 years.
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