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How does Pension and Off-Chart Spending Impact Numbers?
Old 01-22-2016, 05:44 AM   #1
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How does Pension and Off-Chart Spending Impact Numbers?

I'm trying to best show a scenario where I retire early and my wife keeps working. To do this, I'm following advice from a previous thread that I found where a pension amount equivalent to the spouse's salary is used. My question is how is that applied to the model?

Is the pension amount used to offset the annual withdrawal amount? i.e., if I have an annual withdrawal amount of 5k and a pension amount of 5k, does that effectively mean that the model assumes nothing is being withdrawn from the portfolio each year?
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Old 01-22-2016, 06:36 AM   #2
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If the effective taxes are the same, then yes. Otherwise you may want to offset for the tax difference since 5k withdrawn from cash (or taken from divys that may be taxed at 0%) may be different than earned income.

These incomes are usually part of the the numbers used in a model. A pension usually reduces the required WR from the rest of your assets. Same thing with SS.

And thank your wife for sacrificing for your FIRE cause.

and welcome to the board!
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Old 01-22-2016, 05:26 PM   #3
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Quote:
Originally Posted by bingybear View Post
If the effective taxes are the same, then yes. Otherwise you may want to offset for the tax difference since 5k withdrawn from cash (or taken from divys that may be taxed at 0%) may be different than earned income.

These incomes are usually part of the the numbers used in a model. A pension usually reduces the required WR from the rest of your assets. Same thing with SS.
Either that or factor in taxes in your annual expenditure. All the numbers I plug in FIRECalc are before tax.

Maybe create a dummy return in TurboTax/TaxCaster to approximate how much tax you need to pay for a desired spending amount.
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