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How to model impact of fixed annuities, CD's, etc.?
Old 12-26-2017, 11:40 AM   #1
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How to model impact of fixed annuities, CD's, etc.?

I'd like to try out the impact of a period-certain annuity in my FIRECalc model. (I know, you hate annuities for good reasons, but bear with me.) I haven't found a way to model them in. Here are ways I thought of that are no good:

1. Entering Pension Income
Why it won't work: This continues the annuity income through the end of the plan, and I'd like to try other periods.

2. As a workaround, manually entering Expenses, but first subtracting the annuity income
Why it won't work: FIRECalc inflates expenses, and the income I'd like to try won't inflate. So it would come out too optimistic. I could manually inflate expenses before subtracting the annuity income, but then I think FIRECalc will re-inflate the difference. Maybe I need a formula like (manually inflated expenses - income) * (some kind of factor here to counterbalance the re-inflation that will result)?

3. As another workaround, entering income until a given year on the Not Retired tab
Why it won't work: FIRECalc then assumes no withdrawals until that year, which wouldn't be the case.

Has this been asked before? (I searched but these boards are new to me and I hope I didn't just miss it.) Or should I ask it on one of the busier boards?

I'd also like to try modeling in alternatives like CD's, CD ladders, bonds, and bond ladders. I don't know how to do that, either. So if things like this have been asked and answered, I'd love to be pointed in the right direction. Thanks!
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Old 12-26-2017, 11:44 AM   #2
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Try this:

Do #1 (Pension Income) and the year you want the period certain annuity to end, enter Off Chart Spending in the same amount. This will effectively cancel out/stop the annuity.
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Old 12-26-2017, 11:49 AM   #3
Confused about dryer sheets
 
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Oh, that makes perfect sense, thanks! But I'm still stuck because there are only 3 Pension Income/Off Chart spending lines and I need more. I'm also wanting to include a separate, deferred lifetime annuity and a reverse mortgage in other years. (I know, those could be bad ideas, too, but I still want to try them for our particular situation and see. If they improve our prediction, I'll still come back and ask for the good reasons not to do them, promise.)
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Old 12-26-2017, 11:52 AM   #4
Confused about dryer sheets
 
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Oh, but maybe I can make it work, since the deferred lifetime annuity will be inflation-adjusting anyway... so would it be legit to:
- Enter the period-certain annuity as suggested, with an income starting in one year and ending as off-chart spending in another
- Enter the reverse mortgage as the third of the three Pension Income/Off Chart spending lines
- Do my workaround method 2. from my original post for the deferred lifetime annuity, manually subtracting that income from my expenses before manually entering them?
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Old 12-26-2017, 11:53 AM   #5
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Only three is it I'm afraid. I'm out of ideas.

Edit: your post #4 sounds like a reasonable approach.
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