Diminishing Returns on Retirement Planning Time?

T

Tekward

Recycles dryer sheets
Joined
Nov 18, 2006
Messages
431
I'm very pro-planning and have been doing it for 40 years, but I just reviewed a couple of retirement planning software packages and I am left feeling that they pursue a level of precision that exceeds our ability to predict the future. It feels more like low value detail work, rather than high level monitoring and adjustment.

I use a self developed excel sheet where I know where all the terms come from. I also don't watch it too frequently, checking it every 2-3 months.

For background I'm 66 with a pension and occasional independent short term consulting w*rk. Income still exceeds our modest LBYM budget so I'm waiting on SS. Perhaps our situation drives my comfort with loose planning, I have plenty of adjustment options.

A favorite poem: Joe Heller. https://medium.com/@bobsutton/kurt-vonnegut-joe-heller-and-a-thanksgiving-message-8a31ca397888
 
Tekward said:
... a couple of retirement planning software packages and I am left feeling that they pursue a level of precision that exceeds our ability to predict the future. ...
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Yup. Garbage in, gospel out. I don't use 'em.
 
I know what you mean. Not quite yet retired, but been obsessively running planning software, in addition to own model. Feels like I came full circle to the conclusion there is only so much you can plan for - just establish enough cushion and lifestyle flexibility for the unexpected.
 
I was thinking about this while reading another thread recently where people were obsessed about precisely how (or if) the Social Security "average indexed monthly earnings" number gets adjusted in the year you turn 61. My thought is that if that particular detail makes a real difference in your retirement plan, you will most likely fail because you are going to cut things too close. To put it another way --- "precise" is not synonymous with "correct".
 
I quit planning once I decided to retire. No need to. The decision was made.
 
Agree. And I admit I have used zero retirement calculators other than my own spreadsheets.

But they want to be thorough for marketing purposes. Lots of folks feel safer with illusion of precision.
 
Tekward said:
I'm very pro-planning and have been doing it for 40 years, but I just reviewed a couple of retirement planning software packages and I am left feeling that they pursue a level of precision that exceeds our ability to predict the future. It feels more like low value detail work, rather than high level monitoring and adjustment.

I use a self developed excel sheet where I know where all the terms come from. I also don't watch it too frequently, checking it every 2-3 months.

For background I'm 66 with a pension and occasional independent short term consulting w*rk. Income still exceeds our modest LBYM budget so I'm waiting on SS. Perhaps our situation drives my comfort with loose planning, I have plenty of adjustment options.

A favorite poem: Joe Heller. https://medium.com/@bobsutton/kurt-vonnegut-joe-heller-and-a-thanksgiving-message-8a31ca397888
Click to expand...

JOE HELLER

True story, Word of Honor:
Joseph Heller, an important and funny writer
now dead,
and I were at a party given by a billionaire
on Shelter Island.

I said, “Joe, how does it make you feel
to know that our host only yesterday
may have made more money
than your novel ‘Catch-22’
has earned in its entire history?”

And Joe said, “I’ve got something he can never have.”
And I said, “What on earth could that be, Joe?”
And Joe said, “The knowledge that I’ve got enough.”
Not bad! Rest in peace!

― Kurt Vonnegut
 
My career sometimes involved these types of models on the corporate level. One big variable was taxes. Sure, you could assume that the current structure would stay in place for 20 years but you know it won't. Then there are changes in behavior. If the market goes down will you re-balance? How far would it have to go down? Do you plan to adjust your spending according to how the market is doing?

I started out with a simple Excel model about 20 years ago. I've run some more sophisticated simulations with Fidelity and Principal Financial. (They came to the workplace and, true to their word, did not pester me afterwards.) All looked good- the Principal Financial rep pretty much asked me why I hadn't retired yet.

Now, almost 10 years post-retirement, I keep an eye on the total pot and it's increased $700K. I figure that as long as it's increasing over the long term, I'm not gonna go broke.
 
Retirement calculators are invaluable. The more detailed the better. Answering all those minute questions will force you to understand what you’re getting into. And, a good amount of conservatism is warranted. But, this is all pre-retirement. Since retirement I have not used a retirement calculator. I monitor my portfolio value and pay attention to situations like last year when the market let us down, bonds especially, but as long as my portfolio stays above a certain level, I’m comfortable the plan is working and I go about other things.
 
The detailed planning process is not so that you can execute the plan perfectly/precisely/ or even accurately. It is so that you have thought about what can happen before it actually happens, and can make a prudent decision, because you're not encountering the situation for the first time. You though about it before, and when a decision is forced, it's at least the second time you've thought about it.
 
Jerry1 said:
Retirement calculators are invaluable. The more detailed the better. Answering all those minute questions will force you to understand what you’re getting into. And, a good amount of conservatism is warranted. But, this is all pre-retirement. Since retirement I have not used a retirement calculator. I monitor my portfolio value and pay attention to situations like last year when the market let us down, bonds especially, but as long as my portfolio stays above a certain level, I’m comfortable the plan is working and I go about other things.
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^^^ This sounds a lot like me. I used a lot of calculators pre-retirement since I needed reassurance I'd have enough. I also started tracking my spending & created a simple spreadsheet to monitor my assets & annually calculate net worth. Now, I update the spreadsheet periodically & can see & learn from the trends; it tells me: You can loosen up. You're doing OK.
 
Gumby said:
I was thinking about this while reading another thread recently where people were obsessed about precisely how (or if) the Social Security "average indexed monthly earnings" number gets adjusted in the year you turn 61. My thought is that if that particular detail makes a real difference in your retirement plan, you will most likely fail because you are going to cut things too close. To put it another way --- "precise" is not synonymous with "correct".
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Totally agree!
I once read on Humble Dollar "In financial planning, greater precision only provides the illusion of greater accuracy. All data is, by definition, backward-looking while all decisions are, by definition, forward-looking."
 
Still love the various versions of the paraphrased quote "Plans are worthless, Planning is priceless." I'm a planner and pretty anal in my tracking but also realize I'm but a small boat on the river of life and will constantly be adjusting. I cast off when I felt I was equipped enough for most likely scenarios. I have an idea what is downstream but know very little other than there will be nice calms sections along with some rapids (some possibly quite big) but not sure which one will get me.



Probably the biggest unknown in my planning is LTC. -I'm hopefully 30+ years away from needing any assistance. Statistically (insofar as history is a guide), I'm likely to see my portfolio grow during my retirement and I currently plan to self-insure. As time goes on I'll gain better insight into how my health, healthcare market, and gov't programs and regulations have evolved, and have a better idea of the assets I'll be able to bring to the table and will make decisions as those variables are better defined.
 
Gumby said:
I was thinking about this while reading another thread recently where people were obsessed about precisely how (or if) the Social Security "average indexed monthly earnings" number gets adjusted in the year you turn 61. My thought is that if that particular detail makes a real difference in your retirement plan, you will most likely fail because you are going to cut things too close. To put it another way --- "precise" is not synonymous with "correct".
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+1 I have been saying something similar for quite a few years now. I have read many posts that indicate that even a number of people here are so anxious to retire that they look for the quickest way to quit work even though they have no safety net when their plan falls apart. I'm more of a suspenders and belt kind of guy.

Cheers!
 
I always had my own spreadsheets for planning so that I could both track where I am and easily look at "what-if" scenarios as part of the process, especially during the accumulation phase. Retired now, but still have my own spreadsheet for calculating withdrawals and tracking where we are. I don't really see the value in some other piece of software that comes with assumptions & methods that may or may not match my own (in my case, almost always "not")

A good friend of mine with a very similar background uses MaxiFI Planner in retirement. In his case, it's not because he thinks he can't do the same thing himself, it's more because he's quite a bit older than his wife and he feels this would be easier for her should he pass before she does, which is statistically very likely. She's not the tech savvy type so keeping up with a spreadsheet won't happen, but she's perfectly capable of entering data into MaxiFI and acting on the results.

As an alternative, I provided detailed instructions to my wife for exactly what to do if I pass early. It's a very simple plan and, even though she can run rings around me in Excel, the simpler plan doesn't even need Excel. It's also a plan that has components we'll consider later in life if I'm still around. We have several milestones along the way and I'll update her plan if we pass them with me still around (hint - it becomes even simpler)

Where I go outside is for getting answers to more detailed questions about Roth conversions. For that, I started with a buddy's spreadsheet for the first round and now I'm entering data in Pralana to see how close it comes to the results from my friend's spreadsheet.

Cheers
Big-Papa
 
Gumby said:
I was thinking about this while reading another thread recently where people were obsessed about precisely how (or if) the Social Security "average indexed monthly earnings" number gets adjusted in the year you turn 61. My thought is that if that particular detail makes a real difference in your retirement plan, you will most likely fail because you are going to cut things too close. To put it another way --- "precise" is not synonymous with "correct".
Click to expand...

In a similar vein, I used to obsess about retiring around April, of whatever year that I choose to go out. My main reasoning for that is that it's around my birthday, so it would be like a birthday present to myself. And I look at Spring as a time of rebirth and energy. I tend to get lethargic and moody in the late fall/winter.

But, another reason was financial. We always get a bonus early in the year, and our raises usually take effect the first paycheck in April, so any leave I've accrued would get paid out at the higher rate. But, as time went by, I started thinking, that if I'm planning my retirement on a $800-1000 bonus, and a 3-4% increase on my accrued leave, then there's something wrong with me!

With me, I think it was more about the idea of leaving money on the table, versus actually NEEDING that extra boost to retire. But, the older I get, the time is more valuable than the money. Plus, as my invested assets have grown substantially over the years, an extra $800-1000, plus a few hundred $ boost in the leave payout just doesn't make a significant difference, either way.
 
Some of us like using retirement calculators and spreadsheets in retirement just because we love numbers and like playing around with them.
 
Andre1969 said:
In a similar vein, I used to obsess about retiring around April, of whatever year that I choose to go out. My main reasoning for that is that it's around my birthday, so it would be like a birthday present to myself. And I look at Spring as a time of rebirth and energy. I tend to get lethargic and moody in the late fall/winter.

But, another reason was financial. We always get a bonus early in the year, and our raises usually take effect the first paycheck in April, so any leave I've accrued would get paid out at the higher rate. But, as time went by, I started thinking, that if I'm planning my retirement on a $800-1000 bonus, and a 3-4% increase on my accrued leave, then there's something wrong with me!

With me, I think it was more about the idea of leaving money on the table, versus actually NEEDING that extra boost to retire. But, the older I get, the time is more valuable than the money. Plus, as my invested assets have grown substantially over the years, an extra $800-1000, plus a few hundred $ boost in the leave payout just doesn't make a significant difference, either way.
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Lucky you! At my final employer before retirement, they switched to a so-called "all you can eat" vacation policy, so no accrual at all.

In my case, I gave notice about 15 months before I actually left. I was fully prepared for my management chain to come back with "consider this your two weeks notice". But I had a great boss/friend who had just taken over the role when I told him. I told him I will stay as long as needed to find/train my replacement. That took longer than anybody expected and the person came on board (a transfer) in November of 2022. At that point, I went back to my manager and requested to stay through the end of Q1 2023 since I was so close to the annual bonus and I had a bunch of RSU's vesting through Q1. By March the replacement was probably about 85% up to speed (I managed a very large organization) and I made one last request to extend to early June to grab the last RSU's I had vesting for 2023. Again, they agreed, and I left 1 week after vesting.

Being able to stay through June added a significant amount to the pile from salary, ESPP, RSU vesting, and bonus as the company's stock was on a roll at the time. Almost as satisfying is that, compared with other involuntary departures I had over a long career, I was able to do all of this on all on my own terms..

Cheers.
Big-Papa
 
big-papa said:
Lucky you! At my final employer before retirement, they switched to a so-called "all you can eat" vacation policy, so no accrual at all.

Being able to stay through June added a significant amount to the pile from salary, ESPP, RSU vesting, and bonus as the company's stock was on a roll at the time. Almost as satisfying is that, compared with other involuntary departures I had over a long career, I was able to do all of this on all on my own terms.
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DW is in the same boat, except her RSU's are 6 months after the annual bonus so she'll have to choose between them. Her vaca is only 5 day rollover, but sick days are allowed to be any amount. Probably no wrong answer, just a choice to make. Both are good, just waiting for the day.

I'll just keep maxing the SEP 401k, HSA & profit sharing as a small biz guy...
 
My early retirement was not entirely planned (if you don't want to hunt my early posts, I was laid off when firecalc gave me 85-95% success depending on assumptions). That was almost 10 years ago. Because I wasn't completely secure in my decision to stop working then, I've continued to run firecalc and other retirement calculators annually to reassure myself I'm okay. Mostly I rely on my own spreadsheet which is designed not so much to tell me I'm okay as to tell me I'm in trouble and need to take action.
 
Tekward said:
I'm very pro-planning and have been doing it for 40 years, but I just reviewed a couple of retirement planning software packages and I am left feeling that they pursue a level of precision that exceeds our ability to predict the future. It feels more like low value detail work, rather than high level monitoring and adjustment.

I use a self developed excel sheet where I know where all the terms come from. I also don't watch it too frequently, checking it every 2-3 months.

For background I'm 66 with a pension and occasional independent short term consulting w*rk. Income still exceeds our modest LBYM budget so I'm waiting on SS. Perhaps our situation drives my comfort with loose planning, I have plenty of adjustment options.

A favorite poem: Joe Heller. https://medium.com/@bobsutton/kurt-vonnegut-joe-heller-and-a-thanksgiving-message-8a31ca397888
Click to expand...
I look at my planner (Flexible Retirement Planner) a few times each year. It's become part of my year-end ritual when gathering the last few balances for the year.

Since I joined this and that forum I really became fascinated by the various planners, and how little I knew. So the journey became the reward, which was learning about the terms and calculations. Until I picked up FRP though, things did not come together for me. With that software I had to include additional inputs. It really turned into coursework for me, discovering what the details meant, and how to tweak things.

For those early-retired or planning for it, I think the planners and spreadsheets give more assurance.

I half-agree with your statement about precision for little value. My attention to certain details really holds little impact for a future 25 years out. But it really is no big deal to anticipate some things, and see what they possibly might change for the future.

Early in my career I read that most un-audited spreadsheets have significant errors. So I'm a bit cautious about what I've done in that area.

I'm probably nearer to your boat, where income supports lifestyle. I think of this as monthly maintenance rather than executive planning.
 
I think that PRIOR to retirement you need to have a well thought out plan for achieving your desired retirement income, including the transition years prior to starting SS, for example.

But once you've pulled the plug, it's different. You should monitor your annual spending somewhat to verify that you are not exceeding your planned outgo by much.

But how you manage your portfolio investments, your Roth conversions, and claiming SS at 67 or 70: I think there's a broad span of acceptable answers.
It's not necessary to seek an optimal answer to all of your options.

In fact, trying to optimize while IN retirement might lead one to the perverse situation of spending quite less than one could easily afford to, for the purpose of increasing one's investible assets way more than necessary...
 
Good retirement calculators are invaluable. Some suffer false precision for sure, but they force you to think. I too have built many versions of my own retirement spreadsheets, but the reality is that I enjoy doing that sort of thing while a large fraction of the population isn't even capable of it.

But as I close in on RE, I've labored over FireCalc, Fidelity and the Schwab calculator (with the help of a Schwab planner) in addition to my own spreadsheets. And I get something unique from each of them.
 
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