Hi, I'm Karen. Here's my story!

[ats5g]

Hi Karen,

There are a couple of ways to take the pension into account.

1. One is to get find out what amount of $$ will allow one to buy an inflation adjusted pension at 57. You can use Vanguard's Lifetime Income Program for an estimate. Just click on "learn more".

2. You can the TSP's annuity calculator to back into the $$ amount through trial and error. Looks like the $$ amount is around $1,100,000 for a $55,000 infl adjusted pension starting @ 57.

3. Use FIREcalc and enter the pension as a negative number in Withdrawal change 1 starting in year 5.

I'd vote for using #3 because you really want to offset your yearly income needs by the pension first and then do the whole $$ x 25 to get the target portfolio $$ amount needed.

- Alec

[grumpy]

Karen,

I'm not sure your current spending is the best starting point for the calculation you are trying to do. It has been my experience that spending in retirement is lower than it was while working. Using Quicken, I found that our spending two years prior to retirement was about $90K and so I planned for our retirement spending to be the same. In fact, other than the one-time costs of furnishing our new house, our spending in the past year was only around $75K. I can't specifically identify which expenses are lower but my guess is that the reduction is attributable to: commuting costs down to almost zero, clothing costs way down, car insurance is lower due to being retired, have time to shop more carefully for best prices, etc.

Using current expenses is probably too conservative and leads to thinking you need a bigger nestegg than you really do.

Grumpy

[Helen]

Karen,

I'm curious as to why you would chose the F fund over the G fund ? The rate of returns is not that much different, but the G fund offers much more stability.

I currently have all my TSP money in the G fund as I think the markets are going to tank big time over the next couple of years. That yield curve is very much inverted and there are a lot of other indicators of a market downturn (plus the corn on my little toe always throbs before a crash).

You have a lot of savings for your age - good going !!!

Best of luck,

-helen

[kaudrey]

Thanks everyone for you continued suggestions.

atsg5 - Thanks for the calculation tips. I did as you suggested and came up with the same idea - about $1.1M, or 1/2 of what I'd need without the pension. Being conservative, I'd overshoot that anyway before I retired!

Grumpy - thanks. I know you are right - I live in an expensive area (DC) and have a big mortgage, high commuting costs etc, but I have several reasons for doing this: although I am aggressive in my investments, I am conservative in my thinking about retirement. I got this from my Dad. They didn't retire until he was convinced they would never run out of money (and did it at 57). I want to be able to sleep at night, and not worry about money. Also, I plan to travel alot when I retire. I travel quite a bit now, but with more time on my hands, I expect my travel budget to increase.

Helen - you are the second person who has asked me about the F fund, and suggested I use the G fund instead. Honestly, I don't have a good answer. It is a small portion of my portfolio, and actually will be decreasing in % of total because I am no longer contributing to it - I am allocating more money to the I fund as I an increasing my overall International holdings.

Other note: someone asked me about expenses - my weighted average expense ratio is .37%. I am 75% in index funds and 25% in managed funds. Since TSP makes up 40% of my portfolio, the expense ratio stays low. All of my managed funds have expense ratios lower than the average for their category.

The 1 fund with an expense ratio I don't like it FBRTX (FBR Large Cap Fund), but it only makes up 1% of my portfolio anyway. I'm thinking of just ditching it. It's made me a little money, but I don't really need the fund.

[kaudrey]

Hi everyone,

Well, I've made some adjustments and I have more specific questions. I have about 3% of my portfolio in T Rowe Price's Emerging Market Stock Fund (PRMSX). It is in an IRA. I want to up my allocation to emerging markets to 5%, and I have the cash to do that, but then I was thinking that I should put the entire 5% in an Emerging Markets ETF instead.

PRMSX has an expense ratio of 1.27%, and with Schwab I pay a small commission on it when I trade.

I didn't originally go the ETF route because I thought I'd buy in small increments, but now I believe I'll just buy a bunch and then rebalance once a year.

So, do you think I should sell PRMSX and buy an ETF instead?

My choices seem to be: Vanguard Emerging Market VIPERS, iSHAREs MSCI Emerging Market Index, and BLDRS Emerging Mkt 50 ADR Index. Is there much of a difference between these?

I don't currently own any ETFs but feel like I should be researching them more...

Thanks,
Karen