How do you know you haven't made a math error?

[corn18]

I do my taxes with TurboTax online. I track everything in my spreadsheet as well. I was really cornfused when I put my data into TT and it said I owed $12k in federal taxes. WTFO? Turns out I was not calculating my taxes correctly in my spreadsheet. I could pay $142 in penalties or make a quick estimated payment and hope for the best. I made the estimated payment.

That got me thinking about my retirement plan. Is there a mistake somewhere in my calculations that will create an oh shoot! moment? I gave notice of my intent to retire 31 Mar 2021, so I am on the path now. My spreadsheet says we are good. Firecalc shows 99%. The myriad other models I have used all say the same thing: good to go. This scares me since I use the same basic inputs for all the models. I always told the folks that worked for me that it's the bullet you don't see that will kill you.

Is there anything I should do to mitigate the risk of a miscalculation?

 

[finnski1]

I do my taxes with TurboTax online. I track everything in my spreadsheet as well. I was really cornfused when I put my data into TT and it said I owed $12k in federal taxes. WTFO? Turns out I was not calculating my taxes correctly in my spreadsheet. I could pay $142 in penalties or make a quick estimated payment and hope for the best. I made the estimated payment.

That got me thinking about my retirement plan. Is there a mistake somewhere in my calculations that will create an oh shoot! moment? I gave notice of my intent to retire 31 Mar 2021, so I am on the path now. My spreadsheet says we are good. Firecalc shows 99%. The myriad other models I have used all say the same thing: good to go. This scares me since I use the same basic inputs for all the models. I always told the folks that worked for me that it's the bullet you don't see that will kill you.

Is there anything I should do to mitigate the risk of a miscalculation?

Yes .
You should pour yourself an adult beverage and enjoy the holidays.
It's highly unlikely you would miscalculate by much if at all on your retirement.

Like most on here you probably have over saved and over think all the what ifs.

 

[Lewis Clark]

As long as the inputs are correct, using multiple calculators with similar results would give me confidence in the accuracy of the calculations.

 

[MRG]

I understand the fear, I had the same thoughts. For good reason I remember a lesson from age 17. I was calculating possible profits from a logging job we were involved with and made a stupid math error. DB caught it and dashed my hopes of becoming an instant millionaire.

So if you have access to another set of eyes to review your assumptions and question your logic that's great. That person doesn't have to be a financial genius just explaining it to another human works wonders.

 

[street]

As long as the inputs are correct, using multiple calculators with similar results would give me confidence in the accuracy of the calculations.

This ^. Do some numbers of worst case scenario's and see what things look like then. Your concerns show me that you have done your homework and will be just fine.

 

[W2R]

That got me thinking about my retirement plan. Is there a mistake somewhere in my calculations that will create an oh shoot! moment?

I beat my numbers to death on a daily basis for years before I retired and it all worked out. I used every calculator and did a variety of my own independent calculations and projections as well. I did a lot of "what if" scenarios every time I heard a scary prediction about the future, and every time I read an OMG Ain't It Awful clickbait story on financial websites. And then I went beyond and beat those poor numbers some more.

You probably will do this too. You are mathematically literate and if you spend enough time poring over your calculations, the plan will become part of your being and you will eventually feel confident in it.

 

[pb4uski]

... Is there anything I should do to mitigate the risk of a miscalculation?

Yes. When I was deciding to retire, I ran our stiuation through every free retirement calculator known to man, trying in each case to use consistent assumptions to the extent possible. They all gave me various shades of a green light, so I decided it was safe to retire.

We had also had Vanguard do a plan and that was a green light as well.

 

[TheWizard]

Well, I never tried estimating income taxes due in my spreadsheet, only approximate AGI year to year.
I've done my income taxes for the past few years with freetaxUSA and things change very little one year to the next, both in my latter working years and now in retirement.

Now there WERE some changes in my retirement year of 2013 that I paid attention to but my AGI didn't change that much and neither did my taxes.

As for planning for retirement, just aim high.
If you "need" $100k per year to carry on, then contrive to get $150k per year as a buffer and reinvest the excess in your taxable account.
This assumes, of course, that the $150k per year comes from pension + annuities + tax-deferred withdrawals + SS, not from taxable account withdrawals in the first place...

 

[foxfirev5]

It will only get worse as one gets older. That's why I keep things as simple as possible. My entire plan and "spreadsheet" fit on a couple of index cards. And then measure twice and cut once.

 

[corn18]

I understand the fear, I had the same thoughts. For good reason I remember a lesson from age 17. I was calculating possible profits from a logging job we were involved with and made a stupid math error. DB caught it and dashed my hopes of becoming an instant millionaire.

So if you have access to another set of eyes to review your assumptions and question your logic that's great. That person doesn't have to be a financial genius just explaining it to another human works wonders.

This is a good bit of advice. There are a few bits that if I have them wrong, I could be well and mighty surprised.

1. Social Security - I will start a separate thread to double check my calculations. I use anypia and my own spreadsheet to make the actual calculation to get to the almighty PIA. If my PIA is wrong, then everything goes sideways fast.

2. Taxes - I actually have a full spreadsheet that uses current rules to calculate taxes. I include the IRS Pub 915 worksheet to calculate percent of SS taxable. This one is really waggy but the impact is not as big as being wrong on SS.

Stuff I think I have down:

1. Expenses - we have been living within our retirement budget for 2 years now. Only one are is still out of bounds (food and dining).

2. My military pension

Like my wife says, if the crap hits the fan, we always have my pension.

 

[corn18]

I beat my numbers to death on a daily basis for years before I retired and it all worked out. I used every calculator and did a variety of my own independent calculations and projections as well. I did a lot of "what if" scenarios every time I heard a scary prediction about the future, and every time I read an OMG Ain't It Awful clickbait story on financial websites. And then I went beyond and beat those poor numbers some more.

You probably will do this too. You are mathematically literate and if you spend enough time poring over your calculations, the plan will become part of your being and you will eventually feel confident in it.

What if's are my nemesis. I can easily change a lot of inputs to do what if's.

What if we get no SS?
What if the stock market drops 50% on day 1?
What if real returns are different than the 2% I put in?
What if I die?
What if my wife dies?
What if inflation goes nuts?

I can handle no social security, but not with other what if's. 75% SS is no problem. A 50% drop in the market the day after I retire is ok as long as real rates don't go to 0% for 35 years and SS goes away. I have lots of cheap term life insurance out to age 78, but what happens if I die @ 79? What if I die at 79 and we didn't do Roth conversions early? What if? What if? What if? I can't cover them all unless I work until age 79.

 

[RobbieB]

If you die, you won't have to worry anymore.

 

[samm]

Yes .
You should pour yourself an adult beverage and enjoy the holidays.
It's highly unlikely you would miscalculate by much if at all on your retirement.

Like most on here you probably have over saved and over think all the what ifs.

Well said!

Cheers!

 

[Midpack]

Like others here, I ran our numbers through a number of calculators, and the results were all in line with each other. If they weren't, it was usually my input error somewhere. We should all double or triple check, whatever it takes to make YOU comfortable.

You can do a cocktail napkin calc using (retirement) income - spending - and WR to make up any shortfall to make sure you're in the ballpark.

And I wouldn't advise anyone to work from a plan that requires "complete accuracy." With all the unknowns, there's no guarantees. We all choose a probability of success we can live with, and we all have a plan B, C, D etc.

 

[Jerry1]

... Is there anything I should do to mitigate the risk of a miscalculation?

Yes. When I was deciding to retire, I ran our stiuation through every free retirement calculator known to man, trying in each case to use consistent assumptions to the extent possible. They all gave me various shades of a green light, so I decided it was safe to retire.

We had also had Vanguard do a plan and that was a green light as well.

I did the same thing. Got to the point of feeling comfortable on my own and then sat down with someone at Fidelity just to see if they would find something I missed.

However, the number one thing that provided comfort was being sure of my budget and then using a larger number in my modeling. Call it cushion or being conservative or what ever, but that is what made me feel the most secure.

 

[ocean view]

We retired early so our Plan B, should our calculations go FAR astray, is for us to go back to work. That might mean a job as a greeter at Walmart, not in our previous careers. It’s doubtful we will ever have to enact Plan B, but desperate times would call for desperate measures.

 

[Vincenzo Corleone]

I do my taxes with TurboTax online. I track everything in my spreadsheet as well. I was really cornfused when I put my data into TT and it said I owed $12k in federal taxes. WTFO? Turns out I was not calculating my taxes correctly in my spreadsheet. I could pay $142 in penalties or make a quick estimated payment and hope for the best. I made the estimated payment.

That got me thinking about my retirement plan. Is there a mistake somewhere in my calculations that will create an oh shoot! moment? I gave notice of my intent to retire 31 Mar 2021, so I am on the path now. My spreadsheet says we are good. Firecalc shows 99%. The myriad other models I have used all say the same thing: good to go. This scares me since I use the same basic inputs for all the models. I always told the folks that worked for me that it's the bullet you don't see that will kill you.

Is there anything I should do to mitigate the risk of a miscalculation?

I wrote a post along the same lines. You may find the responses helpful.

https://www.early-retirement.org/forums/f28/fire-and-my-mental-health-106212.html#post2504439

 

[SecondCor521]

Is there anything I should do to mitigate the risk of a miscalculation?

When I was facing FIRE, I worried about this sort of thing too. Lots of good suggestions on this thread, let me add one more:

If you believe the 4% rule and you have a handle on your expenses, then take your annual expense number and multiply by 25. Then make sure you have that many dollars in your retirement savings pile. This involves only one math operation, so making a miscalculation is difficult to do.

I'll make it even easier - if you plan to spend $40K a year, you should have about $1M saved up in your FIRE stash.

Now you can look at what you're spending, compare it to $40K, and be able to roughly know if you should have more or less than $1M saved up.

The above is not really very precise, of course; that's what all those fancy online calculators like FIREcalc are for. But for a gut check or double check or sanity check, it's really good to know you're in the ballpark. And it's dirt simple to do so you'll know if you're doing it right.

In other words, you're not going to take your salary of $40K a year, plug 40000 into a calculator and accidentally multiply by 2500 and say, "Oh, I actually need $100M to retire, guess I'll have to work a few more centuries!" Or multiply 4000 by 25 and think that you only need $100K.

 

[corn18]

When I was facing FIRE, I worried about this sort of thing too. Lots of good suggestions on this thread, let me add one more:

If you believe the 4% rule and you have a handle on your expenses, then take your annual expense number and multiply by 25. Then make sure you have that many dollars in your retirement savings pile. This involves only one math operation, so making a miscalculation is difficult to do.

I'll make it even easier - if you plan to spend $40K a year, you should have about $1M saved up in your FIRE stash.

Now you can look at what you're spending, compare it to $40K, and be able to roughly know if you should have more or less than $1M saved up.

The above is not really very precise, of course; that's what all those fancy online calculators like FIREcalc are for. But for a gut check or double check or sanity check, it's really good to know you're in the ballpark. And it's dirt simple to do so you'll know if you're doing it right.

In other words, you're not going to take your salary of $40K a year, plug 40000 into a calculator and accidentally multiply by 2500 and say, "Oh, I actually need $100M to retire, guess I'll have to work a few more centuries!" Or multiply 4000 by 25 and think that you only need $100K.

My expenses are $118k / year. So that means I need $3M for 4%. But I have a $50k / year COLA pension. So $118k-$50k*25=$1.7M. But I also have $60k / year of SS starting at age 70. How do I account for that in the 4% rule?

I guess I could go with what I need @ 70: $110k income - $118k expenses = $8k. $8k*25=$200k. So as long as I have $200k @ age 70, I'm good to go!

 

[jollystomper]

Yes. When I was deciding to retire, I ran our stiuation through every free retirement calculator known to man, trying in each case to use consistent assumptions to the extent possible. They all gave me various shades of a green light, so I decided it was safe to retire.

We had also had Vanguard do a plan and that was a green light as well.

+1. I did the same, except instead of Vanguard, Megacorp provided access to financial planners free of charge. I used several of them to validate my plan. It also helped DW, she trusted me but hearing others also say the plan was good gave her further comfort.

Edited to add: I also ran "what if" assumptions such as reduced/losing my pension, high medical premiums/costs, etc.

 

[Dtail]

As long as the inputs are correct, using multiple calculators with similar results would give me confidence in the accuracy of the calculations.

+1

 

[SecondCor521]

My expenses are $118k / year. So that means I need $3M for 4%. But I have a $50k / year COLA pension. So $118k-$50k*25=$1.7M. But I also have $60k / year of SS starting at age 70. How do I account for that in the 4% rule?

I guess I could go with what I need @ 70: $110k income - $118k expenses = $8k. $8k*25=$200k. So as long as I have $200k @ age 70, I'm good to go!

Well, you've narrowed it down to between $200K and $3M.

There are fancy ways and simple ways to do the SS at age 70 thing.

The simplest way is to set aside $200K from your stash to take care of you from 70 plus. Then the rest of your stash needs to cover you between now and age 70.

The simplest way to do that is to take your after pension needs - so $118K - $50K = $68K per year and multiply that by the number of years you have between now and age 70. Then see how that compares to the rest of your stash.

...

Again, there are all sorts of shortcomings with the above, but again, it's a simple way to see if you're in the ballpark without too much complicated math. You can always then go back and do the more complicated math and compare it to the brain dead simple math to do sanity checks on the result.

 

[SecondCor521]

As long as the inputs are correct, using multiple calculators with similar results would give me confidence in the accuracy of the calculations.

But then if the inputs were incorrect, then using multiple calculators could easily give similar faulty outputs, which could lead to increased confidence in the wrong answer.

Using multiple calculators does help rule out errors in individual calculators, so I think they're still useful from that perspective.

 

[corn18]

But then if the inputs were incorrect, then using multiple calculators could easily give similar faulty outputs, which could lead to increased confidence in the wrong answer.

Using multiple calculators does help rule out errors in individual calculators, so I think they're still useful from that perspective.

Ding, ding, ding! That is my concern: my inputs are wrong.

I do take comfort in the simplest part of my massive spreadsheet. It has income minus expenses laid out over 35 years. That part is not very complicated. I assume a 2% real return on my 60/40 portfolio. As long as my SS calculation is correct, my income side is good. I have a very good handle on expenses.

I start off with $1.8M and the lowest balance is $1.1M right before SS kicks in. After that, it grows a lot. But I want to spend a lot of money on blow that dough stuff between 55 and 70, so I guess that $900k excess @ 70 can go towards blow that dough stuff. $900k/15 years = $60k of blow that dough / year!

 

[Dtail]

Ding, ding, ding! That is my concern: my inputs are wrong.

I do take comfort in the simplest part of my massive spreadsheet. It has income minus expenses laid out over 35 years. That part is not very complicated. I assume a 2% real return on my 60/40 portfolio. As long as my SS calculation is correct, my income side is good. I have a very good handle on expenses.

I start off with $1.8M and the lowest balance is $1.1M right before SS kicks in. After that, it grows a lot. But I want to spend a lot of money on blow that dough stuff between 55 and 70, so I guess that $900k excess @ 70 can go towards blow that dough stuff. $900k/15 years = $60k of blow that dough / year!

But if one can calculate the expenses in a reasonable analysis, the rest of most calculator inputs are fairly straightforward and effectively build in their own portfolio returns based on historical sequencing or monte carlo simulations.