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How do you know you haven't made a math error?
12-24-2020, 10:00 AM
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#1
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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How do you know you haven't made a math error?
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?
__________________
Consistently sets low goals and fails to achieve them.
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12-24-2020, 10:08 AM
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#2
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Thinks s/he gets paid by the post
Join Date: Aug 2012
Posts: 1,829
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Quote:
Originally Posted by 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?
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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.
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12-24-2020, 10:36 AM
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#3
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Thinks s/he gets paid by the post
Join Date: Aug 2018
Posts: 1,020
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As long as the inputs are correct, using multiple calculators with similar results would give me confidence in the accuracy of the calculations.
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12-24-2020, 10:44 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2013
Posts: 11,078
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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.
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12-24-2020, 10:48 AM
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#5
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2016
Posts: 9,524
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Quote:
Originally Posted by 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.
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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.
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12-24-2020, 10:49 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Quote:
Originally Posted by corn18
That got me thinking about my retirement plan. Is there a mistake somewhere in my calculations that will create an oh shoot! moment?
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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.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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12-24-2020, 10:49 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,373
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Quote:
Originally Posted by corn18
... Is there anything I should do to mitigate the risk of a miscalculation?
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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.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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12-24-2020, 10:49 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: Reading, MA
Posts: 1,798
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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...
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12-24-2020, 10:53 AM
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#9
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Thinks s/he gets paid by the post
Join Date: Mar 2009
Posts: 2,985
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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.
__________________
Took SS at 62 and hope I live long enough to regret the decision.
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12-24-2020, 11:58 AM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by 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.
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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.
__________________
Consistently sets low goals and fails to achieve them.
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12-24-2020, 12:05 PM
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#11
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by W2R
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.
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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.
__________________
Consistently sets low goals and fails to achieve them.
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12-24-2020, 12:11 PM
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#12
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2016
Posts: 8,968
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If you die, you won't have to worry anymore.
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12-24-2020, 12:11 PM
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#13
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Recycles dryer sheets
Join Date: Mar 2008
Location: Bangkok
Posts: 234
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Quote:
Originally Posted by finnski1
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.
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Well said!
Cheers!
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12-24-2020, 12:31 PM
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#14
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jan 2008
Location: NC
Posts: 21,304
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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.
__________________
No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57
Target AA: 50% equity funds / 45% bonds / 5% cash
Target WR: Approx 1.5% Approx 20% SI (secure income, SS only)
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12-24-2020, 01:01 PM
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#15
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Moderator
Join Date: Nov 2014
Posts: 9,179
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Quote:
Originally Posted by corn18
... Is there anything I should do to mitigate the risk of a miscalculation?
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Quote:
Originally Posted by pb4uski
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.
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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.
__________________
Every day when I open my eyes now it feels like a Saturday - David Gray
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12-24-2020, 01:16 PM
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#16
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Full time employment: Posting here.
Join Date: Feb 2017
Location: SF Bay Area
Posts: 594
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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.
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12-24-2020, 01:26 PM
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#17
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Full time employment: Posting here.
Join Date: Jul 2005
Posts: 617
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Quote:
Originally Posted by 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?
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I wrote a post along the same lines. You may find the responses helpful.
https://www.early-retirement.org/for...ml#post2504439
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12-24-2020, 03:03 PM
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#18
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Jun 2006
Location: Boise
Posts: 7,882
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Quote:
Originally Posted by corn18
Is there anything I should do to mitigate the risk of a miscalculation?
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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.
__________________
"At times the world can seem an unfriendly and sinister place, but believe us when we say there is much more good in it than bad. All you have to do is look hard enough, and what might seem to be a series of unfortunate events, may in fact be the first steps of a journey." Violet Baudelaire.
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12-24-2020, 03:10 PM
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#19
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Thinks s/he gets paid by the post
Join Date: Aug 2015
Posts: 1,890
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Quote:
Originally Posted by SecondCor521
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.
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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!
__________________
Consistently sets low goals and fails to achieve them.
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12-24-2020, 03:15 PM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Apr 2012
Posts: 6,181
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Quote:
Originally Posted by pb4uski
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.
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+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.
__________________
FIREd date: June 26, 2018 - "This Happy Feeling, Going Round and Round!" (GQ)
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