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How do you know you haven't made a math error?
Old 12-24-2020, 11:00 AM   #1
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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?
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Old 12-24-2020, 11:08 AM   #2
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Originally Posted by corn18 View Post
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.
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Old 12-24-2020, 11:36 AM   #3
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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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Old 12-24-2020, 11:44 AM   #4
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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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Old 12-24-2020, 11:48 AM   #5
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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.
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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Old 12-24-2020, 11:49 AM   #6
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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.
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Old 12-24-2020, 11:49 AM   #7
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... 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.
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Old 12-24-2020, 11:49 AM   #8
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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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Old 12-24-2020, 11:53 AM   #9
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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.
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Old 12-24-2020, 12:58 PM   #10
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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.
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.
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Old 12-24-2020, 01:05 PM   #11
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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.
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.
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Old 12-24-2020, 01:11 PM   #12
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Old 12-24-2020, 01:11 PM   #13
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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.
Well said!

Cheers!
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Old 12-24-2020, 01:31 PM   #14
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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.
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Old 12-24-2020, 02:01 PM   #15
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... Is there anything I should do to mitigate the risk of a miscalculation?
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Originally Posted by pb4uski View Post
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.
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Old 12-24-2020, 02:16 PM   #16
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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. Itís doubtful we will ever have to enact Plan B, but desperate times would call for desperate measures.
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Old 12-24-2020, 02:26 PM   #17
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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/for...ml#post2504439
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Old 12-24-2020, 04:03 PM   #18
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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.
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Old 12-24-2020, 04:10 PM   #19
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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.
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!
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Old 12-24-2020, 04:15 PM   #20
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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.
+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.
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