kyounge1956
Thinks s/he gets paid by the post
- Joined
- Sep 11, 2008
- Messages
- 2,171
I have been trying for a long time to figure out the "Magic Number", the balance I need in my retirement accounts in order to be able to retire. I think I have it now, but this most recent calculation gives me a retirement date a year ahead of almost all my previous estimates. The only thing I have added in is an adjustment for Social Security, and since I didn't use my whole projected benefit I didn't think it would make much of a difference. Here are the numbers:
Magic Number calculation
Projected Pension benefit at age 56 (2012)...........................$3,488.21/mo
...............................................................x12=$41,858.52/yr
..............................................x 0.65=COLA'd portion=$27,208.03/yr
........................................................(rounded off)=$27,205/yr
Adjustment for Social Security*.......................................+$3,000/yr
Projected Income......................................................$30,205/yr
Desired budget (2009 dollars).........................................$36,000/yr
Desired budget (in 2012, 4.05% infl)...................................$40,553.54
(rounded up)..........................................................$40,555/yr
Shortfall.............................................................$10,350/yr
x 25=Required portfolio amount=$258,750.00
add part of proceeds from sale of house to portfolio ($100,000)--->
MAGIC NUMBER=$158,750
Current retirement account balance+/-$115,000
Annual contributions (in 26 paym'ts)=$22,000
Projected growth (30% equity, 70% fixed)=7%
Projected balance by Jan 2012=$179,544.48
This is based on a pension benefit estimate from the system's online calculator, which is only a projection, but I have requested an official benefit statement from the pension department to verify that I have used the correct benefit. (Unfortunately it takes them 6 weeks to do it.)
The only thing I have changed since previous projections is the $3000 a year for Social Security. My statement says I'm eligible for about $2000 a month at full retirement age (66+4 mo's) but I only use a quarter of that to give me a cushion, in case I have underestimated expenses elsewhere or there is a reduction in benefits, and I've reduced the one-quarter still further to make up for the fact that I can't start to draw it immediately when I retire. I would not have thought that $3000 a year would make such a difference in the Magic Number. Where is my math mistake? The financial planner I hired last year told me I wouldn't have enough money even by age 59, even counting all of Social Security. Can I really retire in only two years when I had previously thought at least three and more likely four, or am indulging in wishful thinking?
Magic Number calculation
Projected Pension benefit at age 56 (2012)...........................$3,488.21/mo
...............................................................x12=$41,858.52/yr
..............................................x 0.65=COLA'd portion=$27,208.03/yr
........................................................(rounded off)=$27,205/yr
Adjustment for Social Security*.......................................+$3,000/yr
Projected Income......................................................$30,205/yr
Desired budget (2009 dollars).........................................$36,000/yr
Desired budget (in 2012, 4.05% infl)...................................$40,553.54
(rounded up)..........................................................$40,555/yr
Shortfall.............................................................$10,350/yr
x 25=Required portfolio amount=$258,750.00
add part of proceeds from sale of house to portfolio ($100,000)--->
MAGIC NUMBER=$158,750
Current retirement account balance+/-$115,000
Annual contributions (in 26 paym'ts)=$22,000
Projected growth (30% equity, 70% fixed)=7%
Projected balance by Jan 2012=$179,544.48
This is based on a pension benefit estimate from the system's online calculator, which is only a projection, but I have requested an official benefit statement from the pension department to verify that I have used the correct benefit. (Unfortunately it takes them 6 weeks to do it.)
The only thing I have changed since previous projections is the $3000 a year for Social Security. My statement says I'm eligible for about $2000 a month at full retirement age (66+4 mo's) but I only use a quarter of that to give me a cushion, in case I have underestimated expenses elsewhere or there is a reduction in benefits, and I've reduced the one-quarter still further to make up for the fact that I can't start to draw it immediately when I retire. I would not have thought that $3000 a year would make such a difference in the Magic Number. Where is my math mistake? The financial planner I hired last year told me I wouldn't have enough money even by age 59, even counting all of Social Security. Can I really retire in only two years when I had previously thought at least three and more likely four, or am indulging in wishful thinking?