I am surely doing something wrong (FireCalc question)

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hcj
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I am surely doing something wrong (FireCalc question)

Post by hcj »

I tried to do a quick ballpark of what we need to retire, using firecalc. I think I'm doing it wrong because it's basically saying I can retire at 67 without saving a single cent more, and given the other thread that is SURELY wrong.

Here are the steps I followed. I did the calculations using a "minimum" yearly spend and a cushier one. I am only showing the minimum below.

1) Yearly spend = 122k (for those of you following the other thread, this is current take home pay minus mortgage and childcare, and I added some money back in for property tax and house maintenance)

2) I then factored in SocSec payments - 73k for the two of us, one retiring at 70 and the other at 67

3) 122k minus 73k = 49k that we have to come up with ourselves

4) I entered these values on FireCalc:
Spending: 49,000
Portfolio: 1,400,000
Years: 30

5) FireCalc said that had 0% chance of failure over 30 years

What did I do wrong? This is not the answer I was expecting, I thought we would need more like 4mil?
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in_reality
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Re: I am surely doing something wrong (FireCalc question)

Post by in_reality »

hcj wrote:
What did I do wrong? This is not the answer I was expecting, I thought we would need more like 4mil?
Well $50,000 x 30 years is $1.5 million

Your $1.4 million should be generating some gains along the way so looks like it could be ok to me.

Trying lowering the expected returns or increasing inflation and see what happens.
bluejello
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Re: I am surely doing something wrong (FireCalc question)

Post by bluejello »

You forgot about taxes. If you want to spend $122k annually post-tax, then your investments will need to produce at least 130% of that pre-tax (guesstimating your tax bracket here) unless you have all your assets in a Roth IRA, which is unlikely. And remember, you have to pay taxes on SS too, so also discount your social security payments by 30%.

Run the numbers again using pre-tax income numbers and see what it says.
Last edited by bluejello on Sat Oct 04, 2014 2:30 am, edited 2 times in total.
curmudgeon
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Re: I am surely doing something wrong (FireCalc question)

Post by curmudgeon »

You might be being optimistic about returns between now and age 70. If we have an extended downturn between now and your retirement age, you might not have that $1.4m portfolio. You can play around with these things and always find scenarios that look rosy (or grim). How about cutting your SS benefits by 25% (the projected future shortfall in the SS system)? You definitely need to also keep an awareness of inflation.

Fidelity has some pretty good retirement models as well. I like to run numbers through various models, though I take them all with a grain of salt.
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Re: I am surely doing something wrong (FireCalc question)

Post by mhalley »

I agree about needing to account for a couple of adverse outcomes that may not be accounted for by firecalc.
The stock market could take a steep dive the year you retire, reducing your portfolio by 20-25% depending on your asset allocation.
Social security could be changed in a number of ways. There is the possibility of a cut, or several other scenarios, such as a decrease in the col adjustments, a decrease in the maximum ss income per family, an increase on taxes on ss, and of course an increase in taxes in general.
Additionally, there is the possibility of death of a spouse, resulting in ss being decreased to one instead of 2 checks.
So you might look at the numbers with a 25% decrease in your total assets, coupled with a ss income of say 25% of one persons ss to give a worst case scenario.
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hcj
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

Ahh.. ok. Thank you.

Just adding in the 30% tax rate brings Firecalc up to 2.85mm.

I guess it will easily go up to 4mm if we factor all the other things that could go sideways. Mystery solved. Thank you!
livesoft
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Re: I am surely doing something wrong (FireCalc question)

Post by livesoft »

It looks like the OP found out FIRECalc says they can retire at 70 and 67. That's probably correct with that SS and that portfolio.

What happens if they want to retire at age 60?
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Re: I am surely doing something wrong (FireCalc question)

Post by cherijoh »

hcj wrote:I tried to do a quick ballpark of what we need to retire, using firecalc. I think I'm doing it wrong because it's basically saying I can retire at 67 without saving a single cent more, and given the other thread that is SURELY wrong.

Here are the steps I followed. I did the calculations using a "minimum" yearly spend and a cushier one. I am only showing the minimum below.

1) Yearly spend = 122k (for those of you following the other thread, this is current take home pay minus mortgage and childcare, and I added some money back in for property tax and house maintenance) <-- have you included irregular major home repairs like a new roof or new HVAC system? What about other major expenses like a new car?

2) I then factored in SocSec payments - 73k for the two of us, one retiring at 70 and the other at 67 <-- assuming that you will able to work until 70 may be optimistic since this may be outside of your control; for planning purposes I'd knock that back to 65 and add 5 years onto your retirement period

3) 122k minus 73k = 49k that we have to come up with ourselves <-- as others have pointed out, you overlooked taxes in your calculations

4) I entered these values on FireCalc:
Spending: 49,000
Portfolio: 1,400,000
Years: 30

5) FireCalc said that had 0% chance of failure over 30 years

What did I do wrong? This is not the answer I was expecting, I thought we would need more like 4mil?
JW-Retired
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Re: I am surely doing something wrong (FireCalc question)

Post by JW-Retired »

hcj wrote:Ahh.. ok. Thank you.

Just adding in the 30% tax rate brings Firecalc up to 2.85mm.

I guess it will easily go up to 4mm if we factor all the other things that could go sideways. Mystery solved. Thank you!
Can I ask Firecalc users another question. How does Firecalc handle investment expenses? Is there some expense ratio input to cover it, or do you have to include it as part of your spending rate in some way, or what?
thanks
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Ybsybs
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Re: I am surely doing something wrong (FireCalc question)

Post by Ybsybs »

hcj wrote:Ahh.. ok. Thank you.

Just adding in the 30% tax rate brings Firecalc up to 2.85mm.

I guess it will easily go up to 4mm if we factor all the other things that could go sideways. Mystery solved. Thank you!
Wonderful! And did you notice the tab where you tell FireCalc how your money is being held?

I recall you being adverse to stocks. Not investing in stocks at all makes it harder for money to go a long way. But investing in stocks and pulling the money out during downturns is super hard on the portfolio balance, so it is good that you know your risk tolerance. If you were curious about where the numbers came from in that other thread, there's a rule of thumb that you need your liquid assets (stocks/bonds/t-bills/savings/etc) to be 25 times the amount you want to consume annually (taxes&everything). FireCalc will give you more nuanced numbers than that rough rule.

Good luck to you and congrats on working this so aggressively!
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Re: I am surely doing something wrong (FireCalc question)

Post by user5027 »

JW Nearly Retired wrote: Can I ask Firecalc users another question. How does Firecalc handle investment expenses? Is there some expense ratio input to cover it, or do you have to include it as part of your spending rate in some way, or what?
thanks
JW
You can input your expense ratio on the "Your Portfolio" tab/page.
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Re: I am surely doing something wrong (FireCalc question)

Post by JW-Retired »

user5027 wrote:
You can input your expense ratio on the "Your Portfolio" tab/page.
Thanks, that's good to know.
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hcj
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

Thanks for the additional comments. Good things to make sure the number is workable.
Ybsybs wrote:
Wonderful! And did you notice the tab where you tell FireCalc how your money is being held?

I recall you being adverse to stocks. Not investing in stocks at all makes it harder for money to go a long way. But investing in stocks and pulling the money out during downturns is super hard on the portfolio balance, so it is good that you know your risk tolerance. If you were curious about where the numbers came from in that other thread, there's a rule of thumb that you need your liquid assets (stocks/bonds/t-bills/savings/etc) to be 25 times the amount you want to consume annually (taxes&everything). FireCalc will give you more nuanced numbers than that rough rule.

Good luck to you and congrats on working this so aggressively!
Thanks for the rule of thumb. I guess if I think about it we have money in the stock market right now (401k and IRAs). DH manages them and I don't want to look at them because it makes me edgey and (relatedly)I'm not good at asking questions without him feeling like I'm questioning his decisions.

I will have to spend more time on firecalc. I only got to the first two tabs.
jwa
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Re: I am surely doing something wrong (FireCalc question)

Post by jwa »

What I have seen is 25 times expenses after social security, pensions and any other source of guaranteed income. That is a big difference from 25 times your expenses. As one who is retired, I find the former works just fine.
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Re: I am surely doing something wrong (FireCalc question)

Post by derosa »

Based on your original numbers firecalc is working fine. You only want $50k out of $1.4M. No problem. That is really not much at all.

It sounds like you need to take a look at what some of the other tabs do like -- your portfolio, portfolio changes and investigate.

If you don't like these numbers go look at it in flexibleretirementplanner.com for another opinion from a different viewpoint. You get even more control over there.
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Re: I am surely doing something wrong (FireCalc question)

Post by Ice-9 »

user5027 wrote:
JW Nearly Retired wrote: Can I ask Firecalc users another question. How does Firecalc handle investment expenses? Is there some expense ratio input to cover it, or do you have to include it as part of your spending rate in some way, or what?
thanks
JW
You can input your expense ratio on the "Your Portfolio" tab/page.
This brings up another good exercise you can do with Firecalc, which someone suggested on Bogleheads a while ago and I've done ever since I read it.

Firecalc by default tells you how many cycles using historical returns would have succeeded. But what if the rest of your investing career happens to be a less favorable period of returns than any of the historical cycles? Well, you can somewhat account for that by fudging a higher expense ratio. If your actual average weighted expense ratio is 0.15%, plug in 1.15% instead to see how your portfolio would have performed in a parallel universe with 1% lower than historical returns every year.
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

I think so far the most impactful learning from this exercise for me, is what a ginormous difference taxes make.

And how sad I am, that apparently we cannot put any in a Roth because of income limits (I just googled that, so please let me know if I'm wrong). I have one, from nearly 20 years ago, but it's still only at 6k after 20 years. (Started at $1500.) How it has NOT grown probably has a large impact on how I feel about the stock market - though I intellectually know that I just haven't managed it properly and that I can, possibly, learn my way out of that.
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Re: I am surely doing something wrong (FireCalc question)

Post by JW-Retired »

hcj wrote:I think so far the most impactful learning from this exercise for me, is what a ginormous difference taxes make.

And how sad I am, that apparently we cannot put any in a Roth because of income limits (I just googled that, so please let me know if I'm wrong). I have one, from nearly 20 years ago, but it's still only at 6k after 20 years. (Started at $1500.) How it has NOT grown probably has a large impact on how I feel about the stock market - though I intellectually know that I just haven't managed it properly and that I can, possibly, learn my way out of that.
You actually can get around the income limits for Roth contributions if you have no other personal tIRAs (includes rollover IRAs), SEP, or SIMPLE IRAs. Is that the case for you?
If so, see http://www.bogleheads.org/wiki/Backdoor_Roth_IRA
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Re: I am surely doing something wrong (FireCalc question)

Post by The Wizard »

hcj wrote:I think so far the most impactful learning from this exercise for me, is what a ginormous difference taxes make...
OK, but we've been paying income taxes for a few decades now in the working class, so where's the conceptual problem?
It comes down to whether the bulk of your investments are pre-tax or post-tax.
The bulk of mine are pre-tax (403(b)) so essentially all of my retirement income is taxable, including eventual SS at 85% of my marginal rate.
So I found it convenient, when planning things a few years ago, just to target getting the same Adjusted Gross Income in retirement as in my last full working years. I found that to be an "easy" number to work with since it made for a seamless transition.
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ResearchMed
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Re: I am surely doing something wrong (FireCalc question)

Post by ResearchMed »

Sorry if I missed this (I didn't read the previous comments as carefully as I had read everything in your other thread):

What about the really extraordinary expenses that do hit many people:

A very serious illness/accident? Insurance, even the best insurance, does NOT pay "everything you want".
It's especially unlikely to pay for everything your family would want, like some extra care in the hospital or especially at home during recovery.
(We know: in an earlier thread, I mentioned some extremely significant costs after a child was struck by a car, and recover and re-learning to walk took a very long time, and insurer decided that life in a wheelchair was cheaper, etc.)

Or long-term care or earlier disability for either (or both) of you later in life?

Or something like a house fire or tornado or *earthquake* (where you apparently live)? Insurance usually doesn't pay for *everything* if one needs to start from scratch, meaning toothbrushes, shoes, casual clothing, work clothing, ski clothing, etc., for everyone, and furniture (carpets, sofas, end tables, drapes, lamps, books, DVDs/etc., dining/cooking stuff).

There are other scenarios.

Nope, they won't all happen to you, and if you are fortunate, none of them will happen to you.

--> But what if something like that DOES happen to you?

Or just the possible slow grind of increasing health insurance (and decreasing coverage) and regular health care costs as time goes on?

How does the budgeting work then?

I'm also concerned that your "living expense budget" is too low, that you are not thinking through some of the expenses that are currently being met by trust funds or other family contributions (cash or in kind, like vacations, perhaps).
The existence of the annual trust fund income (and 7 year future remaining) was a bit late to appear, and you really might not have all of that clearly in mind when you think about current income or expenses.

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Re: I am surely doing something wrong (FireCalc question)

Post by bluejello »

hcj wrote:I think so far the most impactful learning from this exercise for me, is what a ginormous difference taxes make.
Yup. And this is why Bogleheads encourage maxing out your 401k if at all possible. Pardon me if this is totally obvious to you, but in case it's not, let's look at the math for a couple making $250k gross who wants to save $35k per year. 30% is my ballpark estimate of taxes at this income level, including federal, fica, state, and local. If you live in a particularly high-tax area like NYC or California, your tax rate could well be higher.

Scenario 1: Saving Pre-Tax
They put $35k into their 401ks ($17.5k each, the max limit)
They pay 30% in taxes on the remainder, or $64,500 in taxes
They're left with $150,500 in take-home income.

Scenario 2: Saving Post-Tax
They put $0 into their 401ks
Still paying 30% in taxes, but this time the tax bill is $75,000
After paying taxes they put $35k away into savings
Leaving them with just $140,000 in take-home income.

Just by saving pre-tax in the 401k instead of post-tax, this couple has cut their tax bill by over $10,000!
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Re: I am surely doing something wrong (FireCalc question)

Post by whaleknives »

hcj wrote:. . .
1) Yearly spend = 122k (for those of you following the other thread, this is current take home pay minus mortgage and childcare, and I added some money back in for property tax and house maintenance)

2) I then factored in SocSec payments - 73k for the two of us, one retiring at 70 and the other at 67

3) 122k minus 73k = 49k that we have to come up with ourselves

4) I entered these values on FireCalc:
Spending: 49,000
Portfolio: 1,400,000
Years: 30 . . .
Did you enter your Social Security income in FireCalc? If so, you should enter your annual spending as $122k, not $49k.
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Re: I am surely doing something wrong (FireCalc question)

Post by Compound »

hcj wrote:I think so far the most impactful learning from this exercise for me, is what a ginormous difference taxes make.

And how sad I am, that apparently we cannot put any in a Roth because of income limits (I just googled that, so please let me know if I'm wrong). I have one, from nearly 20 years ago, but it's still only at 6k after 20 years. (Started at $1500.) How it has NOT grown probably has a large impact on how I feel about the stock market - though I intellectually know that I just haven't managed it properly and that I can, possibly, learn my way out of that.
I ran your Roth numbers in an online calculator. $1500 becomes $6000 over twenty years by growing at an annualized rate of 7.18%. That seems like some pretty good growth to me!
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Re: I am surely doing something wrong (FireCalc question)

Post by tibbitts »

hcj wrote:I think so far the most impactful learning from this exercise for me, is what a ginormous difference taxes make.

And how sad I am, that apparently we cannot put any in a Roth because of income limits (I just googled that, so please let me know if I'm wrong). I have one, from nearly 20 years ago, but it's still only at 6k after 20 years. (Started at $1500.) How it has NOT grown probably has a large impact on how I feel about the stock market - though I intellectually know that I just haven't managed it properly and that I can, possibly, learn my way out of that.
I have wonderful news for you: because I'm so generous, I'm going to exchange your income for my income. By doing that, not only will you qualify for your choice of fully deductible IRA, or Roth without any backdoor nonsense, but if you play your cards right, you just might be eligible for the saver's credit. What a deal for you! It's going to be a tough sacrifice for me, but somehow I'll struggle through.
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Re: I am surely doing something wrong (FireCalc question)

Post by Bustoff »

You are aware the default portfolio for FireCalc is 75% equities and the long interest rate for fixed income ?
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hcj
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

Thank you JW for that link. I had seen these thread titles on "back door Roth" but had no idea what they were. We do have IRAs but I will read up as the wiki you linked mentioned right away how sometimes it's possible to transfer IRAs back into a 401k.

Re: my surprise on the taxes. My surprise was that I would need to have double the nest egg (2.85mm instead of 1.4mm) in order to pay 30% tax on withdrawal. I knew it would be more; the amount surprised me. No one (outside of BH forum?) ever talks about that as an advantage to Roth, or at least, not in a way that I understood. I always knew the technical difference--pay the tax now and let it compound, vs shelter your income from tax now then be taxed at a lower tax bracket when you retire--but had no idea that would translate to needing twice the nest egg.

Thanks for other responses -- will be back later when I'm not tapping posts out on my phone.
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Re: I am surely doing something wrong (FireCalc question)

Post by livesoft »

As long as we are talking about taxes, I think taxes are something that other people pay. I started two threads to show how a family doesn't have to pay much in the way of taxes (in contrast to what bluejello posted):

Family with $200,000 income: http://www.bogleheads.org/forum/viewtopic.php?t=79510
Retired family with 6-figure expenses: http://www.bogleheads.org/forum/viewtopic.php?t=87471
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Re: I am surely doing something wrong (FireCalc question)

Post by The Wizard »

hcj wrote:
Re: my surprise on the taxes. My surprise was that I would need to have double the nest egg (2.85mm instead of 1.4mm) in order to pay 30% tax on withdrawal. I knew it would be more; the amount surprised me. No one (outside of BH forum?) ever talks about that as an advantage to Roth, or at least, not in a way that I understood. I always knew the technical difference--pay the tax now and let it compound, vs shelter your income from tax now then be taxed at a lower tax bracket when you retire--but had no idea that would translate to needing twice the nest egg.

Thanks for other responses -- will be back later when I'm not tapping posts out on my phone.
You're a bit confused, I'm afraid.
It does NOT take a 2x portfolio to deal with taxes.
Even if your MARGINAL federal tax rate is 28%, your average rate is more likely 18% or so.
So it makes sense to have traditional tax-sheltered assets to use to fill up the low tax brackets in retirement.
But as you get into the 25% federal bracket in retirement, it MAY start making sense to put more in Roth accounts...
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Re: I am surely doing something wrong (FireCalc question)

Post by cherijoh »

ResearchMed wrote:Sorry if I missed this (I didn't read the previous comments as carefully as I had read everything in your other thread):

What about the really extraordinary expenses that do hit many people:

A very serious illness/accident? Insurance, even the best insurance, does NOT pay "everything you want".
It's especially unlikely to pay for everything your family would want, like some extra care in the hospital or especially at home during recovery.
(We know: in an earlier thread, I mentioned some extremely significant costs after a child was struck by a car, and recover and re-learning to walk took a very long time, and insurer decided that life in a wheelchair was cheaper, etc.)

Or long-term care or earlier disability for either (or both) of you later in life?

Or something like a house fire or tornado or *earthquake* (where you apparently live)? Insurance usually doesn't pay for *everything* if one needs to start from scratch, meaning toothbrushes, shoes, casual clothing, work clothing, ski clothing, etc., for everyone, and furniture (carpets, sofas, end tables, drapes, lamps, books, DVDs/etc., dining/cooking stuff).

There are other scenarios.

Nope, they won't all happen to you, and if you are fortunate, none of them will happen to you.

--> But what if something like that DOES happen to you?

Or just the possible slow grind of increasing health insurance (and decreasing coverage) and regular health care costs as time goes on?

How does the budgeting work then?

I'm also concerned that your "living expense budget" is too low, that you are not thinking through some of the expenses that are currently being met by trust funds or other family contributions (cash or in kind, like vacations, perhaps).
The existence of the annual trust fund income (and 7 year future remaining) was a bit late to appear, and you really might not have all of that clearly in mind when you think about current income or expenses.

RM
+1 on the skepticism about the budgeted amount based on her other current thread.

I would also never make rosy assumptions on how long I could continue to work this far in advance. Those last 5 years of work are critical to the estimate of how much you need to save since they give you simultaneously a longer accumulation period and a shorter retirement period for planning purposes. You should start out with assumptions that are more conservative and then loosen them up when you are actually getting close to retirement.

I don't think the OP has bought into the concept that "stuff happens" and you need to factor in an ample safety margin. I would strongly recommend the OP do several sensitivity analyses in FIRECALC:
* Use the same amount of annual savings per year, but cut back on the number of years you are saving while simultaneously adding an equivalent amount to the time your nest egg has to last.
* Also increase the amount of withdrawal by various percentages above the assumed spending rates while holding the starting retirement balance constant.
* Add in a catastrophic event that causes you to have to double your withdrawal rate for a given year early in retirement.

Then ask yourself whether you feel comfortable sticking with the original assumptions - If you are wrong, it will be impossible to make a course adjustment late in the game. But if you were too pessimistic, I'm sure you'll figure out somewhere to spend the money or you can always gift it to your kids.
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Re: I am surely doing something wrong (FireCalc question)

Post by derosa »

Sounds like part of your research is to see how the state will tax your retirement age earnings.

In our state we are not taxed at all on both our social security payments and one pension. That means state taxes are about nothing.
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Re: I am surely doing something wrong (FireCalc question)

Post by cherijoh »

derosa wrote:Sounds like part of your research is to see how the state will tax your retirement age earnings.

In our state we are not taxed at all on both our social security payments and one pension. That means state taxes are about nothing.
A good suggestion for someone nearing retirement. But that assumes that they will still be in the same state when they retire in 30 years.
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Re: I am surely doing something wrong (FireCalc question)

Post by JW-Retired »

derosa wrote:Sounds like part of your research is to see how the state will tax your retirement age earnings.

In our state we are not taxed at all on both our social security payments and one pension. That means state taxes are about nothing.
State taxes vary so in some states taxes are a big deal. In my state (CA) they don't tax social security but every thing else (cap gains, pensions, RMDs, ) is taxed at the high ordinary income rate. That makes it desirable to maximize your social security in favor of reduced RMDs, for example.

The best approach usually depends on your whole retirement picture.
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Re: I am surely doing something wrong (FireCalc question)

Post by afan »

To the OP, I think you are using Firecalc wrong, so it is hard to tell whether the results make sense.

You should input the amount you plan to spend, not the amount you need on top of SS. Then enter your expected SS income, and the year(s) when it starts. When you call $122k your "take home", I assumed that meant "after tax". If so, then you should not increase your expected spending to account for taxes, you have already done this. If you have not accounted for taxes, that is if 122k is your total income before taxes and taxes have to come out, then you can use this figure, but you doe have to account for taxes.

The easiest way to use it is to enter the amount of money you actually spend, including "spending" on taxes. Then firecalc will tell you how much you need to cover that. Of course, your taxes will depend on sources of income, and your average tax rate. You have to make estimates, firecalc will not do it for you.

In your case, you may be counting SS twice and you may or may not be appropriately accounting for taxes.
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Re: I am surely doing something wrong (FireCalc question)

Post by randomguy »

hcj wrote:Ahh.. ok. Thank you.

Just adding in the 30% tax rate brings Firecalc up to 2.85mm.

I guess it will easily go up to 4mm if we factor all the other things that could go sideways. Mystery solved. Thank you!
30% is a very high tax estimate for the income levels we are talking about. For example 75k ss, 75k of OI (IRA distributions)= 21k of fed taxes . Call it about 14%. State taxes are a crap shoot but most states don't tax social security. Figure 6% as a guess on that 75k of OI and you looking at around 25k in total taxes for a tax home pay of about 125k. Have any of the income as LTGC or return of capital and and the tax numbers will drop quite a bit.

The other thing is if you have 1.4 million now and tell firecalc that your retirement is in the future, on average you will have a ton of real growth between now and then so that 1.4 million will turn into 3 or 4 million in 20 years.
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hcj
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

I agree, I'm pretty sure I put in an input incorrectly or missed a field somewhere. I started by putting 122k as the withdrawal amt (this was prior to the discussion on accounting for taxes) and then I went to the second tab and inputted 73k for SS with a start year of 2041. And firecalc came up with nearly the same result with and without the SS, which didn't make any sense to me. At that point I decided to account for SS myself and plugged in the adjusted number of 49k (122k - 73k). I did not input anywhere else when I wanted the 30 year span to start. So I am most likely not using it correctly.

Thanks for the ballpark rates on the taxes - that will save me a lot of research. I will probably run through a 1040
Form anyway, just to help me understand the interactions between different types of retirement income. But nice to be able to do a quick ballpark sooner (oh I do love my instant gratification ;)

By the way--I plugged in 175k to get 122k after 30% taxes. I need to go back and adjust my 122k number upwards. Good considerations brought up throughout this thread and I will incorporate them for a "safer" number. It also occurred to me over dinner that we for sure spend more than the 122k in take home pay because medical is taken out of our checks and is not part of take home pay.

Cherijoh: I only showed the "minimum" amount I ran through the calc, for the sake of simplicity. I am also running other scenarios (because I do *love* excel) including a cushier amount per year and different retirement ages. I'm very OCD like that. :) I like to work with ranges and understand trade offs. I will likely aim for something in the middle of the range, and if we can swing more we will.
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hcj
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

I just discovered the magical third tab of FireCalc and entered year of retirement information :happy
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ResearchMed
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Re: I am surely doing something wrong (FireCalc question)

Post by ResearchMed »

Is that "income" figure (with or without SS) adjusted for inflation by the software? (I don't know; don't use FireCalc.)

Otherwise, it's likely to buy you a dozen eggs, or maybe two dozen.

And even if adjusted for inflation, I'm still truly concerned that this amount in today's dollars does not really capture what your spending is likely to be. Once children are fledged, those childcare dollars rapidly get spent on other things. More free time, more travel, including skiing. Or other things that occupy your time, and that's not counting health care expenses (premiums and out of pocket) or LTC/etc., issues. Or if there is an earlier disability.
Sorry to be repetitive.

RM
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

@RM: I was wondering that too. It says it adjusts for inflation going forward, but I'm thinking it's taking the amount I entered (175k) as the amount of withdrawal for the first year and adjusting slightly upwards after that for the retirement span entered. Because even after I put in the retirement year, it's still not calculating as I'm expecting it to based on the prior convos here.

I will try some of the other calculators mentioned upthread so I can get a better answer. Do you have one you use/like/recommend?

And no worries on repetition -- I need and appreciate it. I am stubborn and have a thick skull and I stay stuck in something until I have totally worked through it and convinced myself otherwise. I hear you guys - I will revise my "minimum" scenario upwards.
ResearchMed wrote:Is that "income" figure (with or without SS) adjusted for inflation by the software? (I don't know; don't use FireCalc.)

Otherwise, it's likely to buy you a dozen eggs, or maybe two dozen.

And even if adjusted for inflation, I'm still truly concerned that this amount in today's dollars does not really capture what your spending is likely to be. Once children are fledged, those childcare dollars rapidly get spent on other things. More free time, more travel, including skiing. Or other things that occupy your time, and that's not counting health care expenses (premiums and out of pocket) or LTC/etc., issues. Or if there is an earlier disability.
Sorry to be repetitive.

RM
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

livesoft wrote:As long as we are talking about taxes, I think taxes are something that other people pay. I started two threads to show how a family doesn't have to pay much in the way of taxes (in contrast to what bluejello posted):

Family with $200,000 income: http://www.bogleheads.org/forum/viewtopic.php?t=79510
Retired family with 6-figure expenses: http://www.bogleheads.org/forum/viewtopic.php?t=87471
These were really interesting reads. Particularly the retirement one. Thanks for linking.

@Compound: thanks for calculating the rate of return on my Roth!
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Re: I am surely doing something wrong (FireCalc question)

Post by BigFoot48 »

hcj wrote:I will try some of the other calculators mentioned upthread so I can get a better answer. Do you have one you use/like/recommend?
Try mine. I use it and like it and recommend it! Retiree Portfolio Model
Retired | Two-time in top-10 in Bogleheads S&P500 contest; 18-time loser
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Re: I am surely doing something wrong (FireCalc question)

Post by randomguy »

hcj wrote:
livesoft wrote:As long as we are talking about taxes, I think taxes are something that other people pay. I started two threads to show how a family doesn't have to pay much in the way of taxes (in contrast to what bluejello posted):

Family with $200,000 income: http://www.bogleheads.org/forum/viewtopic.php?t=79510
Retired family with 6-figure expenses: http://www.bogleheads.org/forum/viewtopic.php?t=87471
These were really interesting reads. Particularly the retirement one. Thanks for linking.

@Compound: thanks for calculating the rate of return on my Roth!
Please note that the tax situation changes drastically once you start getting 70k of SS income AND your kids leave school.
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Re: I am surely doing something wrong (FireCalc question)

Post by JW-Retired »

BigFoot48 wrote:
hcj wrote:I will try some of the other calculators mentioned upthread so I can get a better answer. Do you have one you use/like/recommend?
Try mine. I use it and like it and recommend it! Retiree Portfolio Model
Yes, I like BigFoot's very much too. Much easier to see exactly what is going on. :beer
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Re: I am surely doing something wrong (FireCalc question)

Post by RobInCT »

Compound wrote:
hcj wrote:I think so far the most impactful learning from this exercise for me, is what a ginormous difference taxes make.

And how sad I am, that apparently we cannot put any in a Roth because of income limits (I just googled that, so please let me know if I'm wrong). I have one, from nearly 20 years ago, but it's still only at 6k after 20 years. (Started at $1500.) How it has NOT grown probably has a large impact on how I feel about the stock market - though I intellectually know that I just haven't managed it properly and that I can, possibly, learn my way out of that.
I ran your Roth numbers in an online calculator. $1500 becomes $6000 over twenty years by growing at an annualized rate of 7.18%. That seems like some pretty good growth to me!
This. $1500 in 1994 is about $2300 in today's dollars. So $2300 in "real" dollars has nearly tripled in 20 years, but that's a reason to distrust the stock market? Does not compute. What has the real estate market done in the last 20 years?
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hcj
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

BigFoot48 wrote:
hcj wrote:I will try some of the other calculators mentioned upthread so I can get a better answer. Do you have one you use/like/recommend?
Try mine. I use it and like it and recommend it! Retiree Portfolio Model
Lol. Thank you! I will download and try it out.
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Re: I am surely doing something wrong (FireCalc question)

Post by hcj »

RobInCT wrote: This. $1500 in 1994 is about $2300 in today's dollars. So $2300 in "real" dollars has nearly tripled in 20 years, but that's a reason to distrust the stock market? Does not compute. What has the real estate market done in the last 20 years?
[emphasis mine] Seeing it phrased this way resulted in an epiphany of sorts this morning. It crystallized why I have such a different view of the world. I live in la-la-land (geographically, though some of you may assign a different meaning and that's ok) where the normal rules haven't applied for the last 30+ years, maybe longer. The real estate did a lot better.
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Re: I am surely doing something wrong (FireCalc question)

Post by RobInCT »

hcj wrote:
RobInCT wrote: This. $1500 in 1994 is about $2300 in today's dollars. So $2300 in "real" dollars has nearly tripled in 20 years, but that's a reason to distrust the stock market? Does not compute. What has the real estate market done in the last 20 years?
[emphasis mine] Seeing it phrased this way resulted in an epiphany of sorts this morning. It crystallized why I have such a different view of the world. I live in la-la-land (geographically, though some of you may assign a different meaning and that's ok) where the normal rules haven't applied for the last 30+ years, maybe longer. The real estate did a lot better.
It sounds like you and your family got very, very lucky based on the part of the country you live in and what has been going on there. Do you want to bet your financial future on the fact that this phenomenon--which you admit has been atypical and against "normal rules"--will continue another 30? Maybe it will, maybe it won't. FYI, I just looked up the value of the house my parents bought shortly after they first got married approximately 30 years ago. My mom lived in it until about 10 years ago. It's been well maintained and is in a great school district in an area of the country that is about average in terms of jobs and economic growth. In inflation-adjusted terms it's worth about 10% more than what they paid for it 30 years ago.

You and your family got lucky. Maybe you'll continue to get lucky. Real estate is just not a very diversified asset, and you and your family may be betting a lot on the fact that not only will the market not crash but that it will continue not to obey the "normal rules." And if not only you are betting on an undiversified asset, but your entire family (the people who you might be counting on to bail you out/continue to help you if you get into trouble) is also betting on that same undiversified asset that just amplifies the problem.

Put another way, if a major shock were to drive housing prices down 50% in your geographic region of the country, what would happen to you and your family? If the answer is "we'd all be in a lot of trouble," then you should strongly consider diversifying.
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