The VPW Accumulation Worksheet

[longinvest]

My comp is a mix of salary - which I always get, stock grants which vest over multiple years - so I always get "something" (how much depends on stock performance and how the good/bad the prior year's vests were), a bonus which I either get - or don't, with some additional variable income that is paid as an "advance" - meaning if I miss my metrics at year end, I could owe the money back. It's that "advance" part, and the timing of a potential "pay back" - which could see a negative $100k adjustment - not to my "salary" - but to my overall income...

SnowBog, I think that you have a complex (business-like) situation.

Generally speaking, when using the accumulation worksheet, an advance is a loan, not a salary, and speculative income, like restricted stocks units (RSUs), isn't salary, it's a windfall. Here are the principles.

Basic principles when using the accumulation worksheet:

• Loans shouldn't be counted as salary.
  • When an accumulating investor borrows $48,000 to buy a car, the amount shouldn't be included in the Accumulation sheet's "Salary" cell.
• Windfalls shouldn't be counted as salary.
  • When an accumulating investor receives a $300,000 inheritance, the amount shouldn't be included in the Accumulation sheet's "Salary" cell. It should simply be added into the portfolio once the money is received.

Justification:

As the accumulation worksheet projects the "Salary" cell amount as salary for all future years until retirement, it obviously shouldn't include "one-time" amounts like an inheritance.

Dealing with some employer benefits has to be considered on a case by case basis.

A 5% 401K employer match, where this 5% can't be taken back (e.g. the amount is "vested") can be included as part of salary and subtracted from the worksheet's suggested portfolio contribution amount.

Any amount that isn't completely owned by the investor (e.g. can be lost if the employee quits the job) shouldn't be included anywhere in the worksheet.

A bonus is generally speculative, in that it might be earned or not each year. It's probably best to keep it out of the "Salary" cell and consider it as a windfall.

When a windfall is received (inheritance, work bonus, vested RSUs), it should simply be added into the portfolio and included in the "Portfolio Balance" cell. It shouldn't be included in the "Salary" cell.

Assuming that the accumulation worksheet will be misused and then criticizing the outcome is unfair.

As for highly-variable income, like earning up to $100,000 one year and as little as $30,000 the next, more or less randomly, causes problems way beyond the simple accumulation worksheet. It makes it difficult to get a bank to grant a mortgage or to convince a landlord to rent a place. It causes a big financial planning problem. It's a problem best addressed using personal finance techniques, such as using a cash buffer to smooth income. Such a buffer could contain 12 months of income. Each month, 1/12 of the buffer would become available to spend, and the buffer would be replenished on an ongoing basis using new (after-tax and portfolio contribution) income received during the month.

As I've often repeated, the VPW worksheet is an income tool, not a budgeting tool. This applies to both retirement and accumulation. A typical example is buying a car. During work years, one's salary doesn't generally increase by $48,000 during the year when it's time to buy a car, and doesn't go back down the next. Lots of salaried people buy cars. How do they do it? Using personal finance techniques, like incrementally saving for it in advance or using a loan (which isn't counted as salary! ), or both.

Budgeting concerns are best addressed using personal finance tools. Faulting the accumulation sheet for budgeting problems is unfair.

[longinvest]

I completely agree that variable spending is a strength of a workable retirement plan and that planning to spend a fixed inflation-indexed spending level is a poor approach. However, I would gently push back against your recommended approach of targeting a specific retirement age using two lines of argument.

The first line of argument looks at what I think of as common human behavior outside of the VPW Accumulation Worksheet. I do not think most people think of retirement as something that they aim for at a specific age, spending whatever is available to them when they reach that age regardless of their financial circumstances. Let's say someone were to receive a large windfall. This could be a large inheritance or something like private company stock that ends up being much more valuable than expected. I think a reasonably large proportion of the population would strongly consider retirement earlier than their "target date" in light of finances that are better than expected. Contrariwise, let's say that someone made poor investment decisions or that market returns are historically bad for 20 years. If someone has half the portfolio they were expecting at their "target date" for retirement, how many would retire to a life requiring significant reductions in their standard of living if the alternative were continued employment and continued savings? I don't think your recommendation to target a specific age for retirement and then to retire without regard to your actual financial resources at that time reflects the reality of how many (if not most) people approach this decision.

Withrye, when a significant change happens to the investor's cirsumstances, like a big windfall or a major salary change, it's time to reconsider the plan. The accumulation worksheet is a terrific tool to use for modeling various scenarios.

The second line of argument looks at what happens to an example retiree using the VPW Worksheet as you recommend. First, take the default settings in the current VPW Worksheet. Adjust only the Age (to 58) and the Portfolio Balance (to $955,000). Income ($70,000), portfolio (60/40), and retirement age (60) are unchanged, as are the default inputs for Social Security. The recommended monthly portfolio suggestion for the year is $1. If stocks fall by 50% (reducing the portfolio to $668,512, the extra $12 accounting for the suggested contribution at age 58), the monthly portfolio contribution after loss rises to $1,103. According to the logic of the Worksheet, the Accumulator ought to save nearly nothing this year but be prepared to save up to $13,236 next year (19% of their salary) if the market sours. It's actually a little bit worse, because if you increment age to 59 and input a portfolio of $668,500 to reflect the market drop, the monthly contribution is $1,251, or $15,012 per year (21% of their salary).

I don't know where you got the idea that VPW wasn't variable.

Let's stay with your example.

First, you've failed to provide the important numbers, the big ones that matter, the amounts available for taxes and expenses before and after loss. Here they are at age 58: $66,290 (in 2024) and $53,068 (after a -50% stock loss).

Now, let's consider what happens 2 years later when the investor retires at age 60, assuming the portfolio grows to $1,030,000 (60/40 stocks/bonds allocation). We fill the Retirement sheet with this information and include the projected $2,500/month Social Security starting at age 70. The worksheet suggests that income, available for taxes and expenses, is $66,375, but it could drop to $51,862 if stocks immediately lost -50% of their value.

It appears that the accumulation worksheet (at age 58) is quite consistent with the upcoming retirement (at age 60). This isn't an accident; it's by design!

Withrye, VPW stands for variable percentage withdrawal. It delivers variable income during both accumulation and retirement. That's how it's designed to work. It's a very logical approach when using a portfolio of fluctuating assets.

[SnowBog]

SnowBog, I think that you have a complex (business-like) situation.
...
Budgeting concerns are best addressed using personal finance tools. Faulting the accumulation sheet for budgeting problems is unfair.

Again, feel like we are "talking past" each other... No clue how you twist my words to come up with "budgeting problems"...

Completely ignore my "variable income"... If I enter in my "guaranteed" income: salary, lowest bonus I've ever received, lowest stock RSU I've ever received, and $0 for my "variable" income - the problem for me is the same. This isn't a "budgeting" problem...

Every other retirement tool says we are on the verge of being able to retire, including your Retirement worksheet. The only one that gives a different answer is your Accumulation worksheet. That's not a "budgeting problem"...

The only way I can get your Accumulation sheet to have an approximate result with your Retirement sheet is by making the "adaptation" I've previously outlined.

Now, you want to chalk that up to my unique circumstances - fine. You want to chalk that up as a "1% problem", because my example reflects a situation where I currently earn way more than we spend - fine.

Continuing to twist my words, accuse me of misusing your tool, or any other accusations you want to throw at my won't change the reality. Instead of addressing my recommendation directly, you talk past me, claiming I'm trying to turn your tool into a "budgeting" tool, or attempting to make it give me a "fixed" result. You don't seem to care to listen to what I'm trying to say... Your Accumulation tool - driven by income - does not universally work. It clearly does not work for me, and I'm done having that be a "me" problem... I don't need your tool, I quickly recognized it didn't work for me, and my only mistake was trying to help others...

If you don't want to change your tool, fine - I never asked you to. I offered a simple adaptation for those that might have had a similar situation as myself. I'm sure they all had "budgeting problems" too...

I might be in the minority, but others have attempted to share their view it didn't work for them; you dismissed them too. It's your tool, we don't have to use it... Heard.

I love VPW, I love the Retirement worksheet, I love your Personal Rate of Return worksheet, I'll forever be grateful for your contributions on these things. I plan on using these excellent tools to help in our eventual retirement.

I'm sorry that the Accumulation sheet didn't work for me. I'm sorry that I earn too much money relative to my expenses, and make it too easy for you to write me off. I'm sorry for attempting to "help" anyone else who might have struggled in the same way. I should have just continued to not use the Accumulation sheet, as clearly trying to "give back" and "contribute" to any it might have helped was unwanted by the author.

I'd encourage anyone using the Accumulation worksheet to pay attention to the "Available For Taxes And Expenses" (B21) cell, as if that is vastly off from what your expected retirement estimates are, IMHO the worksheet isn't working for you as advertised (or clearly you are using it wrong too ). If you run into that, you could consider trying my "adaptation" I've noted before at your own risk. Or at this point, I'd tell you it's clearly "easier" to just ignore the Accumulation sheet. Unfortunately it's author isn't interested in feedback or attempting to help. You'll just be told that since it didn't work for you, clearly it's your problem...

But I'm done. I've attempted to explain my challenges, provided examples, attempting to learn and ask questions, only to feel like you didn't hear what I said and that you must assume I'm an idiot.
I'm sure you are tried of replying to me as well... So out of respect for you, and because I'm just tired of having my attempts to help be thrown in my face, I'm done. I'm unsubscribing from all VPW threads and moving on with my life. I'm sure we both have much better things to do with our time that talk past each other in these threads...

Thanks again, and I wish you nothing but the best!

[Texanbybirth]

I really like this workbook. I've saved a copy to Google Sheets, and I've updated it a little on my side with links to my personal social security estimates (updated once a year from SSA), so the benefit will auto-fill in the appropriate Accumulation box once I choose a retirement age. I'm still toying with the idea of saying "no" to COLA or using my adjusted numbers (75% haircut) - but either way I don't want to count on the full benefit from my SSA statement!

I've also put in some calcs to show me explicitly the "%" I need to save each year. (My 401k provider uses a % to deduct from my paycheck each pay period.) I'm guessing employer contributions to 401ks would count toward that "%": is that right? Should I also include those $ contributions in my salary? I know some very conservative bogleheads do that when calculating their "savings rates".

Thanks for your work on this workbook! As someone who does something similar for a living, I appreciate a well-designed workbook!

[longinvest]

I really like this workbook. I've saved a copy to Google Sheets, and I've upda269*ted it a little on my side with links to my personal social security estimates (updated once a year from SSA), so the benefit will auto-fill in the appropriate Accumulation box once I choose a retirement age. I'm still toying with the idea of saying "no" to COLA or using my adjusted numbers (75% haircut) - but either way I don't want to count on the full benefit from my SSA statement!

I've also put in some calcs to show me explicitly the "%" I need to save each year. (My 401k provider uses a % to deduct from my paycheck each pay period.) I'm guessing employer contributions to 401ks would count toward that "%": is that right? Should I also include those $ contributions in my salary? I know some very conservative bogleheads do that when calculating their "savings rates".

Thanks for your work on this workbook! As someone who does something similar for a living, I appreciate a well-designed workbook!

Texanbybirth, thanks for the nice comments. Yes, the employer match would be included in the salary (in the worksheet) and also be counted as part of the suggested portfolio contribution. As for the savings rate, it's complicated. Let's look at an example:

Annual salary: $70,000
Employer match: 5%
401K employee contribution (5% of $70,000): $3,500
⇒ Biweekly 401K contribution (employee + employer) = ((2 × $3,500) ÷ 26) = $269

Worksheet inputs:

• Information for 2024
  • Age: 30
  • Annual Salary: ($70,000 + $3,500 employer match) = $73,500
  • Portfolio Balance: $50,000
  • Portfolio Allocation: 60/40 stocks/bonds
  • Retirement Age: 60
  • Portfolio Contribution Frequency: Biweekly
• Defined Benefit Pension #1
  • Name: Social Security
  • Start Age: 70
  • Monthly Payment: $2,500
  • Cost of Living Adjustments: No
  • Annual Contribution: $3,700

This generates the following suggestion:

• Biweekly Portfolio Contribution: $625

As a result, for each biweekly paycheck ($625 - $269) = $356 would be contributed to an IRA account (or to the 401K, but without match) in addition to the $269 401K (employee + employer) contribution.

The savings rate is usually calculated using the salary without including employer match. So, in this case, it would be:

• Savings rate: ((26 × $625) - $3,500 employer match) ÷ $70,000 = $12,750 ÷ $70,000 = 18%

That's pretty agressive because of the ultra-conservative "No" choice for Social Security COLA. Here's what happens if we use 75% with COLA, instead:

• Information for 2024
  • Age: 30
  • Annual Salary: ($70,000 + $3,500 employer match) = $73,500
  • Portfolio Balance: $50,000
  • Portfolio Allocation: 60/40 stocks/bonds
  • Retirement Age: 60
  • Portfolio Contribution Frequency: Biweekly
• Defined Benefit Pension #1
  • Name: Social Security
  • Start Age: 70
  • Monthly Payment: ($2,500 × 75%) = $1,875
  • Cost of Living Adjustments: Yes
  • Annual Contribution: $3,700

This generates the following suggestion:

• Biweekly Portfolio Contribution: $536

As a result, for each biweekly paycheck ($536 - $269) = $267 would be contributed to an IRA account (or to the 401K, but without match) in addition to the $269 401K (employee + employer) contribution.

As I wrote earlier, the savings rate is usually calculated using the salary without including employer match. So, in this case, it would be:

• Savings rate: ((26 × $536) - $3,500 employer match) ÷ $70,000 = $10,436 ÷ $70,000 = 15%

Unfortunately, there's no official definition of savings rate. Some people would say that it's ((26 × $536) ÷ $73,500) = 19%. That's probably more accurate, but it's calculated off total compensation (salary + employer match).

To avoid ambiguity, the worksheet calculates a portfolio contribution amount.

[Texanbybirth]

I really like this workbook. I've saved a copy to Google Sheets, and I've upda269*ted it a little on my side with links to my personal social security estimates (updated once a year from SSA), so the benefit will auto-fill in the appropriate Accumulation box once I choose a retirement age. I'm still toying with the idea of saying "no" to COLA or using my adjusted numbers (75% haircut) - but either way I don't want to count on the full benefit from my SSA statement!

I've also put in some calcs to show me explicitly the "%" I need to save each year. (My 401k provider uses a % to deduct from my paycheck each pay period.) I'm guessing employer contributions to 401ks would count toward that "%": is that right? Should I also include those $ contributions in my salary? I know some very conservative bogleheads do that when calculating their "savings rates".

Thanks for your work on this workbook! As someone who does something similar for a living, I appreciate a well-designed workbook!

Texanbybirth, thanks for the nice comments. Yes, the employer match would be included in the salary (in the worksheet) and also be counted as part of the suggested portfolio contribution...

Thanks for the thorough reply! I've tried to make the example more realistic by using (roughly) my numbers (to somewhat anonymize the post).

Annual salary: $140,000
Employer match: 5%
401K employee contribution (5% of $140,000): $7,000
⇒ Monthly 401K contribution (employee + employer) = ((2 × $7,000) ÷ 12) = $1,167

Worksheet inputs:

• Information for 2024
  • Age: 39
  • Annual Salary: ($140,000 + $7,000 employer match) = $147,000
  • Portfolio Balance: $300,000
  • Portfolio Allocation: 90/10 stocks/bonds
  • Retirement Age: 60
  • Portfolio Contribution Frequency: Monthly
• Defined Benefit Pension #1
  • Name: Social Security
  • Start Age: 70
  • Monthly Payment: $3,769 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
  • Cost of Living Adjustments: Yes
  • Annual Contribution: $8,680 (calculation excludes employer 401(k) match included in salary above)

This generates the following suggestion:

• Monthly Portfolio Contribution: $2,083

As a result, for each Monthly paycheck ($2,083 - $1,167) = $916 would be contributed to an IRA account (or to the 401K, but without match) in addition to the $1,167 401K (employee + employer) contribution.

The savings rate is usually calculated using the salary without including employer match. So, in this case, it would be:

• Savings rate: ((12 × $2,083) - $7,000 employer match) ÷ $140,000 = $18,000 ÷ $140,000 = 12.8%

Do my results seem accurate?

The reason I'm trying to hit a % and not a $ amount is because my only retirement vehicle is my employer's 401k, where I tweak our savings lever by adjusting my % contribution to my 401k annually. I don't go into the 401k admin's site and input a $ amount. (I imagine this is the case for many people.) If my results above are accurate, I'm actually shooting to get $1,500 ($140,000 x 5%/12 + $916) from my monthly paycheck into my 401k. That means I need to set my 401k deduction % at 13% ($1,500 / ($140,000 /12)), which matches our calculation of my "savings rate" above. I don't want to sound like I'm nitpicking. I only wanted to point out a tweak I've made to the sheet to make it more applicable to me so I know immediately what to do after I've run the calculations.

My other question is: how do you envision a user of the Accumulation worksheet ever needing to use cell B27, "### Portfolio Contribution After Loss"? I understand the calculations in the table, but it's not highlighted green like the table above it. Am I supposed to use the red table? If so, how? By way of example, I can do the exact same "savings rate" calculation above using the numbers in the red table, and I get a rate of 18%. If I'm a conservative or risk-averse or the-sky-is-falling saver, do I set my 401k deduction to that 18% instead?

Thank you in advance for your continued engagement.

[longinvest]

Annual salary: $140,000
Employer match: 5%
401K employee contribution (5% of $140,000): $7,000
⇒ Monthly 401K contribution (employee + employer) = ((2 × $7,000) ÷ 12) = $1,167

Worksheet inputs:

• Information for 2024
  • Age: 39
  • Annual Salary: ($140,000 + $7,000 employer match) = $147,000
  • Portfolio Balance: $300,000
  • Portfolio Allocation: 90/10 stocks/bonds
  • Retirement Age: 60
  • Portfolio Contribution Frequency: Monthly
• Defined Benefit Pension #1
  • Name: Social Security
  • Start Age: 70
  • Monthly Payment: $3,769 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
  • Cost of Living Adjustments: Yes
  • Annual Contribution: $8,680 (calculation excludes employer 401(k) match included in salary above)

The reason I'm trying to hit a % and not a $ amount is because my only retirement vehicle is my employer's 401k, where I tweak our savings lever by adjusting my % contribution to my 401k annually. I don't go into the 401k admin's site and input a $ amount. (I imagine this is the case for many people.) If my results above are accurate, I'm actually shooting to get $1,500 ($140,000 x 5%/12 + $916) from my monthly paycheck into my 401k. That means I need to set my 401k deduction % at 13% ($1,500 / ($140,000 /12)), which matches our calculation of my "savings rate" above. I don't want to sound like I'm nitpicking. I only wanted to point out a tweak I've made to the sheet to make it more applicable to me so I know immediately what to do after I've run the calculations.

Texanbybirth, I've left the worksheet open to modifications so that it could be adapted to one's specific circumstances, exactly like you did.

My other question is: how do you envision a user of the Accumulation worksheet ever needing to use cell B27, "### Portfolio Contribution After Loss"? I understand the calculations in the table, but it's not highlighted green like the table above it. Am I supposed to use the red table? If so, how?

The portfolio is composed of fluctuating assets, so it fluctuates. Changing the portfolio balance from $300,000 to $165,000, as would happen if stocks were to immediately lose -50% of their value, would increase the monthly portfolio contribution from $2,083 to $2,636 and reduce the monthly amount available for taxes and expenses from $9,443 to $8,890.

A -50% loss is a normal thing for stocks, even if it's infrequent. Such a loss shouldn't affect the accumulating investor's comfort. If it does, it means that the plan isn't viable and must be changed.

Using your example and entering a $140,000/year salary with $18,000/year 401K contributions, assuming California (as it's the most populous state), into the smartasset.com calculator results into the following estimates on an annual basis:

• Income taxes: $27,579 (federal and state)
• FICA and State Insurance Taxes: $11,860 (including $8,680 for Social Security)
• Pre-tax deductions: $18,000 (401K contributions)
• Take home salary: $82,561 (that's $6,880/month)

Applying the required flexibility estimate increases annual 401K contributions by $6,637/year or, if you prefer, it increases the savings rate from 13% to 18%. Changing 401K contributions to $25,000/year results into the following estimates on an annual basis:

• Income taxes: $25,183 (federal and state)
• FICA and State Insurance Taxes: $11,860 (including $8,680 for Social Security)
• Pre-tax deductions: $25,000 (401K contributions)
• Take home salary: $77,957 (that's $6,496/month)

If the investor can't easily reduce expenses (after taxes) by -$384/month (or -5.6%) from $6,880/month to $6,496/month without affecting comfort, something is wrong with the plan. In other words, the investor should make sure that $384/month out of the available $6,880 is budgeted for optional discretionary spending that could be eliminated without affecting comfort. "Comfort" obviously means a lot more than "minimal survival expenses"; it means that life is pleasurable.

When the investor doesn't have the required flexibility to easily reduce expenses without affecting comfort, the plan must immediately be changed. The investor shouldn't wait for portfolio losses to happen!

One of the most effective solutions is to increase the target retirement age (or financial independence age) by a few years.

Increasing the target retirement age by 3 years in your example, from 60 to 63, reduces the savings rate to 8% in 2024 (12.5% after loss) and results into the following estimates using the smartasset tax calculator:

• Available for expenses (after taxes) in 2024 ($11,000/year 401K contributions): $7,264/month
• Available for expenses (after taxes) after loss ($17,500/year 401K contributions): $6,908/month

The additional 3 years result into an after-loss amount ($6,908/month), when targeting age 63, which is higher than the (before-loss) 2024 amount ($6,880/month), when targeting age 60. But, there's still a -$356/month (or -4.9%) required flexibility (after taxes) from $7,264/month to $6,908/month when targeting age 63. The plan is for variable spending during accumulation.

By way of example, I can do the exact same "savings rate" calculation above using the numbers in the red table, and I get a rate of 18%. If I'm a conservative or risk-averse or the-sky-is-falling saver, do I set my 401k deduction to that 18% instead?

Living today as if the sky had already fallen is wasteful. It illogically leads to invest more money into inflated assets today with the hope of selling them later, once the sky has fallen, at a loss when they're deflated. That's before even considering that the sky might not even fall during the remaining life of the investor. Assets might not even be inflated today, after all. We just don't know.

VPW is about accepting the uncertainty of markets and adopting a sensible action plan. The Variable Percentage Withdrawal method is about safely spending more when markets are higher, while maintaining the flexibility to reduce spending if and when markets tank.

[longinvest]

Texanbybirth, I'll add to my previous post that the practical implication is to set the 401K savings rate to 13% (plus 5% employer match) for this year and remain ready to easily increase it to 18% next year, when worksheet inputs will be updated. Next year, portfolio contributions might not increase as much, could increase more, or could even decrease, depending on market outcomes and changes in the investor's circumstances. Yet, maintaining the required flexibility until then (budgeting $384/month for optional discretionary spending that could be eliminated without affecting comfort) is a sensible thing to do.

[Texanbybirth]

Texanbybirth, I'll add to my previous post that the practical implication is to set the 401K savings rate to 13% (plus 5% employer match) for this year and remain ready to easily increase it to 18% next year, when worksheet inputs will be updated. Next year, portfolio contributions might not increase as much, could increase more, or could even decrease, depending on market outcomes and changes in the investor's circumstances. Yet, maintaining the required flexibility until then (budgeting $384/month for optional discretionary spending that could be eliminated without affecting comfort) is a sensible thing to do.

Thank you for that interpretation, it makes perfect sense to me. Since I’ve had my paycheck set at 15% for over a decade now I’m loathe to ever change it, especially downward. However, as the sole-breadwinner with 5 young children in our family I know things can change quickly, and having some flexibility built into “the system” (our personal system) is a wise move.

I appreciate your willingness to engage a new user of your excellent worksheet!

[longinvest]

Thank you for that interpretation, it makes perfect sense to me. Since I’ve had my paycheck set at 15% for over a decade now I’m loathe to ever change it, especially downward. However, as the sole-breadwinner with 5 young children in our family I know things can change quickly, and having some flexibility built into “the system” (our personal system) is a wise move.

I appreciate your willingness to engage a new user of your excellent worksheet!

Texanbybirth, your questions were clear, along with detailed worksheet inputs; it's really enjoyable to reply to such well-written posts. Thanks for the nice comments and good luck with your big family!

[silent cal]

Hi longinvest,

I have some questions about using the VPW Accumulation Worksheet as a married couple and am curious to hear your thoughts?

Husband
Age: 25
Annual Salary: ($30,000 + $1,500 employer match) = $31,500
Portfolio Balance: $60,000
Portfolio Allocation: 90/10 stocks/bonds
Retirement Age: 50
Portfolio Contribution Frequency: Biweekly

Defined Benefit Pension #1

Name: Husband Social Security
Start Age: 70
Monthly Payment: $1,670 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
Cost of Living Adjustments: Yes
Annual Contribution: $2,295 (calculation excludes employer 401(k) match included in salary above)

Wife
Age: 25
Annual Salary: ($61,000 + $5,063 employer match) = $66,063
Portfolio Balance: $0
Portfolio Allocation: 90/10 stocks/bonds
Retirement Age: 50
Portfolio Contribution Frequency: Biweekly

Defined Benefit Pension #2

Name: Wife Social Security
Start Age: 70
Monthly Payment: $2,146 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
Cost of Living Adjustments: Yes
Annual Contribution: $4,666 (calculation excludes employer 401(k) match included in salary above)

Here are my questions:

• Do we list each of our Social Security contributions as separate Defined Benefit pensions? If I recall on the Retirement spreadsheet you say to not include the lower SS amount. Should we likewise do that here?

• We are currently invested aggressively in a 90/10 portfolio and plan to rebalance towards a 60/40 portfolio at retirement. As long as we update this spreadsheet annually to show changes to our AA, the portfolio balance target amount should likewise adjust right? That is to say, we aren't 'messing up' the calculations if we are currently a 90/10 but plan to be at a 60/40 AA when we use the Retirement sheet?

• You answered this previously but am I correct to include the employer match as part of annual salary. Then, to calculate our 401k target amounts, we would subtract our biweekly employer matches from the 'Biweekly Portfolio Contribution' cell to determine what we need to save outside of the match?

• Is the idea that the 'Required Flexibility' section in the Accumulator spreadsheet is essentially designed to mimic the 'Required Flexibility' in the Retirement spreadsheet? So that as an Accumulator approaches and then enters Retirement, if we was able to find flexibility in his budget as an Accumulator, he can roughly expect the Retirement flexibility dollar amount to be similar? Say in the last year as an Accumulator vs first year as a Retiree?

[Laurizas]

[*] Defined Benefit Pension #1: Social Security annual contribution (OASI tax), start age of payments, and monthly payment amount, all of which can be estimated using Neurosphere's

Monthly payment in today's or future dollars?

[longinvest]

[*] Defined Benefit Pension #1: Social Security annual contribution (OASI tax), start age of payments, and monthly payment amount, all of which can be estimated using Neurosphere's

Monthly payment in today's or future dollars?

Laurizas, Social Security payments should be expressed in today's dollars. As for fixed pensions payments (without cost of living adjustments), they should be expressed in nominal dollars.

[Laurizas]

Social Security payments should be expressed in today's dollars.

I am not from USA, but we have pensions from the state in my country. The projected retirement pension calculator suggest that in 20 years my pension would be 3000 euros, so what do I enter into Monthly payment cell: 3000 or should I discount this in accordance with average inflation?

[Laurizas]

Longinvest, could you also answer the question from the post above?


We are currently invested aggressively in a 90/10 portfolio and plan to rebalance towards a 60/40 portfolio at retirement. As long as we update this spreadsheet annually to show changes to our AA, the portfolio balance target amount should likewise adjust right? That is to say, we aren't 'messing up' the calculations if we are currently a 90/10 but plan to be at a 60/40 AA when we use the Retirement sheet?

[longinvest]

Social Security payments should be expressed in today's dollars.

I am not from USA, but we have pensions from the state in my country. The projected retirement pension calculator suggest that in 20 years my pension would be 3000 euros, so what do I enter into Monthly payment cell: 3000 or should I discount this in accordance with average inflation?

Laurizas, usually pubic pension projections are made using today's dollars, as amounts are adjusted yearly. If that's the case where you live, $3,000 would be entered into the worksheet with "Cost of Living Adjstments" set to "Yes".

In the unlikely case that the amount is nominal and there's no indexing, $3,000 would still be entered into the worksheet, but "Cost of Living Adjstments" would be set to "No". The worksheet takes care of making the necessary adjustments in its calculations.

In summary, the projected number ($3,000) should be entered into the spreadsheet without any adjustment. The choice is about setting "Cost of Living Adjstments" to "yes" or "No".

If you're curious, here's what I did during accumulation. I only included "accrued" pension benefits into the accumulation sheet* as of the end of "last year". In other words, I only included the amounts I would receive from public and work pensions assuming I didn't work from "this year" until retirement. I didn't like the idea of including unearned benefits into the worksheet. This caused me to slightly oversave but not too much as pension contributions were entered into the worksheet as "Annual Contribution".

* I mostly used earlier unpublished versions.

[longinvest]

Longinvest, could you also answer the question from the post above?

Laurizas, here are my answers to that post (in another thread).

[Laurizas]

usually pubic pension projections are made using today's dollars, as amounts are adjusted yearly.

I am sure it is in future euros. Does it change you answer?

[tj]

I am not from USA, but we have pensions from the state in my country. The projected retirement pension calculator suggest that in 20 years my pension would be 3000 euros, so what do I enter into Monthly payment cell: 3000 or should I discount this in accordance with average inflation?

Laurizas, usually pubic pension projections are made using today's dollars, as amounts are adjusted yearly. If that's the case where you live, $3,000 would be entered into the worksheet with "Cost of Living Adjstments" set to "Yes".

In the unlikely case that the amount is nominal and there's no indexing, $3,000 would still be entered into the worksheet, but "Cost of Living Adjstments" would be set to "No". The worksheet takes care of making the necessary adjustments in its calculations.

In summary, the projected number ($3,000) should be entered into the spreadsheet without any adjustment. The choice is about setting "Cost of Living Adjstments" to "yes" or "No".

If you're curious, here's what I did during accumulation. I only included "accrued" pension benefits into the accumulation sheet* as of the end of "last year". In other words, I only included the amounts I would receive from public and work pensions assuming I didn't work from "this year" until retirement. I didn't like the idea of including unearned benefits into the worksheet. This caused me to slightly oversave but not too much as pension contributions were entered into the worksheet as "Annual Contribution".

* I mostly used earlier unpublished versions.

So, my FERS pension will have COLA adjustments after i start it, but they are nominal dollars until then.

E.G. if I quit my job at the end of the year and I'm projected to have a $350/month pension starting at age 62....the amount will still be $350/month at age 62 - it does not increase between now and then, but it will increase by COLA every year after it starts...what would be the proper way to input this?

[longinvest]

I am sure it is in future euros. Does it change you answer?

Laurizas, if that's the case, "Cost of Living Adjustments" should be set to "No". This will cause the VPW worksheet to discount the amount for a loss of purchase power between now and the start of payments.

[longinvest]

So, my FERS pension will have COLA adjustments after i start it, but they are nominal dollars until then.

E.G. if I quit my job at the end of the year and I'm projected to have a $350/month pension starting at age 62....the amount will still be $350/month at age 62 - it does not increase between now and then, but it will increase by COLA every year after it starts...what would be the proper way to input this?

Tj, as the initial pension payment amount isn't firmly indexed to inflation between now and the start of payments (because indexing of the initial amount is conditional to work continuation until the start of payments), the prudent choice is to set the "Cost of Living Adjustments" cell to "No".

During retirement, once payments start, the "Cost of Living Adjustments" cell could be set to "Yes" if there's good confidence at that point that full inflation indexing will be provided and that the pension is sufficiently funded to avoid future cuts. Otherwise, prudence suggests that it should be set to "No".

[Laurizas]

I am sure it is in future euros. Does it change you answer?

Laurizas, if that's the case, "Cost of Living Adjustments" should be set to "No". This will cause the VPW worksheet to discount the amount for a loss of purchase power between now and the start of payments.

Tkanks. And what do I enter into Monthly payment cell: 3000 or should I discount this in accordance with average inflation and enter present value?

[longinvest]

Tkanks. And what do I enter into Monthly payment cell: 3000 or should I discount this in accordance with average inflation and enter present value?

3000.

[silent cal]

Hi longinvest,

I have some questions about using the VPW Accumulation Worksheet as a married couple and am curious to hear your thoughts?

Husband
Age: 25
Annual Salary: ($30,000 + $1,500 employer match) = $31,500
Portfolio Balance: $60,000
Portfolio Allocation: 90/10 stocks/bonds
Retirement Age: 50
Portfolio Contribution Frequency: Biweekly

Defined Benefit Pension #1

Name: Husband Social Security
Start Age: 70
Monthly Payment: $1,670 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
Cost of Living Adjustments: Yes
Annual Contribution: $2,295 (calculation excludes employer 401(k) match included in salary above)

Wife
Age: 25
Annual Salary: ($61,000 + $5,063 employer match) = $66,063
Portfolio Balance: $0
Portfolio Allocation: 90/10 stocks/bonds
Retirement Age: 50
Portfolio Contribution Frequency: Biweekly

Defined Benefit Pension #2

Name: Wife Social Security
Start Age: 70
Monthly Payment: $2,146 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
Cost of Living Adjustments: Yes
Annual Contribution: $4,666 (calculation excludes employer 401(k) match included in salary above)

Here are my questions:

• Do we list each of our Social Security contributions as separate Defined Benefit pensions? If I recall on the Retirement spreadsheet you say to not include the lower SS amount. Should we likewise do that here?

• We are currently invested aggressively in a 90/10 portfolio and plan to rebalance towards a 60/40 portfolio at retirement. As long as we update this spreadsheet annually to show changes to our AA, the portfolio balance target amount should likewise adjust right? That is to say, we aren't 'messing up' the calculations if we are currently a 90/10 but plan to be at a 60/40 AA when we use the Retirement sheet?

• You answered this previously but am I correct to include the employer match as part of annual salary. Then, to calculate our 401k target amounts, we would subtract our biweekly employer matches from the 'Biweekly Portfolio Contribution' cell to determine what we need to save outside of the match?

• Is the idea that the 'Required Flexibility' section in the Accumulator spreadsheet is essentially designed to mimic the 'Required Flexibility' in the Retirement spreadsheet? So that as an Accumulator approaches and then enters Retirement, if we was able to find flexibility in his budget as an Accumulator, he can roughly expect the Retirement flexibility dollar amount to be similar? Say in the last year as an Accumulator vs first year as a Retiree?

Hi everyone, I wanted to bump this in case anyone here knows the answers to these questions by chance.

[longinvest]

Hi longinvest,

I have some questions about using the VPW Accumulation Worksheet as a married couple and am curious to hear your thoughts?

Husband
Age: 25
Annual Salary: ($30,000 + $1,500 employer match) = $31,500
Portfolio Balance: $60,000
Portfolio Allocation: 90/10 stocks/bonds
Retirement Age: 50
Portfolio Contribution Frequency: Biweekly

Defined Benefit Pension #1

Name: Husband Social Security
Start Age: 70
Monthly Payment: $1,670 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
Cost of Living Adjustments: Yes
Annual Contribution: $2,295 (calculation excludes employer 401(k) match included in salary above)

Wife
Age: 25
Annual Salary: ($61,000 + $5,063 employer match) = $66,063
Portfolio Balance: $0
Portfolio Allocation: 90/10 stocks/bonds
Retirement Age: 50
Portfolio Contribution Frequency: Biweekly

Defined Benefit Pension #2

Name: Wife Social Security
Start Age: 70
Monthly Payment: $2,146 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
Cost of Living Adjustments: Yes
Annual Contribution: $4,666 (calculation excludes employer 401(k) match included in salary above)

Here are my questions:

• Do we list each of our Social Security contributions as separate Defined Benefit pensions? If I recall on the Retirement spreadsheet you say to not include the lower SS amount. Should we likewise do that here?

• We are currently invested aggressively in a 90/10 portfolio and plan to rebalance towards a 60/40 portfolio at retirement. As long as we update this spreadsheet annually to show changes to our AA, the portfolio balance target amount should likewise adjust right? That is to say, we aren't 'messing up' the calculations if we are currently a 90/10 but plan to be at a 60/40 AA when we use the Retirement sheet?

• You answered this previously but am I correct to include the employer match as part of annual salary. Then, to calculate our 401k target amounts, we would subtract our biweekly employer matches from the 'Biweekly Portfolio Contribution' cell to determine what we need to save outside of the match?

• Is the idea that the 'Required Flexibility' section in the Accumulator spreadsheet is essentially designed to mimic the 'Required Flexibility' in the Retirement spreadsheet? So that as an Accumulator approaches and then enters Retirement, if we was able to find flexibility in his budget as an Accumulator, he can roughly expect the Retirement flexibility dollar amount to be similar? Say in the last year as an Accumulator vs first year as a Retiree?

Hi everyone, I wanted to bump this in case anyone here knows the answers to these questions by chance.

Silent cal, I've already replied to your post in this July 2024 post of the main VPW thread. I think that you made 2 identical posts, one here and one there. Maybe you missed my reply in the other thread.

[silent cal]

Hi everyone, I wanted to bump this in case anyone here knows the answers to these questions by chance.

Silent cal, I've already replied to your post in this July 2024 post of the main VPW thread. I think that you made 2 identical posts, one here and one there. Maybe you missed my reply in the other thread.

Wow I did miss your other reply, sorry for that!

Not sure how I managed to duplicate the post

[longinvest]

Silent cal, I've already replied to your post in this July 2024 post of the main VPW thread. I think that you made 2 identical posts, one here and one there. Maybe you missed my reply in the other thread.

Wow I did miss your other reply, sorry for that!

Not sure how I managed to duplicate the post :oops:

Silent cal, in relation to your question about how to handle things for a couple, here's what my wife and I ended up doing in retirement (we both retired in 2024). Just before retiring, when we discussed in details the financial impact of first death, my wife told me that she didn't care about keeping as much (fluctuating) income after my death (if I was to die first), that she'd rather enjoy having more money to spend with me while we're together and healthy. As my thinking was similar, we've decided to fully include pensions and government benefits in our VPW calculations. This is possible because our numbers are such that the required flexibility after first death (assuming pension bridges have already been depleted) would allow the survivor to live comfortably.

During accumulation, we had briefly discussed the topic, but as it was a very remote thing and we always preferred erring on the "save a little more" side, we had only included approximately half of future government benefits in the Accumulation sheet. We should probably have discussed this more and chosen to fully include these benefits. The difference in savings wouldn't have been much, but this leaves us today with a slightly bigger spending challenge (I mean the challenge of wisely spending or gifting excess money VPW gives us during retirement).

Good luck!

[silent cal]

Wow I did miss your other reply, sorry for that!

Not sure how I managed to duplicate the post

Silent cal, in relation to your question about how to handle things for a couple, here's what my wife and I ended up doing in retirement (we both retired in 2024). Just before retiring, when we discussed in details the financial impact of first death, my wife told me that she didn't care about keeping as much (fluctuating) income after my death (if I was to die first), that she'd rather enjoy having more money to spend with me while we're together and healthy. As my thinking was similar, we've decided to fully include pensions and government benefits in our VPW calculations. This is possible because our numbers are such that the required flexibility after first death (assuming pension bridges have already been depleted) would allow the survivor to live comfortably.

During accumulation, we had briefly discussed the topic, but as it was a very remote thing and we always preferred erring on the "save a little more" side, we had only included approximately half of future government benefits in the Accumulation sheet. We should probably have discussed this more and chosen to fully include these benefits. The difference in savings wouldn't have been much, but this leaves us today with a slightly bigger spending challenge (I mean the challenge of wisely spending or gifting excess money VPW gives us during retirement).

Good luck!

Thank you for sharing this! Super helpful, my wife and I will include our full government benefits in our VPW calculations as well.

Longinvest, your work with VPW and the One-Fund Portfolio has had such a tremendous impact on my financial planning (and my parents!). Thank you so much for your hard work over the years sharing your wisdom and tools. I hope you're enjoying a well deserved retirement!