Retirement calculator

[Zeus 56]

While not going into a lot of detail, this calculator does the trick. It reflects everything I need to know. The real beauty of it is that I can change info and see immediate results on the graph that is always displayed. You can also view the inflation adjusted numbers in a table. ( try unclicking the " increase expenses with inflation" button to see why it is important).

 

http://www.lpl.com/calculators/RetireShort.html

 

I've tried several, including FireCalc (which is great for comparing a plan to history). But I really like this one for the "what if scenarios" What if:

-I move to a 0% State Tax state

- I retire 4 (or whatever)years early

- I get terrible returns on my money (one negative about this calc. is that it does not take negative yeild numbers, which sometimes can be a reality)

- I start with less/more

- Expenses increase (damn water buffalo is always sick)

- I have less/more at retirement

- inflation is better/worse/not used.

- I want 0 years to retirement (a favorite of mine)

 

It won't account for post retirement income(like social security), but that can be subtracted from your expenses. I'd rather plan on not getting SS anyway, instead of relying on it.

 

After playing with it for a while the most important thing seems to be having an after retirement yeild that covers a large portion of your expenses. (Duh - that means living within your means!) And of course keep it realistic.......

 

dreaming the dream, not living it yet........

 

Zeus

[soi6 0]

Good Calc, thanks... I've played with the Fire one also. This one has some nice features.

[Owen` 2]

Good find Zeus. I like the layout and the approach.

 

But.

 

Some significant nits to pick. You would have to do a lot of composite computation offline to use this because quoting a tax rate . . . doesn't address the reality that pretty much all Americans (anyway) have some of their networth in non taxable vehicles.

 

Same thing is true of a composite rate of return among all your various investment vehicles.

 

You are right about Soc Sec being worrisome, but with that voting block my presumption is it will be there at some magnitude greater than zero. No way to add that here, and no you can't just cut expenses by that amount because SS increases by COLA adjustment each year. It needs to be a seperate entry.

 

Not inclined to rain on this parade tho. There is good stuff here.

Edited August 21, 2006 by Owen`

[Saddic 31]

Thanks Zeus,

 

This is a problem I've been wrestling with the last few weeks (trying to do my homework and sum up my net worth to see if I've made it or not).

 

Fortunately, my back of the envelope estimates say.... (and I too am treating SS as just beer money (ie. If it solvent or not when it comes time to collect)).

 

These calculators help too...

 

They raise questions though as there are some areas I have no confidence in predicting (inflation, rate of return, future tax rates, etc)... How do you guys estimate them? or are you using today's numbers and crossing your fingers?

 

Cheers...

[Emil 0]

Remember that what you spend in retirement should be significantly less than when you where working if you've been fiscally wise. Your biggest expenditure when you were young should be next to nothing as the 30 year mortgage should be paid off unless your were foolish and took out 2nds. You children should be grown and out of the house so less mouths to feed and no school costs. When your retired you won't have a daily commute burning up gas and other related vehicle cost and the cost you spend on wardrobe will decrease. If your moving to LOS and can adapt to eating Thai food your food costs will be about 1/4. You'll also learn alot where you'll pay alot less than when you were there on holiday.

 

Don't put off retirement if your planning to move to LOS as working those additional years to have a large income might not be worth it. There is no guarantee as to your health and energy level when you get older. Today you know that you can do a S/T or 2 in the afternoon before doing a L/T in the evening, when your in your 60's or 70's you'll probably be happy with a good L/T and an occasional S/T. Worst yet would be to work additional years to achieve the large monthly income and not be around to enjoy it, but I'm sure your relatives would be happy.

[Owen` 2]

Guys,

 

Inflation historically is 3% long term. That is the number I use. No one knows for sure what it will be. The various central banks around the world have learned over a period of 50 yrs and presumably manage it better and maybe can get down under the historical 3%, but history does not include the depletion of global oil supply to spike energy costs higher.

 

I use 3%. No one knows what it will be.

 

Social Security (or pensions at age 62 or 65 or whatever, for the Brits) is a very important question in the projections. Firecalc.com does have a SS input and it is inflation adjusted. You just need to go to ssa.gov and work out what your value will be to insert in that box. Personally, I use the full amount I expect for my work history. Note that it will NOT be the amount you would get if you worked til you were 62. That's an effect of "early retirement". You stop putting money into SS early. So you won't get the $20K numbers from SS. Maybe half or less. You will get full Medicare, but that's a different issue.

 

Healthcare costs and mechanism are enormously important. They drive your personal inflation rate in Pattaya, as does currency exchange.

 

Tax rates should not be the focus of too much worry, if you are funding this from assets and not from pension. If from assets, you have many maneuvers available to get money moved to Roth IRAs. Every time there is a down year in the market that costs you money and gives you a "negative income", you can move money to the Roth IRA and erase that capital loss of that year, and then move more to erase your personal exemption and deduction and then stop and move no more (because moving money to Roth's is a taxable event (unless there is a loss that year to shelter it)). Everytime this happens you move more and more to a Roth. Then when you have good years in the market, the Roth grows tax free. When you have to start tapping the Roth, that's tax free income every year.

 

If you are funding everything from a pension, you're helpless and taxes will eat your pension influx.

 

The long term rate of return is modeled in Firecalc. It is 7% for equities and about 4% for bonds. There is nothing you can do to know your future rate of return for sure.

 

The goal is to do early retirement At Exactly The Right Time. Too early and you run out of money before death. Too late and you drive your blood pressure higher sitting in your workplace hating it -- and high blood pressure takes years off your life. From a money perspective, there are several factors in waiting:

 

1) You have fewer years to fund from retirement money (non salary)

 

2) You put more in Soc Sec and get a higher pension from Soc Sec when the time comes.

 

3) You presumably save more money.

 

Note that waiting, however, does NOT guarantee you will have more in your retirement account on which to retire. The reason this is so is the market can move down as likely as up. If you wait and it moves down during your wait, you have less in your retirement acct. No way to know.

 

My plan is to do a bit of consulting and writing in retirement. I plan to travel a month and a half each year and some could be for consulting. My income will be tiny compared to pre retirement, but not zero. This reduces the yearly living expenses -- and it also adds to the eventual Soc Sec number.

 

As for your budget in retirement NUMBER ONE: ignore the talk of 70% of your pre-retirement salary. That is crap. Total crap. Your living expenses should be way under that number. It's not a matter of not paying for work clothes or gas for the commute. It's that you don't pay taxes on income anymore because you don't have any unsheltered income. Pensions are taxed, so this statement doesn't apply to them.

 

Regardless, work out your living budget. Do not try any crap rules of thumb of 70% of previous salary. Those rules are wrong.

[Saddic 31]

 

Thanks Owen,

 

Good info...

 

You should consult for the baby boomers to help them out as your side business. Your insites are appreciated and I'm sure there are a lot of boardies who need this info.

 

For my own situation, I've just been pushed into early retirement (got laid off) so I'm going to take the next year or so making trips and learning... Maybe start a side business via ebay...

 

If you're in PTY Oct/Nov let's get together for a cold one...

 

Cheers