Retirement planning spreadsheet

[Polyian]

Yes, debt is not bad if managed correctly. A budget is always a good start but in the end it's all about managing your family money the same way you would manage a small business. i.e. managing cash flow.
We have used Quicken to plan and mange our finances since 1998, long before we retired. We know exactly what's coming in, what payments are due and what is free balance. We have accounts set up for chequing, various savings, credit cards, investment accounts etc. When a credit card is used (most of our spending) we record the transaction in Quicken and that updates our main cash account accordingly. We always know exactly what our financial situation is before making purchase decisions. I do my transaction updates each morning over coffee from the various financial institutions, only takes 2 or 3 minutes...a side benefit is we will see credit card fraud almost immediately rather than waiting a month.

[Smitty77]

Maggiedad - Congrats on the upcoming Aprils Fools Days life changes!

Ramsey program is a good one. I've sent friends and family in that direction, especially those that were digging their way our of problems with Credit Card debt.

But for the Debt Free fans, and again for sure nothing wrong with going with what allows you to sleep well at night!), let me point out one other factor that can impact the ability to accomplish 'Debt Free' for some easier then others.

The location you live, and the cost of housing, can have a direct correlation on your ability to get Debt Free... For example, a family with a combined income of say $100k, where housing costs average $250-300K, has a high probability of paying down their housing debt in say under 15-20 years. Compare that same $100K income, where housing costs average $500-600K, and the odds are much lower on paying off a house in less then 30 years. As well as the ability to save and invest for retirement is also hindered too.

Costs of living raises on items like SS and say for Military Retirees, are 'National Averages'. So a 1% raise (Which has not been seen for awhile...) for COLA, will go a lot farther in some parts of the country, then another. (And sure, it's easy to say 'move' - but when you have roots in a community, family, friends, etc. - not all that easy to do.)

So while the desire to be Debt Free maybe what many would want - the reality of geographic location and local costs can influence that... Paying off a low interest mortgage, with Schedule A assistance - vs investing in company match 401K's, personal IRA's/Roth IRA's and other personal investments for the long haul. Can in the long run yield more then enough returns to offset the comfort of 'Debt Free'.

Long winded, and sorry if my thoughts did not come across. But each of us must work with the circumstances we're in - and do the best that we can for those circumstances.

And to be clear, as the above may not have pointed that out - sure not knocking the 'Debt Free' approach to financial living! Just pointing out that it is not the only path, and as Barbara pointed out, for some the differences can be many, many thousands of dollars. For example, my wife and maximized both of our 401K's and over 50 catch up from age 50 and on. We also did these last 6 years for me, and 10 for my wife of our careers, with ROTH 401K's. We invested another 15-20% of our combined income in a Brokerage account. With a mix about 50% good old DRIPS, and 50% more speculative. (That 50% speculative, was under 5% of our total investments, not including real estate.)

In preparing for retirement, one size does not fit all!

Best to the gang,
Smitty

[Maggiedad]

As I said before, lots of interesting opinions here! To be clear, I wasn't saying that living debt free was the ONLY option, just the option we chose and one that many folks should consider.

It is a bit concerning to see comments that essentially are saying there are parts of the country where one can't live/retire debt free because of cost of living etc. One sometimes difficult element of the Dave Ramsey plan of getting debt free and staying that way is to not purchase anything you can't pay cash for. (caveat: he does not discourage an affordable 15 year mortgage). What we discovered when reaching this level was that we had more money every month to save toward what we wanted to buy, and we continued to manage a lifestyle well below our income. Guess that's why I'm remodeling a 14 year old coach instead of driving a new one. I'll have under $100k invested in a coach that sold for $340K in 2002, with most of the top line stuff that anyone would want. It was a good fit for us.

This line of thought also applies to the comments earlier about saving thousands by not taking funds out of retirement accounts early. i absolutely agree that one should never, except in dire emergency, ever take the penalty of early withdrawal. It's a retirement account after all, not a shopping account. The difference between my approach and theirs, however, is that I don't buy things I can't pay cash for (ie: can't afford). I waited several years to buy a used coach for cash. When the new C5 Corvette came out in 1997 I vowed to own one, and I did. Bought a used one for cash in 2003. Patience is a virtue!

Bottom line is, to each his own. Debt free is for me, and I've never yet met someone who was debt free that wished they weren't. Lot's of folks the other way around though.

Happy travels!

[Barbaraok]

I'm sorry, I guess I didn't make myself clear - I was talking about what it would have cost to withdraw from our IRAs in terms of income tax, not early withdrawal penalties. We were 62 when we retired. The tax on withdrawal (these were established before Roths came into being) would have been on top of our then substantial tax rate. By not taking the money out until we had to start doing so last year (RMDs) meant that the money kept working for us, our tax rate stayed much lower, and if we die earlier, the IRAs will go to our daughter - you can't leave SS or pension payouts to a beneficiary other than a spouse.

Just a word of caution on your renovations. When you are complete, I'm sure that it will be lovely and that you will enjoy it. But your coach will still be worth what any other 2002 coach is worth - not much. We keep ours up, but realize that what we put in now is strictly for ourselves, that it is comfort only and the value just keeps getting lower and lower.

[Smitty77]

Great added info Maggiedad, and again congrats - retiring under 60, shows that this has worked well for you. My main point on the differences in cost of living in different parts of the country, was to point out the benefits of Smart Debt, such as low interest mortgages. (And you pointed out that you two were still able to save and prepare for retirement, and pay down your mortgage earlier. And a salute on this, as many that could have done this, would have been driving in a flashy new car (With payment and or lease.) vs accelerating the mortgage payoff.) And sure, different parts of the country have different ongoing living costs. California has both high state income tax, sales tax, and property taxes are also in the upper end of the states property tax costs scale! Toss in insane higher utilities costs, and a gas that has to be unique form the rest of the 49 states - thus higher priced - and you end up with an overall higher cost of living.

Now, lets see a few more pictures of that Corvette being towed Four Down! And your Dynasty, as is our Allure, makes a great foundation to make a coach into what you want. As with our Allure, I also like that it was on the tail end of a pretty long run of engine maturity (Assume it's either the ISC or ISL..), pre ULSD, so well sorted out. Probably one or two exhaust manifolds over the years, if not yet, probably someday - but other these are go run them diesels.

You two enjoy upcoming retirement, you've earned it!

Best,
Smitty

[arboldt]

I retired (i.e. quit working) on Feb 5 this year at age 66 1/2. My wife retired 15 months before that at 65.

I looked into what our actual expenses were pre-retirement and compared that to social security at different ages, plus a 'reasonable' withdrawal rate from our accounts. So this is what we did:
1) No income from February to October (now) when my wife turns 66. We'd live frugally off of our savings.
2) In October (her full retirement age), my wife would claim her social security and I'd claim spousal (50% of hers). We can do this because our ages still qualify ... younger people cannot.
3) When I turn 70 in 2019, I'll claim my social security and she'll switch to spousal from mine.

The biggest factor for us was our experience in budget elasticity. Over the years, I've had a few times of minimal income, and we learned how to adapt. We have never considered a budget with consistent life-style expenses. If you have a lot of fixed or habitual expenses, you may need to hold off taking the step. If you can adapt your grocery, travel, and other expenses, you've got a lot better chance of making it.

Just something to consider.

[Maggiedad]

Originally Posted by Smitty77

Now, lets see a few more pictures of that Corvette being towed Four Down! And your Dynasty, as is our Allure, makes a great foundation to make a coach into what you want. As with our Allure, I also like that it was on the tail end of a pretty long run of engine maturity (Assume it's either the ISC or ISL..), pre ULSD, so well sorted out. Probably one or two exhaust manifolds over the years, if not yet, probably someday - but other these are go run them diesels.

You two enjoy upcoming retirement, you've earned it!

Best,
Smitty

Thanks for the kindness Smitty. The coach selection process for us involved a lot of study over a number of years. For us, the 2001-2005 Monaco Dynasty, Signature, Executive ended up being our choice for a variety of reasons. It was a period in Monaco's history where they were producing some of their best work, and we wanted some high end features that we just couldn't afford on a newer coach. Our "must haves" were at least 3 slides, so we could have opposing slides in the living area, Aqua Hot heating and hot water, a tag axle, and a Roadmaster chassis with steel superstructure. They may be old, but they're bullet proof!

The remodel has been a fun project, and done as affordably as possible with all the labor done by me. The finished product will have engineered cherry wood floors, wood wainscot, new leather loveseat, reupholstered captains chairs (which we got done for under $500 the pair locally), electric console fireplace with big screen TV on an electric lift, stainless residential fridge, Bosch convection micro, Bosch gas cook top, and the mod that started it all... a shower I can actually stand up in! I'm just over 6 feet, but just didn't like having to shower with my head in a bubble. Some careful study followed by removing the entire old shower allowed me to use a European style drain called Hepvo which eliminates the P-trap that causes the manufacturers to raise the shower floor. Once that was plumbed under the floor in a space above the wet bay, I was able to put down a solid surface shower base on the coach floor, followed by solid surface walls and a Euro shower valve setup. Now I can use the shower without bending over at all! Someday I'll document the mods for others to look at, as I know this community thrives on information exchange...I have certainly benefited from that on a number of occasions.

As for the Corvette, I don't think they can be towed 4 down, so we have a Jeep Wrangler for that duty!

Apologies for hijacking the thread, but this info may benefit someone

Happy travels!

[HD4Mark]

Six years today we have both been retired. The company we both worked for had a buyout and offered us pretty good money to get out. I had enough time for retirement, DW did not but all that cost her was medical coverage she gets with mine. We were 52 and 53 years old.

It may sound simple but we already had a financial planner, company retirement plan (took cash not their annuity plan because we don't trust them) DRIPs they offered for 32 years in my case and 401s. When they made us the offer we went to see our financial guy to see of it was a good idea. After some figuring he handed us a piece of paper with an amount on it ans asked "can you live on this much?" Well it was pretty close to what we were earning working. One exception is we would be DEBT FREE. Yes our coach is older, my SUV is older but we did invest in a new Jeep toad but paid cash. No mortgage. No credit card debt.

Not to ruffle any feathers here but it seems to me if you need to have a spreadsheet to see if you can retire, you shouldn't.

BTW I read a long time ago, may have been Motley Fool, the first step to financial freedom is to do away with credit card debt.

[Polyian]

Originally Posted by HD4Mark

Not to ruffle any feathers here but it seems to me if you need to have a spreadsheet to see if you can retire, you shouldn't.

BTW I read a long time ago, may have been Motley Fool, the first step to financial freedom is to do away with credit card debt.

No disagreement with eliminating debt but I'll wager your financial planner used a spreadsheet and many more tools to provide you retirement advice...some of us don't pay financial planners and choose to use the tools ourselves.
To each their own.

[Smitty77]

Originally Posted by Polyian

No disagreement with eliminating debt but I'll wager your financial planner used a spreadsheet and many more tools to provide you retirement advice...some of us don't pay financial planners and choose to use the tools ourselves.
To each their own.

Not sure today, but about 7-9 years ago, Financial Engines was pretty much the software used by the bulk of Financial Analysts to do the 'What If's'. Many companies used it, with a custom front end on it, to look like it was their 'in house' software.

But, things could have changed...

The value of the spreadsheet and Retirement Planning tools, is to easily pencil in different scenarios, and see how the ripple out over hopefully the decades ahead. One of our requirements, was to us 105 life expectancy, to add another cushion at the end.

As we were pre 65, and pre SS FRA, we also wanted to see how lean the early years were going to be for us. We stressed tested these early years, and found that to be a valuable part of the spreadsheets!

And for sure, to each their own. And whatever lets people sleep at night!

Best to all,
Smitty

[drdarrin]

So, I have emailed to spreadsheet to all (or almost all) that have requested a copy. I have continued to use it and test it and added various scenarios that are unique to our particular situation.

Have any of you found any calculation issues with it?
What are you're overall impressions of it?
Any suggestions for improvements?

As a footnote, I know there are those who believe in being debt free and those that don't and there are good reasons for both. That said, the point of my efforts in putting this tool together and sharing it with you is so that you and I can project our budgets into the future to see if our plan is sustainable over time.

Be happy and carry on...

[TJFogelberg]

Roy's spreadsheet helped me verify that we are on track for retirement and can back off on saving. I have my own spreadsheets that focus on a monthly budget and projected monthly income. For those of us who don't have big buyouts or pensions on the horizon, these exercises are invaluable. The spreadsheet uses after tax $ first before dipping into tax deferred $. We will take $ out of our tax deferred accounts and after tax accounts simultaneosly to optimize the tax situation. Doing this stuff can really give one some peace of mind, especially if you build in conservative assumptions as I have done. Never trust a financial "planner" to do this for you. 98% of them are on commission and are known as asset gatherers. They couldn't give a damn about your retirement in most cases.

[Rvlegaleagle]

That was very nice of you to take your time to help out others who could use the help or to think about other things they might not have.

Planning....I do remember hearing someone once saying "While we are all busy planning, he is laughing". Umm...something to think about.

As for someone else "handling" your money, you have to be kidding. That is what the banks said in the beginning....now you pay them just to have an account, wire your own money, let them "use" your money so they can charge someone else interest to borrow it, pay late fees and a host of other fees. Interest, (whether earning or paying) is an incredible "invention". It is and has been a scam since day one and has only been getting bolder and worse as time goes on. Think of it, making and printing billions of dollars out of thin air with nothing to back it up! Hokus pokus, if I have the spelling right.

Debt free and cash in YOUR pocket is the ONLY way that makes any sense and is within YOUR control. But it is much harder than you think to actually do it!

There will be critics, there always are, who believe in "investments" like the stock market which as of "today" is through the roof, tomorrow not so sure. You might as well go to the casino and pick 18 black or you could buy one of those lottery tickets which profits help pay for our schools and educate our children. No, debt free is just what it says.

As to SS, funny acronym, take YOUR paid in money while it is still there to take...millions of people are doing it! Remember what someone once said about "planning". I am about 3 years away and counting the days. It is such a small amount these days (worth less in 3 years) that it just goes back to where it came from in one form or another.

And while we are at it, lets not forget about Medicare, another gem which just leaves you in a doughnut hole Debt free and when it is your time, it is your time. Have some Faith, loose the fear and stop letting others take from your children and grandchildren. Gee, do something besides "planning" while your still here! Help your neighbor, for that matter get to know your neighbor and just be "still" once in a while, listening to the sounds of nature with a cup of coffee. It will do wonders and I can't wait to be out there among you!

Whoever retired and stared to really "live" freely in their 50s are real smart people and my hat is off to you. You are not the norm for sure. The rest of us have bought into the unrelenting Madison ave media nonsense. It reminds me of the old Wimpy saying on Popeye "For a hamburger today, I will gladly pay you next Tuesday".

Lets face it, all bets have been off for decades. Personally, I think it goes back to JFK. Debit free, a great spiritual relationship, some cash and it will all work out

[h20ski]

Roy


Thank you very much for your updated spread sheet. I know it takes a lot of time and I thank you for that.


Hope everyone has safe and Happy New Year.


Dave