Hello all
I am trying to figure out what RoR I should aim for on my savings to be well positioned in retirement. I made a simple excel model to estimate this, and am looking for feedback if this approach makes sense.
Here is what it looks like
Output: RoR pre retirement = inflation + x%; what is x?
Input and assumptions
* current age; lifespan; age at retirement; ages at which social security and company pension kick off
* inflation rate (3%); RoR before retirement = inflation + x%; RoR after retirement = inflation + y%
* current savings: across retirement, 401k, taxable accounts for me and spouse
* monthly expenses in retirement in today's $s; i think i am somewhat liberal with this estimate
* left out budget for kids' education from my calculations; that is covered by a different savings pool
Approach
* I calculated PV for social security, pension and in-retirement expenses at my retirement date - using the post retirement RoR
* I calculated estimated value of current savings at my retirement age based on RoR pre retirement
* when these match, i have an estimate for x (assuming fixed y)
* given that my current savings include a mix of taxable and tax advantaged $s, and SS and pension will be taxable: i needed to account for effect of taxes on this income and any withdrawals. to keep things simple, i escalated my in-retirement expenses by z% to account for effect of taxes. (<-- is this a reasonable approach?)
I concluded the following
* assuming z = 20 and y = 1 (<-- is this too conservative?); x = 3 (<-- this is really what i am trying to get a handle on)
* i am ~12 years from retirement with say 40 years of lifespan; SS and pension will start a few years after retirement; SS and pension together will cover about 25% of monthly retirement expenses (based on PV of retirement expenses at retirement age; SS and pension dont escalate with time)
* current savings are 14x of the estimated yearly expenses in retirement in todays $s (including the tax effect mentioned above)
Does this sound like a reasonable approach? is x = 3, y = 1, z = 20 within the right ballpark?
Appreciate your help!
I am trying to figure out what RoR I should aim for on my savings to be well positioned in retirement. I made a simple excel model to estimate this, and am looking for feedback if this approach makes sense.
Here is what it looks like
Output: RoR pre retirement = inflation + x%; what is x?
Input and assumptions
* current age; lifespan; age at retirement; ages at which social security and company pension kick off
* inflation rate (3%); RoR before retirement = inflation + x%; RoR after retirement = inflation + y%
* current savings: across retirement, 401k, taxable accounts for me and spouse
* monthly expenses in retirement in today's $s; i think i am somewhat liberal with this estimate
* left out budget for kids' education from my calculations; that is covered by a different savings pool
Approach
* I calculated PV for social security, pension and in-retirement expenses at my retirement date - using the post retirement RoR
* I calculated estimated value of current savings at my retirement age based on RoR pre retirement
* when these match, i have an estimate for x (assuming fixed y)
* given that my current savings include a mix of taxable and tax advantaged $s, and SS and pension will be taxable: i needed to account for effect of taxes on this income and any withdrawals. to keep things simple, i escalated my in-retirement expenses by z% to account for effect of taxes. (<-- is this a reasonable approach?)
I concluded the following
* assuming z = 20 and y = 1 (<-- is this too conservative?); x = 3 (<-- this is really what i am trying to get a handle on)
* i am ~12 years from retirement with say 40 years of lifespan; SS and pension will start a few years after retirement; SS and pension together will cover about 25% of monthly retirement expenses (based on PV of retirement expenses at retirement age; SS and pension dont escalate with time)
* current savings are 14x of the estimated yearly expenses in retirement in todays $s (including the tax effect mentioned above)
Does this sound like a reasonable approach? is x = 3, y = 1, z = 20 within the right ballpark?
Appreciate your help!
Statistics: Posted by sg77 — Sun Feb 18, 2024 10:21 pm — Replies 1 — Views 388