<p>jym, I’m so sorry about your dad.</p>
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I have a financial calculator program, you enter 3 out of 4 of how much you start with, how much you take out, what interest rate you will make, and how long a time, and it calculates the 4th.</p>
<p>I use it mostly for mortgage calculations, but it works for annuity-type calculations too.</p>
<p>My program is modeled after the old HP financial calculator, but I bet there are on-line calculators too.</p>
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<p>Well, I’m not notrichenough (sort of) but it’s fairly easy. Create a spreadsheet. Add 30 columns across the top from 2011 to 2041. Add a row under those 30 columns for expected rate of return; you can default that to some number like 5%. Add another row for assumed inflation rate if you want to calculate real dollars. Add another row for your withdrawal rate; default all cells in that row to 4% as a start. Add 4 more rows that will be calculated as described below: withdrawal amount, Jan 1 value of assets, Dec 31 value of assets, and portfolio return. Create a single cell for the start value of your assets; set that cell equal to $1 million.</p>
<p>Add these calculations to the first cell in the indicated row and copy them across:</p>
<p>The portfolio return row is calculated as the value of your assets on Jan 1 times the expected rate of return.
The value of assets as of Dec 31 is the Jan 1 value + return - withdrawal amount.<br>
The value of assets as of Jan 1 is the value of the Dec 31 cell in the previous year. Default the first Jan 1 cell to your start value of assets.
Your withdrawal amount row will be calculated as the value of assets as of Jan 1 times your withdrawal percent for that year.</p>
<p>When you copy these formulas out for 30 years, you should have a final value of assets in the last cell that includes all portfolio returns and all withdrawals for the past 30 years. </p>
<p>You can also add a row using assumed inflation rate to get the real (today’s dollar) value of your assets in 30 years.</p>
<p>Now you have a spreadsheet you can use for what-if analysis. What if inflation goes to 15% in year 3? What if your rate of return is negative in year 10? What if you withdraw more than 4% of your principal in year 5?</p>
<p>Hope this is clear!</p>
<p>Thank you hayden and notrichenough.</p>
<p>To give an example of all the little details that pile up-- we were able to sell my father’s car, and when I called the insurance carrier to cancel the auto policy, they said they had to have some form from the DMV showing that the plates were returned in order to cancel the policy. My DH unfortunately got to the DMV to return the plates 5’ after they closed that day (Friday). So, since we are out of state and back in our home state, we had to mail the plates in, which required me going to the post office to do this because of the size of the envelope and needing to get tracking/delivery confirmation for the plates. So ok, the plates show as having been received on March 16, but this is my third call to the insurance agency to see if they were able to get confirmation that the database was updated, as I haven’t yet received this form they are supposed to send. Nope. Headquarters in the state capitol still hasn’t updated their database, even though we can confirm that the plates were received 2 weeks ago. Sigh…</p>
<p>There are a gazillion other details to take care of, though surely more than the OP’s aunt is having to face, since I am dealing with a house and contents to sell, repairs to make to get it ready for sale, bills, insurance companies, credit cards, forwarding his phone (for at least a few months) to our home # out of state (that took 5 calls to Verizon to straighten out, with constant wait times-- on hold for many minutes and screw ups, etc) Fortunately I had set up some of these accounts on line so had some access to account info, but when one has to talk to a human being (ie to change the rate plan on his phone to set up call forwarding and add back long distance which they inadvertently removed which I then had to authorize to be added because they’d deleted it, etc etc etc), if you aren’t already listed as an authorized representative/agent for the account holder, and especially if you use the word “deceased”, roadblocks go up. I am dealing with this with my dad’s mortgage, which I paid on line but the bank sent it to the wrong address and it hasnt posted. We refinanced his mortgage 2 yrs ago to pull out cash for him to live on that was a nightmare) but of course the bank doesnt show all the necessary documents (that were sent to them a gazillion times) to show I am authorized to speak on his behalf. So I played the “hypothetically speakling” game with the guy at the mortgage company… “hypothetically- if the payment was sent erroneously to your payoff address instead of to the monthly mortgage address, when woudl it get to your office sine the bank sent a paper check instead of an electronic payment?” All he’d say is “the account has a zero payment due for this month” to which I replied “hypothetically, what will it show on April 1?” and all he would say is “it shows a zero paymet due (since March is paid”.) This took 2 calls to my bank and 2 to the mortgage co , with no resolution yet. </p>
<p>Didnt mean to hijack this thread, but just giving a flavor for the kind of stuff that has to be handled. As someone upthread said, you don’t understand until you have had to go through it.</p>
<p>vballmom-
You lost me at “create a spreadsheet!!” If its an excel task, I ask a family member to do that. :o</p>
<p>OOPS!!! The long list of stuff that has to be done as executrix belongs in a different thread about the couisin who died <a href=“http://talk.collegeconfidential.com/parent-cafe/1112047-destitute-cousin-dies-whos-responsible-medical-bills-new-post.html[/url]”>http://talk.collegeconfidential.com/parent-cafe/1112047-destitute-cousin-dies-whos-responsible-medical-bills-new-post.html</a></p>
<p>Sorry for any confusion. I’ll cut/paste the post.</p>
<p>Haha ok, maybe you can ask someone else to do this. Once it’s set up, it can be a useful planning tool.</p>
<p>Hayden,
You are very fortunate to be able to choose how the funds will be distributed upon retirement. A lot depends on the other assets that are also available, particularly for the other spouse in the marriage.</p>
<p>If the major asset is the one that you’re electing, you have to figure out how good you & spouse are at managing money AND how likely/unlikely it is that changes will be made to pension/payouts and solvency of the company & pension fund.</p>
<p>I have a friend who recently retired as a doc & took a lump sum, assuming she could invest and be guaranteed her nest egg rather than worrying that it would be reduced, underfunded, or somehow changed. She also elected to take two part-time jobs because she didn’t really feel like retiring, so she’s not drawing from her savings or retirement at this point anyway.</p>
<p>For us, H has the option to take monthly payments immediately upon retirement and can decide how much survivor benefit he wishes to pass on to me (or whomever else he might name). He is electing to give me a full survivor’s benefit, which will be about 55% of what his pension is because it will be the bulk of our assets.</p>
<p>You need to ask your HR the numbers for YOUR situation–the lump sum payout, and the amounts if you take full pension at each of the potential years, with and without survivor annuity for your spouse to determine what makes sense for your family situation.</p>
<p>As was said, financial calculators available on-line can be helpful in figuring out a stream of income from an asset and how long it will last.</p>
<p>Thanks, HImom. My main reasons for considering a lump sum have to do with 3 factors. First, I don’t have to worry about whether I elect the 10 yr spousal guarantee, or the lifetime spousal guarantee. Second, I don’t have to worry about what happens if the firm gets acquired or goes bankrupt. And third, if both my husband and I were to die, the lump sum converts into an inheritance for the kids, rather than just stopping. I realize the monthly pension may represent more money, but one never knows what accidents or illness are around the corner. Life is like that.</p>
<p>Yes, if you get a lump sum, YOU can decide if you want to purchase an annuity & be SURE To check out the credentials of the company you would purchase it from to be sure it won’t go bankrupt with YOUR assets. You & your spouse will be responsible to be sure the funds last as long as you both need them to. If it would make you feel safer, you could purchase an annuity with some of the funds while investing the rest yourselves, depending on your comfort level with each of these options. Our neighbors have lost confidence in the stock market and are buying laddered CDs, because they want to pass most of their estate to their disabled son & the caregiver son. They live very simply & it allows them to sleep at night. Their house is paid off and will be left to the caregiver son.</p>
<p>It is a real problem with pensions being so widely underfunded and so many bankruptcies and takeovers. Another friend who had the options you do also chose to take the lump sum and manage it himself. It does take discipline and foresight to be sure you stretch your funds so it will last and allow you & family to be comfortable.</p>
<p>Never thought that the underfunded pension thing would hit the hospital system where I work. So, currently, retirees can selected an total annuity or up to half lump sum.
Only when funding reaches an improved level will total lump sums again be allowed.</p>
<p>Luckily(?) I’m not a retirement age yet. Plan to collect lump sum if able when I do retire.</p>
<p>For us, H’s pension is with the federal government and doesn’t give us the lump sum option anyway, so we will take the annuity and figure the federal government will not go bankrupt or be bought out. We’ll also take the maximum survivor’s benefit, since I’m significantly younger than H & don’t have many assets other than our home & his pension.</p>
<p>If H’s pension were with a private company, I’d really have to investigate before going with an annuity.</p>
<p>The two main things that I notice seem to herald a really good retirement are (1) health, and (2) self-supporting adult children. If you haven’t managed those two things, all the money in the world just isn’t going to give you a good retirement.</p>
<p>We can make the best of our health, even if it’s not as good as we would like due to factors beyond our control. Yes, health and self-supporting adult kids who make good choices are key to helping you have a happy retirement. A generous pension and continuing subsidized healthcare is also very helpful, especially for those of us who have slim retirement savings.</p>
<p>Anyone else have an adult child who is asking for help with financial planning and calculating the cost of retirement 40-50 years out? My DS has been in the workforce for just under 3 years and is now getting to the point where he can squirrel away some serious cash each month but he doesn’t know how to divvy it up between short term/liquid and retirement vehicles. He’s really on edge trying to figure this out. DH and I are actually encouraging him not to lock up as much as he is in retirement vehicles because he has grad school tuition, a first home, hopefully an engagement ring and family in the not too distant future. How do you advise your kids?</p>
<p>This should be fairly easy as there are limits to the amount of income that can be invested in traditional retirement vehicles. Traditional IRA (pre-tax) and Roth (after-tax) limits are a limited to a combined $5000/year. If your son has access to a 401k (pre-tax), the limit is $16,500 for 2011. If he can max out his pre-tax contributions every year while at the same time building a nest egg for a house/grad school/marriage, he’ll be off to a great start.</p>
<p>If he’s a federal employee, in addition to the 401K TSP plan that the govt matches, he can also do a ROTH IRA and also contribute up to 10% of after tax lifetime earnings toward a voluntary contribution account that upon retirement can be rolled over into a ROTH IRA. We will be suggesting that our S do all of this.</p>
<p>I think it’s very hard to gauge at this moment in time because entitlements in the country are such a political football. It is difficult to predict social security, medicare, taxes, etc. It feels to my DH and me as if there will be a lot of means testing in the bestowing of any entitlements. We are assuming the worst and trying our best to save in the midst of getting our kids through college. The perfect storm.</p>
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Not yet but I became very interested when I was about 30. I created a huge spreasheet … with a row for each year of my life … and a ton of columns; one column for each major expense or income (salary, taxes, payments to IRAs, weddings, buying cars, social security incoming, 401k withdrawals, etc). This involved a ton of assumptions but gave me a pretty good look into the flow of my (and then our) net worth position as we age. </p>
<p>When I was young the punch-line was pretty straightforward and this worked until almost 50.
- Make enough to live day-to-day
- Live day-to-day frugally. I did not say spend no money … we have taken vacations to Europe but with cheap airfare and hotels … etc
- Fund an emergency fund (for us 6 months expenses)
- Max out 401k payments (assuming there is an employee match)
- Max out IRA payments
- Make regular payments into kids 529 accounts
- If we have extra savings after #1-#6 then pay down mortgage … with goal was to have mortgage paid off when oldest started college so we could redirect the mortgage payment towards paying for college
- Take any extra sources of cash (gifts from parents, proceeds from stock options or stock plans, etc) … and make extra payments to #4-#7</p>
<p>Frankly, until we were 50 we were basically still sitting on 6 months of bucks in open accounts … however our IRA, 401ks, and 529s are in very good shape.</p>
<p>It only took a couple evenings to create the spreadsheet but to me it is priceless … for me it provides much more insight than the online calculators and is MUCH easier to play with different assumptions.</p>
<p>Here’s a new article about health-care costs for future retirees.</p>
<p>[Retirees</a> face squeeze on health care costs - JSOnline](<a href=“http://www.jsonline.com/business/122399504.html]Retirees”>Retirees face squeeze on health care costs)</p>