Forecasting retirement incomes from various streams

[JoeP]

Has anyone here found a good resource for forecasting when and how much different retirement incomes will become available?

The challenge I have is that we have various retirement funds that we're paying into: 401k, traditional IRAs, Roth IRAs, wife's pension, my lump sum from a previous employer, SS. These start becoming available at various ages, and some can be deferred.

What I'm trying to calculate is how much we will have coming in per month or year, depending upon the year. Example: This could be a combination of me still working and collecting a salary, while my wife decides to exercise one of her options. Then next year, maybe she decides to exercise another while I still work.

FWIW, right now we are setting the bar very low, and making cost of living assumptions based upon that very low income level. If we get more, then it will be a nice surprise, but would not alter the type of living expense model we have planned.

So I guess what I'm looking for is some sort of income-over-time bar graph that allows "what if" scenarios with respect to exercising retirement options, and shows the future annual income we could expect.

[jIM_Ohio]

Has anyone here found a good resource for forecasting when and how much different retirement incomes will become available?

The challenge I have is that we have various retirement funds that we're paying into: 401k, traditional IRAs, Roth IRAs, wife's pension, my lump sum from a previous employer, SS. These start becoming available at various ages, and some can be deferred.

What I'm trying to calculate is how much we will have coming in per month or year, depending upon the year. Example: This could be a combination of me still working and collecting a salary, while my wife decides to exercise one of her options. Then next year, maybe she decides to exercise another while I still work.

FWIW, right now we are setting the bar very low, and making cost of living assumptions based upon that very low income level. If we get more, then it will be a nice surprise, but would not alter the type of living expense model we have planned.

So I guess what I'm looking for is some sort of income-over-time bar graph that allows "what if" scenarios with respect to exercising retirement options, and shows the future annual income we could expect.

You need to collect data, then process it a certain way. I can refer you to some websites or proprietary software, send me a PM.


Here is how you do it by hand:

1) Create a cash flow analysis. List of expenses and income. Do this for your CURRENT situation.

2) Create a balance sheet. This is a list of assets and liabilities. Do this for your current situation.

3) Then create a way to track the changes to #1 and #2, and itemize each asset and liability in #2.

4) Repeat steps 1-3 for retirement. Meaning a new cash flow analysis- likely expenses are about the same, but the income sources are different- you are trying to replace income and need placeholders to know where income gets mapped from and to. You likely know Pension and SS (these are based on percentages of what you earn) and less likely to know investment amounts. When you analyze assets, you will see what you need in each retirement account to make up for the income gap. When you itemize #3 in retirement, take 4% of any investment balance and plug the 4% product into the income statement. In addition, when you do #3 for liabilities, take into account if debt is paid off, and the expense for that debt is removed from cash flow (for example if mortgage exists now, it is on cash flow statement and liabilities now, if same mortgage does not exist in retirement, you remove the expense from cash flow, and the liability from the balance sheet).

The reason you itemize everything is that it is possible you have a high net worth with a paid off house, yet 25-50% of your assets are tied up in your house. So by breaking everything down, it is easy to optimize certain information in software or for problem solving.

There is a good way to normalize everything- use the rule of 25X/4% (1/4%=1/.04=25X). If you take out 4% of investments each year, you can likely have that investment last 30+ years.

So if you need $60k of income
and you have $25000 coming from the pension
and $12000 coming from SS

This means you need $23k of income (60-25-12). Multiply the $23k need by 25 ($575,000) and that is what you need at retirement to fill the income gap.

If you needed to see the value of SS compared to investments, use the 25X to normalize that- meaning $12k in SS is worth 12*25=$300k in investments.

You could do the same with the Pension ($25k income*25X multiplier=$625,000). You would need a $625,000 buyout from the Pension fund to equal the income stream you are getting in retirement (and FYI the payout would likely be half that if you did cash out). Pensions have complex math for joint payouts vs single payouts, the 25X is focused on making money last, regardless of joint or individual.

[feh]

firecalc.com lets you specify future income streams. You could run different scenarios.