Author Topic: Too good to be true?  (Read 888 times)

caracarn

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 47
  • Location: Ohio
Too good to be true?
« on: September 12, 2017, 01:00:22 PM »
So I was not sure if this was the best forum or not but I need some analysis on this to determine if I can trust this calculator.

My employer uses Voya for their 401(k) and I took a look at their financial calculators and found a retirement calculator that seems much more robust than I assumed any of these firms would have.  It links live to all your accounts, much like a Personal Capital, so that your data is always updated.  It then gives you details on how many years of your retirement you have funded at whatever level you want to do and surprisingly also lets you know two data point if you are ahead (as we appear to be according to this calculator):  How much you could spend each year in retirement (Says $79,000 versus our target of $48,000) or when I can retire instead (says 58).  IF, and that's a big if, it's accurate, this is a very simple way to keep track of my path towards FIRE, and again totally unexpected when I went to check it out.  I was expecting some simply things like Vanguard or others have but this was a lot more detailed in what you entered into it.  The problem is the math behind it is all a bit behind the curtain.  As it sits now it is telling me we'd be leaving behind a bit over $4.5MM if I worked until full retirement age of 67.  Curious what other think of the numbers and if they look reliable.

A few notes that might help, it says it is using the inflation rate (3% as set) to figure out the income and expenses in retirement.  The only income in retirement is SS for the 27 years.  My wife is 3 years younger than me so the 27 years goes until she is 90. 

If it seems to work I can change any of the numbers, including inflation rate (which it set lower at 2.44% on it's own, but I raised up to assume we will not stay in low inflation for the next 47 years) to test our various scenarios pretty easily, so I'm trying to get a view on if people who are much better at the calculators than I feel this thing is painting an accurate picture or doing some hanky panky behind the scenes.

gooki

  • Handlebar Stache
  • *****
  • Posts: 2153
  • Location: NZ
Re: Too good to be true?
« Reply #1 on: September 13, 2017, 02:00:27 AM »
Looks legit.

Your expenses are practically equal to you ss income, so the 1.7 mill keeps compounding for the next 27 years.

I confirmed it by running some numbers through a compound interest calculator.
Follow me on my journey to FI.

MDM

  • Walrus Stache
  • *******
  • Posts: 7130
Re: Too good to be true?
« Reply #2 on: September 13, 2017, 04:07:05 AM »
The "Total available at retirement" is what one gets in Excel using =FV(0.0588,20,-15024,-391033,0).  The $15,024/yr is $300,480 divided by 20 years.

Couldn't decipher the post-retirement numbers from a quick look.  Guessing the income and/or expenses are not assumed constant...?

But as gooki noted, if one assumes an income closely matching expenses, the initial savings have nothing to do but grow.

caracarn

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 47
  • Location: Ohio
Re: Too good to be true?
« Reply #3 on: September 13, 2017, 06:27:02 AM »
The "Total available at retirement" is what one gets in Excel using =FV(0.0588,20,-15024,-391033,0).  The $15,024/yr is $300,480 divided by 20 years.

Couldn't decipher the post-retirement numbers from a quick look.  Guessing the income and/or expenses are not assumed constant...?

But as gooki noted, if one assumes an income closely matching expenses, the initial savings have nothing to do but grow.
Yeah on the income and expenses, as I mentioned when you hover over the ? it says that these grow at the inflation rate, which was set at 3% for this model.  so my SS payments, which are estimate at about $49K per year for my wife and I when they start to flow increase at that level, so perhaps the model is a bit too optimistic as I know the last few years saw very minimal increases in the payouts and not sure they even kept pace with inflation.  My parents grumble regularly about how little or not at all their SS payment changed from last year.  Expenses were the same, so that $48K to start goes up by 3% per year to get to that number is what should be happening.  Since my investments are in index funds thinking the 5.88% was OK for a reasonable number in growth.

Good to hear the this looks like it works.  If it does then I can use this (assuming I can stay here at this employer til whenever I retire) to see what my RE timeframes are.  Nice to see that it might be as early as 58.  I was thinking I'd be lucky if I could manage anything before 62, so this was welcome news.  The thing that is hard to model is how helping with kids college and other unplanned expenses (high medial costs with Type 1 diabetic, who is heading to hospital today to figure out three days of really low blood sugar for example).  At this point I've artificially removed that because our savings account is about the same size as what we've saved for college and about $10K more which can cover some unexpected medical, but eventually unless I just drop other accounts that we actually would like to use, it will be a less accurate model.

Mgmny

  • Bristles
  • ***
  • Posts: 314
  • Age: 27
  • Location: Northwest 'Burbs of MSP
Re: Too good to be true?
« Reply #4 on: September 13, 2017, 06:49:53 AM »
My only question would be around the "income" during retirement. Does Voya know your lifetime earnings average - or are they just guessing? I would make sure your SS checks are on track to equal what voya thinks they will.

Also, RE will obviously impact this significantly because you won't start dipping into that SS for a few years after you start retiring. I definitely still think it's possible, but if you retire 10 years earlier than the projections, and you will use about $20k a year more than the SWR of maybe $1million you might have (instead of 1.7mil). So instead of starting with 1.7 million with SS, you'd start somewhere closer to $800k. Probably not a big deal if you can live off of SS alone, but those are just some rough numbers.

caracarn

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 47
  • Location: Ohio
Re: Too good to be true?
« Reply #5 on: September 13, 2017, 08:19:56 AM »
My only question would be around the "income" during retirement. Does Voya know your lifetime earnings average - or are they just guessing? I would make sure your SS checks are on track to equal what voya thinks they will.

Also, RE will obviously impact this significantly because you won't start dipping into that SS for a few years after you start retiring. I definitely still think it's possible, but if you retire 10 years earlier than the projections, and you will use about $20k a year more than the SWR of maybe $1million you might have (instead of 1.7mil). So instead of starting with 1.7 million with SS, you'd start somewhere closer to $800k. Probably not a big deal if you can live off of SS alone, but those are just some rough numbers.
For my SS I logged into my account on ssa.gov and got the number right from there.  And yes, I get that it assumes that I continue to make at least the SS max (which was $118K when I logged in) and said I would get $2,910/month at 67.  So it lets you enter those numbers.  I actually lowballed it and said $31K for me and then took the $16K estimate for my wife. 

And the numbers as shown are saying I will work to 67 and she would work to 64.   I can adjust that down and then yes, everything changes, so if I move it to the age it says I can retire (59) here is what I get then.

ETA:  Also the only contributions are my current 401(k) contribution which does not include the additional 8% profit sharing that has historically happened, or any additional savings we would be doing, which usually amounts to another $300/month or so right now and will likely go up as we optimize more things over time.  Also no annual bonuses going in etc.  So as I said was trying to get a windage on how good this tool was so that as things progress I can determine if I can rely on it as an indicator on when I can pull the ripcord if ready to do so.

Just noticed my accounts went up $1,000 since my original post.  Always fun to find you have a little more money that you did not have before!  :)
« Last Edit: September 13, 2017, 08:27:25 AM by caracarn »

Jenny1974

  • 5 O'Clock Shadow
  • *
  • Posts: 78
Re: Too good to be true?
« Reply #6 on: September 13, 2017, 08:46:38 AM »
 My company uses Voya and I've set up the personal dashboard as well.  The results almost looked too good to be true but, of course, that doesn't mean they are wrong.  I already have $1.7 million saved and don't plan to retire for another 15 years so the extreme results are probably accurate.  I do like the Voya dashboard although I like Personal Capital better.  PC tends to link to my accounts easier.

caracarn

  • Pencil Stache
  • ****
  • Posts: 813
  • Age: 47
  • Location: Ohio
Re: Too good to be true?
« Reply #7 on: September 13, 2017, 08:59:06 AM »
My company uses Voya and I've set up the personal dashboard as well.  The results almost looked too good to be true but, of course, that doesn't mean they are wrong.  I already have $1.7 million saved and don't plan to retire for another 15 years so the extreme results are probably accurate.  I do like the Voya dashboard although I like Personal Capital better.  PC tends to link to my accounts easier.
I use Personal Capital as well, but they did not have the worksheets for forecasting retirement that I have seen.  Is great for tracking current and past thought, I agree.  Much better than Mint IMO for investment details.

Laura33

  • Handlebar Stache
  • *****
  • Posts: 1470
  • Location: Mid-Atlantic
Re: Too good to be true?
« Reply #8 on: September 13, 2017, 09:44:21 AM »
The only thing that seems wonky is the SS income -- if you assume $50K/yr for 30 years, that is still only $1.5M total, and they are estimated 2x that.  I assume that is because they are accounting for inflation, but that still seems high to me given the current SS funding issues + the fact that the easiest way to "cap" SS has been to provide inflation adjustments that don't actually reflect the measured inflation rate.

But, yeah, I do agree you should be set given your expenses.
Laugh while you can, monkey-boy