Author Topic: I my way of calculating pension correct?  (Read 509 times)

Linda_Norway

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I my way of calculating pension correct?
« on: March 08, 2017, 07:23:33 AM »
Hi.

I hope that the case study is the right place to put this.

I have tried to make a detailed calculation (see attachment) of what our income would be during FIRE. All amounts are in Norwegian crowns, at the moment 1 USD = 8,5 NOK. In the first column I put different scenarios of free assets (yes, I understand that free assets are not a part of my house, but rather money invested in an index fund). This was done to find out how much we'll actually need. I count on us not having any income during FIRE, which might be unrealistic.

We know pretty well how much on average we save per year, but we don't know exactly how much we spend per year. I can calculate from my own bank account, but can't look into my DH's account.
As 2017 will a normal year (not buying a house), we will make up a good status at the end of 2017. Until then we calculate that we need somewhere around 450.000 - 500.000 NOK per year, provided we live in a mortgage free house like we do today.

I put in the safe 4% withdrawal. Of course there is no inflation in the picture. I hope that is compensated for by any extra income from investments. Therefore only 4%.

As you can see in the sheet, we are set pretty well from the age of 67 with the pensions we also have built up. These will also grow as we continue to work until 2023. About half of my pension is unclear as the provider is still defining the rules and doesn't want to answer my questions. So I have only counted the part I am certain about. Until the age of 67 we'll need to live on our assets. I thought it would be natural to use the stash up during those 17 years, with a bit of margin, as there is no reason to keep it forever.

The persons in the sheet are myself (L) and my DH (E). We do not have children.

Are there any obvious flaws in my calculation? Or am I on right course and is it just a matter of finding out how much we need per year and then finding the right row?

Linda_Norway

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Re: I my way of calculating pension correct?
« Reply #1 on: March 08, 2017, 11:46:25 AM »
My DH and I just looked at it together. We also calculated how much we spent and saved last year. Spent: 477.000 NOK and saved 740.000 NOK, a 60% saving rate.

Some flaws in the excel sheet:
- if we start with a lot of stash, we don't need to reduce the stash with 1/17th a year. We only need to take out what we need to make the required sum, 500.000 NOK.
- Why not calculate to have the same yearly income each year and adjusting the reduction sum.
- I didn't calculate taxes over state pension.
- A calculation fault in a certain column.
- 4% safe withdrawal rate after inflation is quite ambitious in a country where you pay 28% taxes over fund earnings.
- Last year we didn't have any big spendings, like buying a car.

In addition we could add some additional income in the early years. My DH thinks he can easily make 10% of his income by working for 10 weeks a year. So we'll try to find out if we earlier can start working part time.