Author Topic: Grade My Retirement Spreadsheet  (Read 1977 times)

badger_flyboy

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Grade My Retirement Spreadsheet
« on: June 05, 2016, 08:52:43 PM »
Hey guys, I recently set up a spreadsheet to help plan out my income/spending/saving over the next 20 years.  I know this is longer than I need to be financially independent, but it's just a rough draft.

Some qualifying info:
  • My wife and I are in nearly the same job (military) so that's why income looks similar
  • We're paying off all student loans in this first year of employment.  Then we'll get to work on retirement savings.
Can you take a look at the attached spreadsheet and tell me what you think?   What am I missing, or not accounting for?  Are my general calculations accurate?

Thanks in advance for your help!

RWD

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Re: Grade My Retirement Spreadsheet
« Reply #1 on: June 06, 2016, 09:57:33 AM »
Tax rate shouldn't be a flat percentage (I'm assuming US tax brackets). I think it's a bit weird to have two separate sections (Husband and Wife) that both include things like spending and retirement balances.

Nords

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Re: Grade My Retirement Spreadsheet
« Reply #2 on: June 11, 2016, 10:21:27 PM »
Comments that you may already be aware of:
Your TSP & IRA contribution limits will rise with inflation (in $500 increments) over the next 20 years.  If you use the pay & allowances from the 2016 pay tables (for the next 20 years) then ideally everything will stay in 2016 (constant) dollars instead of being adjusted for inflation.  Of course in reality you're going to fill in your actual numbers as you go through the years.

Your flight pay is taxed just as much as your base pay. 

You might want to look up the married filing jointly income tax brackets and reduce your tax numbers accordingly.  Right now you're assuming that every dollar is taxed at the 20%-25% rate, but the reality of a progressive income tax is that only the last dollars are taxed at that rate.  Your first dollars are taxed at 0%, then some at 10%, more at 15%, and so on. 

Have you accounted for state/local taxes?


More comments that you might not have considered yet:
Junior servicemembers are lightly taxed.  In fact, up through the ranks of E-6 and O-3, with deductions and exemptions and credits it's possible for some families to pay zero taxes.  Because of this light taxation, today you may be in the lowest tax brackets ever.  In that case it makes more sense to maximize your contributions of after-tax dollars to your Roth TSP and your Roth IRA.  It's also a lot less hassle than doing Roth conversions after the paychecks stop.

Note that by your calculations (saving 50% of your compensation for 20 years) you reach financial independence around 15 years.  This is consistent with the 4% SWR:
http://the-military-guide.com/how-many-years-does-it-take-to-become-financially-independent-2/
Even more interesting, you reach FI on your own high savings rate.  You won't need a military pension. 

Once you tweak the numbers (each of you serving to 20) then assume one of you goes to the Reserves at the 5-year point or the 10-year point.  Only 17% of today's servicemembers serve for at least 20 years (including Reservists & National Guard members) so the odds of both of you staying until an active-duty retirement are mighty small.  Did you want a family with that?  Yeah.

MDM

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Re: Grade My Retirement Spreadsheet
« Reply #3 on: June 12, 2016, 01:17:33 AM »
Tax rate shouldn't be a flat percentage....
OP, feel free to copy the calculations from the case study spreadsheet for federal taxes if you wish.

Dicey

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Re: Grade My Retirement Spreadsheet
« Reply #4 on: June 12, 2016, 06:59:39 AM »
We're paying off all student loans in this first year of employment.  Then we'll get to work on retirement savings.
Your plan and Nord's advice are very strong. Please, please do not skip even one year of retirement saving. When compound interest is involved, the sooner you start, the greater the impact.  Skipping a year would be penny wise and pound foolish.  Your future self will thank you, even if you do take a little longer to pay off the SLs.