So - I think I've got the way to go on this, but would be interested in any thoughts or opinoins on if I am missing anything here.
Maybe this is a "new" bucket approach, but a debt side bucket vs asset side.
Looking at my debt as prinicpal+tax on the principal taking out of pretax was eyeopening. And as I lived with that being my ultimate obligation for a while, I started playing with my spreadsheet a little differently.
Rather that modeling the debt payments as ongoing living expenses, I modeled it as an initial extra withdrawal from the pretax account - like I would do if I retired and pulled that money out to pay things off right away. This started as just a way to kind of estimate things, but after a while it started to make a lot of sense - both mathematically and visually in my spread sheet. I determined I would never pull out money at a higher marginal rate than 24% fed tax, and so I used debt*1.24 as being enough to pay it all off, and then have yearly cash flows on the more durable parts of my spending. It may be avoiding pulling out money at 32% tax means I need to pay over 2 or even 3 years, but I thought that that was a neglible change and I didn't need to get too complicated adding on that caveate. I'll be paying down as much as I can before retirement anyway so the blance will be shrinking before I get to that anyway.
Subtracting the debt*1.24 from the current retirement funds puts me at a WR of 5.1%. That seems like it is within the range of sanity for actually retiring.
All things being average to middling from here to there, I project I would start retirement late 2025/early 2026 at about 4.7% WR. Social security comes online in about 10 years. If that rug doesn't get pulled out from under us, currently soc sec numbers leave me at about 3.33% WR at 70 with social security paying about 40-50% of expenses at that time. I am also expecting my earned benefit to go up with 2 more years of income. My current soc sec numbers come from making 0 dollars after 2023, so will add in 2024 and 2025 income into that and I think I will get to 3% WR at 70. Can also focus on other things to get the budget number down to attain 3% by 70.
This sounds pretty doable. And I will try to keep my side business going for a few years as a buffer. If I make the same there as I did in 2023, would start retirement at 4.28 WR%.
What I like about this is that I can easily see the effects of paying down the debt, so every month I subtract a little less from the stach for my projections at the balance goes down. I like this kind of encouragement.
This has me feeling like I have a handle on it and a good plan, but let me know if I am missing something in modeling like this.
Still working on my AA to get to at retirement, bond tenting, etc. So, always a work in progress it seems!
How did people do this without spreadsheets?? 8^O
