Retirement Calculators for Engineers
nesteggly.com
nesteggly.com
A UI request - in testing different scenarios, I want to delete & retype the first digit or two only (what if I want 60000 per year? 75000 per year?) but deleting only the first digit empties the whole text box and I have to type out the zeros every time. Would be great to be able to edit only part of the many long numbers instead of the whole thing.
In fact, you make the exact same mistakes they do, and more, which are critical ones.
Personal Capital's Retirement Planner is quite a bit different too. For one, it's a Monte Carlo simulator. Two, it assumes your retirement income will remain constant for your entire retirement. Third, to use their calculator they make you sign up, link your accounts and endure the harassment of their financial advisors.
There's a lot of details that are required for increasingly better projections, and sometimes people taking a glance at what your software has to offer might not necessarily have time during their lunch hour or on the weekends to fill everything out.
Yes, Personal Capital targets sub-HNWIs, but realize they run a business, and if they're targeting you, it's also a sign you're probably doing something right.
So if you need a public domain based approach to retirement calculations, you might be able to follow what they are doing.
How does your strategy differ from the many ERN evaluates?
The thing that's most different about my strategy is that it doesn't have a 'memory' of what your past retirement income was. Put simply, you retire every 3 months. A lot of folks get nervous when I say this but in practice, this is in fact how most people behave.
For example, consider the case of someone who unfortunately retired just before the COVID crash. Strategies that have a 'memory' intrinsically offer some assurance that you'll probably weather the downturn without decreasing your lifestyle very much. In practice, most folks will 'start over' their retirement just to be safe and reset the memory of their prior payments. In my opinion, if you're not going to trust the assurances of a given strategy then what good is it?
Another thing that sets my strategy apart is that it focuses on capital depletion. Most strategies don't have any sort of annuity component and this typically resorts in a binary outcome near the end of the investment horizon -- you're either filthy rich or you went bankrupt years ago (both of these are bad outcomes for me). My strategy is constantly readjusting itself so that you exhaust your savings around 100 years old (or whatever age you set the formula to). This results in better overall effective utilization of savings.
I could go on but those are the two biggest things.
I have no intention of burning most of my investments away when I can instead, over a lifetime, teach my children how to manage their resources and insulate them from concerns most others toil away at.
I'd instead rather spend as a little as possible.
These calculators would be in the low fidelity category. He gives examples of others that have higher fidelity.
Bogleheads has a nice list of calculators also: https://www.bogleheads.org/wiki/Tools_and_calculators The Retiree Portfolio Model is a high fidelity spreadsheet tool that takes some effort to use, but can be well worth it: https://www.bogleheads.org/forum/viewtopic.php?t=97352
One thing that low and medium fidelity calculators could do to provide value is education. These calculators are mostly used by those that are years away from retirement, who are probably younger and could use pointers to topics to learn about that will apply to their situation going forward.
For example, a colleague asked me about backdoor Roth contributions recently as he now makes too much to contribute directly. It turns out he had rolled a 401k into an IRA when the company we worked for was sold 12 years ago. I left it in a 401k and told folks at the time about the rules that might make backdoor Roth contributions uneconomical. I failed to educate properly at that time, and now he's not able to do Roth contributions to save money in the future.
Calculators that grow with you, remembering what you've entered and prompting for only the information needed for the next decision point are also a good idea. If you are targeting engineers, you'll likely grow into a very high fidelity calculator towards retirement, as engineers tend to like to fully understand the nuances of the situation. It may be that your tool creates a spreadsheet that can be downloaded and edited to handle the last 5-10% of the special nuances for that particular individual.
Making data input easier for users to think about is also a good idea. The recently featured on Hacker news https://news.ycombinator.com/item?id=23069276 calculator has a place where you can enter special future spending. Having a page that you enter your child's age or rough birthday (even future) could make prompting for uneven income and spending like not working, child care, sports and college easier for folks to plan for and enter.
There are many cliffs in the tax code for example. Frugal professor had an old post that shows some of the cliffs before the 2018 tax code changes:
https://frugalprofessor.com/federal-income-tax-calculator-to...
I'd like to see calculators that determine which cliffs folks are likely to be near and educate them about the issues.
The ACA health care subsidy cliff is another important one. Earn $1 too much and your health care costs go from <$100 to $1000+ per month for early retirees.
Getting a balance between tax deferred (traditional IRA, 401k, etc.), tax free (Roth) and taxable savings is also important. You want to be able to withdraw savings from each of these in retirement in a balanced way. https://www.gocurrycracker.com/6-years-of-nearly-income-tax-... has a nice rundown of what they do to minimize taxes.
Why am I talking about taxes so much? The only thing you control in your retirement is the contributions and withdrawals from the various accounts. The market conditions control the returns. Being smart about how you balance your actions to minimize tax drag can be a big boost towards retirement.
Other decisions can also have a big effect your retirement spending. Are you planning on retiring in a state that taxes your social security benefits and capital gains? How much sooner could you retire moving to a state that doesn't tax these?
https://github.com/jamesplease/fi-calc/pull/197
I totally understand where you're coming from with optimizing for taxes, tax cliffs, etc. Tax law is just so immensely nuanced and fluid. I mean, every state has their own set of crazy rules and these rules change all the time. Even the popular backdoor Roth isn't a sure thing:
https://www.marketwatch.com/story/heres-why-you-may-want-to-...
My calculator takes the Occam's Razor approach to taxes and uses a generic "tax burden" parameter in the assumptions. Someone as savvy as you are would surely be able to keep that parameter lower than others. For most people trying to minimize their tax burden, I think they'd be better served by a financial professional than a calculator. Just my $0.02.
That's not an inescapable situation.
Some 401k providers (eg most of the ones provided by FAANG) allow you to roll pretax IRA money into your 401k, which frees up your IRA for backdoor Roth.