year start and finish

[winnynewby]

Jim, hope I didn't miss this topic elsewhere. Seems pretty simple but wanted to check.
Am looking to project decreased spending needs as I age, and want to make sure I have the start and end ages correct. As an example, is year one start: 2010 and stop: 2011? And year two start 2011 and stop 2012? Don't want to double up. Thanks, John

[jimr]

John,

Thanks for posting. If I understand your example correctly, you're trying to enter decreasing spending on a year-to-year basis using additional inputs. That sounds a bit tedious, but it should work fine. I think there was another post where I described entering the decreasing spending in blocks of 5 years or so, but if you're up for the extra data entry, doing it year-by-year is fine.

That said, I think you need to make the start and end year the same in order to get one year of a given spending level. Also, the best way to be sure you've entered things correctly is to look at the detailed output tab and review the yearly data that's shown there. You should see the income amount from additional inputs in the table on the row for the appropriate year. To get a feel for how things work you might run a test entering kind of large numbers in additional inputs so they clearly stand out on the detailed output table.

Let me know if that doesn't answer your question or if you have trouble with the approach I suggested.

Good luck,

Jim

[Guest]

Jim, thanks for the prompt reply. I did find an FAQ that mostly addresses it, but I guess my question is more related to the definition of "overlapping years". I don't intend to do one year increments, and only expressed it that way to try and convey the overlapping years idea. Should the "ending year" of the first period also be the "beginning year" of the next period, or would that be considered an overlapping year? Hope that is more clear.

Also, expressing it as an expense would imply that taxes were included in that number right? That years expense would essentially be a gross(before tax) draw, and not the equivalent to the "annual retirement spend" which is after tax. John

[jimr]

...but I guess my question is more related to the definition of "overlapping years"....Should the "ending year" of the first period also be the "beginning year" of the next period, or would that be considered an overlapping year? Hope that is more clear.

ok. I think I understand now. The start and end years should NOT overlap. The start year for the next period should be the end year for the previous period plus 1.

Also, expressing it as an expense would imply that taxes were included in that number right? That years expense would essentially be a gross(before tax) draw, and not the equivalent to the "annual retirement spend" which is after tax. John

The way the planner works, taxes due are computed on income rather than expenses. So income items (like retirement income) will have taxes deducted from them at the rate that you specify. For investments, taxes are computed on the portfolio gains each year.

Note: There's an implicit assumption in the planner that the cost basis of your investment portfolio is the same as its value. Investment taxes are deducted from each year's portfolio gains. For most retirees, this doesn't exactly reflect reality since some of the gains will be unrealized capital gains that are deferred, but it's probably close enough. You can always tweak the investment tax rate up or down to offset the imprecision of the model.