Flexible Retirement Planner Support Forum

I think I am having a brain freeze and over thinking things because previously I thought I understood all the input numbers and the numbers in the Detailed View.

Assume for the sake of discussion that in the Summary View I enter Annual Retirement Spending of $150,000 and Annual Retirement Income of $0.00. (I am already retired and thus do not have any earned income from full-time or part-time work). I understand from the instructions that income taxes should not be included in the spending amount because the program will automatically calculate and deduct the amounts needed for payment of taxes.

In the Additional Inputs window I entered amounts for any pensions for my spouse and me as well as social security income. Assume the pension and social security amounts total $50,000.

Question 1. Am I correct in entering $0.00 for Annual Retirement Income based on the lack of any employment income? Or should the pension and social security amounts be entered as Annual Retirement Income? It seems best to enter the pension and social security amounts under Additional Inputs since that gives me the ability to enter the pension and social security amounts individually and set parameters such as Start Year, End Year, Amount, Taxable Percent, etc.

Question 2. Under the Detailed View, the same $150,000 I entered as Annual Retirement Spending appears under the Planned Expenses column as the annual planned expenses. My brain is freezing on the meaning of the After Tax Income column and the Median Total Withdrawal column.

The After Tax Income and Median Total Withdrawal amounts for the first year total $150,000 (that's maybe just a coincidence) but then gradually their total exceeds $150,00 based on the initial portfolio value.

My understanding/guess is that the program starts with the Annual Retirement Spending amount ($150,000), and then subtracts the outside or non-portfolio income (pensions and social security) of $50,000, which leaves me short in that year at that point in the amount of $100,000. Income taxes also have to be paid since they are not included in the Annual Retirement Spending of $150,000. So is the program, behind the curtain, then withdrawing from my portfolio the remaining $100,000 needed to cover the Annual Retirement Spending and whatever additional amount is needed to cover the income taxes?

If my understanding is correct, then the Median Total Withdrawal amount is the median amount I would be withdrawing from my portfolio in the given year to fund the Annual Retirement Spending.

I'm still confused as to what the After Tax Income is? I can't find anything in the instructions that explains it. Is the After Tax Income the after tax return on the portfolio investments only? I'm not sure where the $50,000 I entered for pensions and social security is coming into play or whether it appears in any of the columns under the Detailed View. I'm guessing that the Wizard of Oz is dealing with the pension and social security income behind the curtain and that the pension and social security income has nothing to do with the After Tax Income amount.

Question 3. What is the difference between "Run" ("Simulate current scenario") and "Run All" ("Simulate all scenarios")? I guess I am asking what is the "current scenario" for Run versus "all scenarios" for Run All? I think it my case they might be the same thing. I noted that under the Configure tab there is a choice for Manage Scenarios. I only have one scenario entered, titled Main Data Entry. If I entered additional scenarios, would the results be displayed in a way that indicated which Scenario any given result belongs to?

Thank you Jim. I've used and loved this program for years so I am kind of surprised by my brain freeze. But I do learn and see new things every time I use it!

For question 1, if I understand you right, you'll want to leave the main page input blank. The cash flow inputs on the main input page are sort of pre-filled shorthand ways to enter common additional inputs cash flows. For example, inside the simulation, the "Annual Retirement Spending" looks exactly like an additional inputs entry of "Other Expenses" with a start year of retirement year, an end year of end of plan, and a taxable percent of 100%. A lot of people leave those main page cash flow inputs blank if they're entering their stuff using additional inputs, but it's fine to mix and match them. The key is to double check everything in the detailed view year-to-year table to make sure everything seems reasonable (like you're doing in question 2).

For questions 2, first, it can be helpful to temporarily set the spending policy to stable when trying to verify stuff in the detailed view table so planned expenses doesn't move around (as much). Also, you can click the radio button on the top right of the detailed view page to show some extra info (if you didn't already). You can also right-click on any column header and select show all columns and that'll show a bunch more columns that might be helpful in tracking what's going on from year to year (or it might just be more confusing). If you right-click on any table cell you'll get an option to copy/export the data into excel if that's easier to use for working with this data.

In general, after tax income plus median total withdrawal should equal expenses funded as long as the withdrawal is coming out of the taxable portfolio (since it's carried at a 100% cost basis) or the tax free portfolio. If the withdrawal comes from the tax deferred portfolio, it'll automatically get grossed up to cover income taxes due on the withdrawal so the total withdrawal amount can be greater than expenses in that case. If you specify a taxable percent on any income cash flows (like pension and ss), the taxes are first subtracted from that income, then what's left is used to fund expenses. So in your case I think after tax income should be your pension plus ss income after taxes on that income is subtracted. Then any shortfall (expenses - after tax income) gets withdrawn from the portfolio. If after tax income is greater than expenses, any excess is deposited into the taxable portfolio and no withdrawal is needed.

For question 3, as you've deduced, run all runs all scenarios but since you only have one it does the same thing as run. Some people like to be able to flip back and forth quickly between scenarios so run all let's them make sure everything is current based on the latest settings. If you're using multiple scenarios, the show all runs window can be also be helpful for this. Show all runs also can be good for looking back in history at a previous version of what set of inputs you're working on to see what the inputs and results were at that point.

For Question 1, I could have been a bit more clear. I do leave all the main page inputs blank, specifically $0.00 for Taxable Annual Savings, Tax Deferred Annual Savings, Tax Free Annual Savings and Annual Retirement Income. Since I am not employed or receiving any Schedule C income, I think of myself as not having any "retirement income." I also consider myself as not having any of the three specified types of savings although not spending everything that a portfolio earns (dividends, interest, distributed capital gains) certainly has the same effect as savings.

I do like the greater flexibility and detail of the additional inputs page and so I tend to use that page whenever possible.

You are always very good about reminding users to double check everything in the detailed view year-to-year table to make sure everything seems reasonable. I am pretty religious about doing that. None of my results looked unreasonable or unexpected. I was just trying to wrap my head better around some of the columns in the Detailed View, mainly the specific columns I mentioned in my initial post.

Regarding Question 2, you made an excellent point (."..it can be helpful to temporarily set the spending policy to stable when trying to verify stuff in the detailed view table so planned expenses doesn't move around (as much).") I tend to stick to the stable spending policy, but for other reasons. I know that I have the option to set the policy to a more flexible option. But I like the stable policy because it seems to be a bit more conservative. In other words, using the stable spending policy, if the given annual spending results in an acceptable probability of success, then I tend to think that at the specified annual spending, come hell or high water, I have a pretty good chance of making it with that spending level. I can always increase the spending level and introduce a greater degree of flexibility and perhaps have a similar probability of success. But the stable policy seems to give me more of a sense of the "rock bottom" amount. I hadn't thought of your point though, that the numbers are less likely to bounce around when the spending policy is set to stable. Thanks for pointing that out.

Thanks too for the reminder about the radio button on the Detailed View page to show additional details. There seem to be new/additional "additional details" available since I last looked at that aspect of the program. I didn't know about the ability to right click on a column header to select to show all columns. Wow! (All of that makes me appreciate too that the column widths can be adjusted and that I recently upgraded to a wider monitor!)

You are right that all of the additional information can be confusing at times. But instead of trying to hide the additional information, I prefer instead to try to understand it. The complexity of the FRP program in a sense is similar to the complexity of a car or a cell phone. I've always told myself that if I take the time to reread the user manual (or some online equivalent) for the car or a cell phone periodically, it's virtually guaranteed that I will discover several features about the car or the cell phone that I never knew existed. Maybe some of those features won't be important or useful to me. But some of them might be real game changers.

The same thing applies to tinkering with FRP and seeing how the results change and understanding what those differences mean. In my opinion, it is the ability to "get under the hood" in FRP that sets FRP apart from so many other retirement calculators. Early on in my retirement planning when I first started looking at various calculators (I was self-employed), I couldn't understand why when I had a better year income-wise, many calculators would show that I needed even more money to retire than I did the year before even though in the previous year I had earned less money and had one more year of retirement to plan for. Keep in mind that some of these calculators were the simple 4-5 question type of calculators. It is a bit of a stretch to even refer to them as a retirement calculator. Some of the questions might have been something as innocuous as "what is your favorite color." As irrelevant as such a question is, it's a question that is easily answered and makes the user think they are really plowing through the questions with ease and making progress. Eventually I figured out, or at least concluded (because you couldn't get under the hood of those calculators), that these simple calculators must be assuming that I was saving 15% of my annual income (I was actually saving much more) and spending the other 85%. So whatever my income and retirement savings were at a given time, the calculator was assuming I spent 85% of the specified income and it then calculated my annual retirement needs based on those assumptions. Thus the more I earned, the further away I became from being able to retire. The less I earned, the closer I was to being able to retire. Finally I realized that something was off because a year earlier my income was lower and I had a slightly longer expected retirement but the calculator was stating that I would be able to retire on less money.

If you can't look under the hood of a retirement planning calculator and get a sense of what assumptions and calculations it is making, it's probably not worth using (and perhaps even dangerous to use) that calculator.

I understand better now why the amount of my after tax income plus my median total withdrawal initially equals the expenses funded but then starts to exceed the amount of expenses funded. Compared to everything else, I have a significant amount of tax deferred portfolio and taxable portfolio (and I wish the tax free portfolio amount was larger). So the automatic grossing up of the withdrawal to cover the income taxes due on the withdrawal probably explains what is causing the total withdrawal amount to eventually exceed the amount of the annual expenses.

I follow your comment on my After Tax Income (" So in your case I think after tax income should be your pension plus ss income after taxes on that income is subtracted. Then any shortfall (expenses - after tax income) gets withdrawn from the portfolio.") To back test that, I went to the Additional Inputs page, unchecked the "Enabled" box for all rows for pension and social security income. The result was (besides my probability of success dropping a bit), the Detailed View showed After Tax Income of $0.00.

Then I checked the Enabled box for just one item, that is, one row of social security which had a total amount of $30,000 and a taxable percent of 85%. The After Tax Income amount became $27,195 which is $30,000 less the income tax percentage I listed of 11% applied against the taxable percent (85%) of the amount of social security ($30,000). In other words, $30,000 - ($30,000 x 85% x 11%) = $30,000 - $2,805 = $27,195. I am sure anyone who is still reading this post has fallen asleep at this point. But the point is that your guess about what the After Tax Income was in my case was right. And it just underscores my point about the value of being able to look under the hood.

I will have to create some additional scenarios so I can get a better idea of what Run All scenarios can do. I have been creating separate dated data files periodically so that effectively each scenario is a separate data file. The result is that multiple scenarios cannot all be run at the same time because they aren't in the same underlying data file. I try to update my data file perhaps every 6 months, or maybe more frequently if circumstances warrant. I will go back to a previous data file or two and bring them in as different scenarios so I have the ability to run multiple (all) scenarios.

Thank you again for helping to thaw my frozen brain!