Thanks for the thorough reply! I've tried to make the example more realistic by using (roughly) my numbers (to somewhat anonymize the post).Texanbybirth, thanks for the nice comments. Yes, the employer match would be included in the salary (in the worksheet) and also be counted as part of the suggested portfolio contribution...I really like this workbook. I've saved a copy to Google Sheets, and I've upda269*ted it a little on my side with links to my personal social security estimates (updated once a year from SSA), so the benefit will auto-fill in the appropriate Accumulation box once I choose a retirement age. I'm still toying with the idea of saying "no" to COLA or using my adjusted numbers (75% haircut) - but either way I don't want to count on the full benefit from my SSA statement!
I've also put in some calcs to show me explicitly the "%" I need to save each year. (My 401k provider uses a % to deduct from my paycheck each pay period.) I'm guessing employer contributions to 401ks would count toward that "%": is that right? Should I also include those $ contributions in my salary? I know some very conservative bogleheads do that when calculating their "savings rates".
Thanks for your work on this workbook! As someone who does something similar for a living, I appreciate a well-designed workbook!
Annual salary: $140,000
Employer match: 5%
401K employee contribution (5% of $140,000): $7,000
⇒ Monthly 401K contribution (employee + employer) = ((2 × $7,000) ÷ 12) = $1,167
Worksheet inputs:
- Information for 2024
- Age: 39
- Annual Salary: ($140,000 + $7,000 employer match) = $147,000
- Portfolio Balance: $300,000
- Portfolio Allocation: 90/10 stocks/bonds
- Retirement Age: 60
- Portfolio Contribution Frequency: Monthly
- Defined Benefit Pension #1
- Name: Social Security
- Start Age: 70
- Monthly Payment: $3,769 (75% haircut of my personalized SSA estimate, per my opinion on the future of SS)
- Cost of Living Adjustments: Yes
- Annual Contribution: $8,680 (calculation excludes employer 401(k) match included in salary above)
- Monthly Portfolio Contribution: $2,083
The savings rate is usually calculated using the salary without including employer match. So, in this case, it would be:
- Savings rate: ((12 × $2,083) - $7,000 employer match) ÷ $140,000 = $18,000 ÷ $140,000 = 12.8%
The reason I'm trying to hit a % and not a $ amount is because my only retirement vehicle is my employer's 401k. (I imagine this is the case for many people.) I tweak our savings lever by adjusting my % contribution to my 401k annually. I don't go into the 401k admin's site and input a $ amount. If my results above are accurate, I'm actually shooting to get $1,500 ($140,000 x 5%/12 + $916) from my monthly paycheck into my 401k. That means I need to set my 401k deduction % at 13% ($1,500 / ($140,000 /12)), which matches our calculation of my "savings rate" above. I don't want to sound like I'm nitpicking. I only wanted to point out a tweak I've made to the sheet to make it more applicable to me so I know immediately what to do after I've run the calculations.
My other question is: how do you envision a user of the Accumulation worksheet ever needing to use cell B27, "### Portfolio Contribution After Loss"? I understand the calculations in the table, but it's not highlighted green like the table above it. Am I supposed to use the red table? If so, how? By way of example, I can do the exact same "savings rate" calculation above using the numbers in the red table, and I get a rate of 18%. If I'm a conservative or risk-averse or the-sky-is-falling saver, do I set my 401k deduction to that 18% instead?
Thank you in advance for your continued engagement.
Statistics: Posted by Texanbybirth — Fri Mar 15, 2024 8:39 am — Replies 105 — Views 18137