How to include pensions in our FI number

Lots of good discussion already on how to identify what you need to have invested to cover the remaining expenses after a pension. I offer another perspective on pensions – figuring out how much you would need to have invested at a particular SWR (e.g., 4% or 5%) to generate the same taxable income as your pension (for VA disability a tax adjustment is also needed to get an accurate equivalent number since it is tax-free). By seeing this larger number it helped me better understand my asset allocation and investment risk strategy. It is also cool to see the $ amount others would have to have invested to generate the same amount of passive income. I also included an estimate for my healthcare benefits as I pay a lot less than most non-military Americans. While this is cost avoidance, seeing how much these health benefits functionally increase my net is also fun to see. This article provides some simple calculations that I use to make these calculations. [

Calculating Functional Net Worth – Living The FIgh Life

](https://livingthefighlife.com/calculating-functional-net-worth/) As for social security, I like how Big ERN's SWR calculator enables me to add in SS (for my wife and myself), my civil service pension (to be collected at age 62), and my wife's pension (collected at age 67) to see how they impact my SWR over time. I find that I can withdraw a lot more today since all of these future incomes will offset my lower SWR later. Congrats on your FI success!

I struggled with this as well, I went the other way and and assumed by military pension didn't exist for calculators, so my fi number was about 2x more than I really needed. Now, I just started my drawn down.

I asked my wife how much she needs every month on top of the VA/DFAS payment. I set up a re-curing deposit to checking for that amount.

Turns dividends will mostly cover that on top of cash reserve, so my drawdown rate maybe 0% until I need some $ for an unexpected expense or a trip or something.

I'm only about 6 months ish into this drawdown, so take it with a grain of salt.

While calculators are useful, I have found that what best meets my needs is a spreadsheet. For me, I don't have a single dollar amount saved that will meet my needs for life. Rather, I need to understand that every year between now (I'm 52) and when I die (hopefully 40+ years from now) I will have enough income. Our (my husband and my) income and expenses will fluctuate. He has a pension that he was able to start collecting when he retired last year (at age 57). But he will also start collecting social security at 62, I will start social security at 62. We have two mortgages that will be paid off in the future at known dates. There just isn't any calculator that will work for this. For me, a spreadsheet does the trick. I have every single year between now and when I retire in there with our projected income for each year. For example, we have a couple of Roth IRAs, but we only need them to last until the mortgages are paid off. So on my spreadsheet I can see that they need to last for X years and that's when I then turn to a calculator as a side tool to experiment with drawdown rates to understand the maximum drawdown rate I can pull from those IRAs for them to last until the mortgages are paid off. Then I go back to my spreadsheet and input those amounts. I recommend a spreadsheet for you. Or, what you may want is a simulator. These tools let you play around with all kinds of things like college tuition, inheritances, car purchases every X years, etc. They are more advanced than I find useful, but it may be perfect for you. A calculator simply isn't going to do it! Check out the "simulation tools" options at

Resources – Two Sides of FI

And these guys are big fans of Projection Lab.

To add to everyone else's advice: - The 4% Safe Withdrawal Rate is based on having assets of 25x your net annual expenses. Since your military pension & VA disability compensation have annual inflation adjustments, they'll grow at roughly the same assumed rate as your expenses. I'd subtract those two annual deposits from your annual expenses and then target assets of 25x that lower number.

- To adjust for the kids aging out of the VA disability compensation tables, you can look up those rates at the VA website:

Current Veterans disability compensation rates | Veterans Affairs

Because each of you are military veterans, you each receive your VA disability compensation at the "veteran + spouse" rate. (I get that question a lot.) And again, federal law now automatically raises VA disability compensation at the same inflation adjustment as Social Security (and military pensions), so you can assume that those numbers are in today's dollars with the same buying power as the year when your kids drop off the tables.

- I'm an optimist on Social Security, although pessimistic on its fixes being implemented until about two months after SS runs out of money. You could enter your earnings into one of the SS calculators (on their website) and use those. If you want to be pessimistic in your projections then I'd use the SS estimate of reducing benefits in 2033 to about 80% of today's projected amounts. However I think enough elected representatives will gain the political will to fix the SS actuarial issues by that session… if they want to be re-elected.

Since you’re already collecting the pension just subtract from expenses. For social security there’s a couple of ways as others noted but would suggest a financial goals calculator from portfolio visualizer to accurately project out both expenses and inflows over time.

But if you want a simple calc for FI determine what your SS will be at what age and price out an annuity with the same details in today’s dollars and that’s what’s it’s approximately worth.

Agree with subtracting the pension from expenses to generate your FI number. One thing I dont hear enough when people have pensions is make sure your investment allocation is heavier on equities since your pension could be considered the bond portion of your portfolio.

I subtract my pension from my monthly expenses. My FI number only needs to cover what my pension will not cover. I plan to work until I can start getting pension payments. It might be different for someone planning to retire before their pension kicks in. I also include Social Security but in a separate calculation. I view it as the cherry on top. ✌🌱

This forum thread addresses many of the relevant points of discussion.

Pension - Complicating Retirement Planning

Both of those means of including your pension are fair. Cutting the monthly expenses by your monthly pension is the quickest and easiest. You definitely should include Social Security, which you can factor into your monthly expenses the same way, starting at your age of intended withdrawal.