Chapter Ten Refresh

Welcome to the “End of Chapter Resources Page” for Chapter Ten of The Golden Albatross book. In Chapter Ten, I dove deeper into two practical examples of how a person could use their pension’s Total Dollar Value (TDV), which we calculated in Chapter Nine. Those practical applications for TDV included its use to determine your Gap Number, and its use to compare any lump-sum offer that your employer might offer in lieu of your pension. I also discussed a few limitations inherent to TDV.

The Gap Number

In Chapter Ten, I explained that a Gap Number is the difference between your planned retirement expenses and your fixed income stream. I also mentioned that if your Gap Number is small due to your pension, then you may want to weight that pension more heavily when making your Golden Albatross decision. The reverse is also true.

Gap number formula. E= Retirement Expenses F = Fixed Income

I’ve written several articles on my blog about how using your Gap Number to plan for (early) retirement. Check them out below. I also linked below to an article from one of my favorite blogs, called “Can I Retire Yet?”, founded by Darrow Kirkpatrick. His article linked below introduced me to the concept of the Gap Number.

Grumpusmaximus.com articles on the Gap Number:

• • https://grumpusmaximus.com/retirement-planning-how-to-calculate-your-gap-number/ 
  • https://grumpusmaximus.com/gap-number-method-action-part-1/

Can I Retire Yet? Articles on the Gap Number:

• • http://www.caniretireyet.com/how-to-model-the-retirement-income-gap/

Tracking Your Money

In Chapter Ten, I also mentioned that to determine your Gap Number, you needed to know how much you planned to spend in retirement. I made it known that the best way to project retirement spending was to track your spending for multiple years, and then form a spending plan based on that data. Of course, I also said you needed to modify that retirement spend plan for any unique retirement issues like increased medical expenses, no mortgage, or university tuition for your children.

If you’re new to tracking your expenses, don’t worry, because I’ve written several articles on the various programs available these days. In fact, I even drafted my brother into the cause and asked him to write an article about the program he uses. So, there’s no lack of information on my site about money tracking programs.

However, that’s not the end of it. Just Google “money tracking software” and you’ll find a host of articles on the various programs available. In fact, several websites like PC Magazine and CNET usually put together an annual review of the latest programs. In my opinion, the best program for you is the one you will use. If that means you’re better off using a pencil and paper, or an Excel spreadsheet, then use that. Otherwise, you can check out my links below:

• • https://grumpusmaximus.com/category/resources/money-tracking/
  • https://www.cnet.com/news/manage-save-invest-your-money-take-charge-with-these-apps/
  • https://www.pcmag.com/roundup/300724/the-best-personal-finance-services

Lump-Sums

I’ve written a lot about lump-sum offers. In fact, it might be the topic I’ve written about  the most  in relation to pensions. There’s no doubt the topic will feature prominently in my second book about the actions one should take to reach FI … if one decides to stay at a pensionable job. That said, if you’re looking for more information on lump-sums, then I suggest you start with my most recent article about them in the Pension Series. It’s an academic analysis of the topic that I conducted as a part of a post-graduate class. It’s thorough, if a bit dry, since I had to write it in an academic setting. However, it provides much of the depth on the topic that I was unable to address in the book due to space:

• • https://grumpusmaximus.com/pension-series-21-lump-sum-buyout/

More Lump-Sums

If you’re looking for examples of how I would use the TDV formula to compare it with a lump-sum offer, then start with Part 8 of the Pension Series, which I wrote as a guest post on the “Can I Retire Yet?” website. Doing so will preview the techniques I equip you with in Chapter 12 of the book in order to decide what your pension is worth, and whether or not it’s worth it.

• • http://www.caniretireyet.com/pension-lump-sum-2-opposing-methods/

After that you can move on to Parts 11, 12, 13, and 19 of the Pension Series. In them I demonstrate how I use the TDV calculations to compare to lump-sum offers. Part 13 is of particular value since I supply you with a spreadsheet that a reader built for the blog. Based on the information you plug into it on the first page, it auto-populates and then calculates TDV using multiple different formulas from multiple different bloggers. It’s a great tool to use when considering a lump-sum.

• https://grumpusmaximus.com/pension-series-part-11-lump-sum-case-study/
• https://grumpusmaximus.com/pension-series-12-pension-lump-sum-analysis/
• https://grumpusmaximus.com/pension-series-part-13-master-pension-value-calculator/
• https://grumpusmaximus.com/pension-series-19-lump-sum/

Finally, remember my cautionary notes from Chapter Ten about the Time Value of Money and the Dalbar Report. Don’t let some overly complicated explanation of the Time Value of Money distract you from the fact that your pension fund is going to offer you a lot less in their lump-sum offer than what your pension is worth! Forewarned is forearmed.