Question: When I play around with my retirement age, I noticed an odd result - if I retire EARLIER the picture improves. Why is that? That doesn't look right.
Yes this indeed seems counter intuitive but it is correct based on the way
the software is designed.
Changing just the retirement age up and down does not necessarily make the
exact test you are thinking.
In the program, when two spouses work, the retirement period begins when
either spouse retires.
PRIOR TO RETIREMENT, the program does not assess retirement expenses and try
to net out income and expenses. It doesn't do this until the retirement
period is reached.
But once the retirement period starts, the after tax annual job income of
the person still working is applied into the calculations.
In the sample case that was sent...when she retires, your $132k (after taxes and contributions)
gets added into the retirement picture as income.
And based on your expenses looks like it makes a decent difference in the
Thus making your wife retire earlier is having the counter effect of making
your picture better because it is starting the retirement calculations earlier AND THEN
adding in your job income into the "retirement picture". This money just gets SAVED.
To prevent this, you have a couple of choices:
1). sync up your retirements to the same year, even if she really retires
sooner than you. Use Cash infusions possibly to deal with extra income that
comes from sync'ing them up, like for a part-time job.
2). Change your expenses for these intermediate years when you are working
and she is not... assuming you are spending most of your salary while you
work... I think your expenses are probably understated for those
intermediate years. So enter a 3 year Special Expense that will increase your retirement income goal to match your big Job Income that is continuing after the your spouse has retired.