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Just when I’m starting to feel good about my future, Transamerica rains on my future parade with a lousy e-mail. “Your retirement outlook is… Rainy.” They insert a cute little stormy cloud in case I didn’t get their point the first time.





My Retirement Outlook is Rainy? The Problem With Assumptions


Do these downer e-mails leave me in a state of despair? Of course they don’t. I know something that Transamerica doesn’t. Namely, that the money I’ve got stashed in their accounts represents less than 20% of my retirement assets. The rest is in Roth and taxable accounts with Vanguard.

M.D. Financial ServicesIt’s not entirely Transamerica’s fault. After all, I didn’t tell them that I had money elsewhere. I don’t think they asked me, either, but I learned that if you do tell them, their computers will listen.

Growing weary of the little gray cloud, I decided it was time to open up about the long-term relationship I’ve had with the other brokerage. Linking my accounts, I gave Transamerica access to my balances over at Vanguard. If computers experience envy, Transamerica’s hard drives would be a brilliant shade of green.

It must have come as quite a shock to know that all this time, I was nurturing a more meaningful relationship with another company. It shouldn’t have come as much of a surprise. After all, every fund I’m holding within the Transamerica account is a Vanguard fund.

Not only did it feel good to have everything out in the open, but my honesty was rewarded with a change in disposition. The storm cloud was replaced with a bright, shiny sun. My retirement outlooks is now… Sunny!




I was rewarded with the Sun emoji by keeping my stated retirement income needs low. From the reigning Rain King to Walking on Sunshine with a few clicks of the mouse. If I had chosen the standard “70% to 80% of income replacement” the dark cloud would ominously hover overhead.

Interestingly, when I input a desired retirement income of $100,000 (pre-tax), the program suggests I’ll be left with $59,700. Assuming a tax rate > 40% with a portfolio that is < 20% pre-tax money is a poor assumption. I can almost guarantee that my actual tax rate would be < 10% (see The Taxman Leaveth) when I’m done earning an income.

Another silly assumption made by Transamerica was that I didn’t have money elsewhere. The truth is, though, that I had provided incomplete information. Once I filled in the blanks, Transamerica was able to make an improved, albeit imperfect, projection.


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My Incorrect Assumption


Earlier, I explored the idea of leaving my job a year earlier than planned. Ants in the pants, and all that. There was one big problem. I would be walking away being only 25% vested in the employer contributions to my 401(k). That adds up to a penalty of about six week’s pay. It wouldn’t make or break me, but it’s a significant chunk of money.

I based that assumption on the language in my Benefits Summary:


“For anesthesiologists hired after December 31, 2011, the annual contribution will vest 25% after two years and will be 100% vested after five years.”


There was no further delineation, and being a rather literal person, I took that to mean that I would be stuck at a 25% vest until I hit the five year mark. Having been an independent contractor for most of my career, I have no other experience with vesting schedules, and didn’t imagine it would be any different than what was spelled out.

Last week, I logged into my Transamerica account, not to explore this question or to see a sad, gray cloud, but to investigate my 401(k) fees. You know how I hate fees. It turns out that mine are indeed rather minimal. I had looked at this once before, but I just wanted to be sure I wasn’t missing something.

I don’t often check my balances via the Transamerica website. Personal Capital pulls the information for me, so I rarely have a reason to log in to Transamerica. Since I was there, though, I clicked on the 401(k) and clicked again on the “Balance Details” button.

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In the Details, I was presented with two balances. The total balance and the vested balance. I did a double take. There was a gap between the two, but it was not 75% of the employer contribution, as I had expected. I calculated it to be 55.49%. A day or two later, the discrepancy was 55.45%. My unvested portion was shrinking!

Like Transamerica, I started with incomplete information, and made an assumption. Like Transamerica, my assumption turned out to be incorrect, and led me to make decisions based on a false premise.

An e-mail to a Transamerica representative confirmed my suspicion. Interestingly, I asked if the vesting increased linearly from year 2 to year 5, and the response was that I would be 50% vested at year 3, 75% at year 4, and 100% at year 5. While that is true, it does ignore hundreds of data points in between, and my suggestion that it increases linearly was more accurate. I guess we don’t all think in terms of X-Y axes*.

[Post-Publication Edit: Based on comments below, I looked again at the account. Not wanting to raise eyebrows, I avoided asking too many questions. In fact, I only asked one question, which was insufficient to get it right. Yes, I made yet another false assumption. One more e-mail this morning clarified the situation for me.]

The Transamerica rep pointed me to a part of the site I hadn’t found that displays my total employer contribution (which was larger than I thought) and my vested percentage (exactly 50%). I received the year 3 bump to 50% after being credited with 1,000 hours worked in 2016 (calculated at 40 hours per week), which happened on June 11th this year.]

What This Means


The handcuffs that I had once imagined to be 24 karat gold, then downgraded to silver, are merely a set of plastic cuffs that I once used to play cops and robbers with my older brother and his friends. They can be broken with minimal effort and little regret.

By the time I have put in the equivalent of 25 weeks of full time work in 2018, I will be 100% vested in my employer’s 401(k) contributions.


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Do you ever make assumptions when you should be asking questions? I do. I hate to ask a dumb question, after all. Remember, as Mr. Garrison likes to say — there are no stupid questions — just stupid people.


*Fun fact: axes is the only English word that is the plural of three different nouns: ax, axe, and axis.


34 thoughts on “My Retirement Outlook is Rainy? The Problem With Assumptions”

  1. Subscribe to get more great content like this, an awesome spreadsheet, and more!
  2. Our practice has a similar vesting schedule, but over four years, with each year vesting another 25%, until one is 100% vested after the fourth year. I recommend that you examine the plan documents prior to making an assumption regarding the linearity of the vesting as there may be breakpoints at each year of service, rather than each day adding an additional 0.04% of vesting.

    (As an aside, I left my current job after two years (18 years ago) and subsequently returned after my six month “sabbatical”–a job that I moved across country for that was intended to be permanent that did not work out as planned. My group allowed me to keep the 100% contribution on my departure, even though they were only technically on the hook for 50%, because they did not adequately explain or document the vesting to me, and I pushed them on this. The fact is that I was leaving, and they did not want the hassle. My guess is that Big Employer is a bit more savvy and a bit less forgiving.)

    By the way, I am not so much a fan of these retirement calculators provided by the financial services industry. They have me working until age 107! Not really, but I believe that they make assumptions that, well, “may not reflect the position of the management.” For many of these, I can tweak the numbers or assumptions slightly and go from prince to pauper and back again.

    FIRECalc is my favorite independent retirement planner and the one that makes the most sense to me.

    • Good to know, Vagabond. Thank you for sharing your story. As much as I hate to admit it, you may be on to something. I don’t know why I would be about 45% vested and not 25%, but I plugged in a few more random data points and it doesn’t appear to be perfectly linear, either. In other words, I may have made yet another bad assumption in my post about the problem with assumptions. It’s time to admit I have a problem!


  3. It is actually remarkable that stuff like this is not transparent as it should be. And it is tricky to raise questions (certainly was for me) without alarm bells going off in certain HR quarters.

    I would agree with VagabondMD that the devil is truly in the detail. I had to dig into my pension benefits recently (we wrote about it in the post linked below) and it was a painful experience getting to the bottom of things. Turns out my company pension starts to pay at separation from service, four years earlier than I thought it would. That is a decent chunk of change in my book. Ultimately it took a lengthy phone call with a very helpful and savvy administrator to walk me through the language and highlight the salient points. That was after talking with another person who did not have the slightest clue about what they were talking about – my questions were certainly not stupid but the answers were…ahem…. less than helpful…..

    The warm hazy day turned bright and sunny rather quickly.

    • Those aspects of compensation should really be spelled out somewhere. If we employees don’t have access to complete information, how are we supposed to know if we are being properly compensated? And — as you point out — if you start snooping around too much, you might find yourself on the receiving end of some questions you might not care to answer, and your surreptitious plans can be exposed.

      Thanks to your responses, I’ve learned two things today:
      1. I should have made fewer assumptions before publishing this post about the problem with assumptions. While it makes me look a bit foolish, I have proven my own point.
      2. By June 30th, I will be 100% vested in the employer contributions. My future’s so bright, I gotta wear shades. That pretty little Sun should be replaced with a cartoonish Supernova! Although I will have less than 4.5 years with my employer, I will have worked at least 1000 hours in five different years, so I will get the 100% vest that happens “after 5 years.” Interestingly, the vesting schedule appears to occur on a calendar year basis, while our employer, and our compensation, uses a July 1 to June 30 fiscal year. Just one more oddity.


  4. Those automated calculators are pretty funny. I had one 401(k) account for less than a year before my employer changed vendors, and it was projecting not just “Rainy,” but more like “Category 5 Retirement Hurricane.” Of course, they didn’t know I had any other savings or that I didn’t project needing a six-figure retirement income.

  5. Great post! At my last job, I made some assumptions about the vesting schedule as well and was delighted when I discovered that I was in fact fully vested months before I thought I would be. At my current job, I just got my first employer contribution to my 401K and was again delighted to see that it was more than I had expected based off of the confusing language of the match policy. Thanks for sharing : )

  6. Pretty cool: in June 2018 even the plastic handcuffs come off. Congrats!
    Some of the retirement calculators are smarter than others. My 401(k) plan manager is Voya and their retirement calculator is actually really good. You can link other brokerage accounts, you can specify the retirement date, income requirement, etc. But: Voya always warns me that my equity share (100%) is too high. Oh, well, I guess they haven’t read my blog (or Joanna’s guest posts here at PoF) about why bonds are overrated. 🙂
    About assumptions: There are a few areas where, just like you, I have questions about what’s the exact process when I leave the firm. For places like the 401(k) plan, which is managed by an outside firm, it’s fine to ask because I’m sure my questions will not be forwarded to my employer. But for other HR issues I’d have to make some assumptions not because I’m too shy to ask but because I’m still flying under the radar with the retirement plan. These range from trivial things like handling of leftover vacation days to big sums like vesting schedules of deferred bonuses. Potentially big sums…
    Anyway, Great post, as usual. Good luck!

    • Thanks, Big ERN. It wouldn’t be the end of the world if my “secret” got out. If it were, I’d be a lot more secretive. That being said, I don’t want to make a firm decision until next year, so I try to be cautious for the time being.

      I hope the terms end up being in your favor.


  7. What a nice surprise!
    That’s one good thing about increasing regulations for retirement accounts. They’re watched so closely, that many have standard features and they have to follow the rules.
    I was in a financially shaky group that often didn’t pay the promised 401k matching until fall of the following year. When I left, I thought I was never going to see that money, but it actually kept coming for two years until it was all paid up. Hooray!

    • Thanks for weighing in, MCK. In some cases, it can be a carrot on a stick scenario. Once you collect one of them, another is dangling within reach. It appears the optimal exit point is becoming clearer and clearer for me. I was willing to consider leaving in 2018 when I thought I was giving up tens of thousands. To know that I won’t have to sacrifice anything (other than future wages) makes it all the more enticing.


  8. I gave my notice that I was leaving my practice of 4.5 years. They told me I would not be vested 100% until the end of the fifth year. I contested it. There were two pieces of literature that conflicted each other that I had been given. Also I finally convinced them that all of the money was mine anyways. No one denied that I was 100% vested in the employee portion. I pointed out that all of the “employer portion” came from my income as well since it was an eat what you kill private practice and we all covered our own overhead. They were very fair and once they understood this they considered me 100% vested for both portions even before the official 5 year point.

  9. I've got my 2 acres of non-leveraged, crop-producing, cashflowing farmland via AcreTrader. Get yours.
  10. I made some assumptions on small things like how much my pension would be worth when I withdrew it as a lump sum. I figured the interest would be near zero and it ended up being a couple thousand dollars. A nice little surprise but nothing more than rounding error in terms of a low seven figure portfolio.

    I fondly recall watching the vesting schedule for me and my wife, and thinking “ok, just two more years. Ok, just one more year.” and counting down. I timed my departure from my next to last job to occur just a couple days after December 31 in order to secure an extra year of vesting and contributions and stock returns (even though it made my notice period only 4 days instead of the typical 2 weeks). I was really panicking that my employer might find out my intent to leave beforehand and terminate me preemptively a few days earlier than planned, thereby screwing me out of what would have been about $20-25k between contributions and growth. It all worked out in the end and I just now got my final payout from that plan almost 6 years later. 🙂

    • You recall the time fondly, Justin? That’s awesome, but the countdown is starting to feel drawn out for us. Fortunately, I can feel comfortable making it shorter. Six months ago, I figured I’d work another five years or so.

      This blog has helped me organize and clarify my thoughts, better analyze our finances, and has given me a great sounding board. In real life, I drop vague hints occasionally, but have not been forthcoming with any specifics. Our plans will most likely be set by next summer, and I look forward to being able to speak more freely about our future plans. We could start talking now, but I don’t want to be viewed as a short-timer, and reserve the right to change course in the event of a major market meltdown or some other unforeseen changes.


      • “Fond” looking back 🙂 In hindsight, now that we know we ended up getting vested and picking up all those company matches and contributions, I’m okay with the several year long vesting schedule.

        I walked away from what could have been retiree health insurance and a modest pension, but would have required 7 more years of work at a place that I didn’t really want to work more than another couple of years. I knew going into the job that I wasn’t going to stick around long enough to vest in HI or pension, so played the game accordingly.

        Everything worked per plan in the end, though getting fired meant the timing was slightly off.

      • If a major meltdown would cause you to change plans, then you probably should not retire. What will you do if the major meltdown occurs shortly after retirement? If the market loses 50% tomorrow, the Shiller PE will be just slightly below its long-term average.

        • Excellent point. CAPE is hovering around 27; HEP is quite high now, too. Both numbers point to a tempered outlook for stocks over the next decade.

          A more recent comment you made about starting out with a sabbatical is a great solution. That will give me time to decompress, explore the world a bit, and keep an eye on the portfolio.


  11. Don’t you love it when your handcuffs turn into plastic before your very eyes! Excellent post, maybe I’ll see you in New Zealand in the summer of ’18 (it’s on our bucket list, and we’re targeting mid-18 as our FIRE Date. Unless, of course, my handcuffs turn to plastic before then, like a lucky Doc I know……).

  12. You know what they say about assumptions….I’ve already made far too many of them!

    I wonder (almost daily) if everyone isn’t making incorrect assumptions about future market returns. Even Bogle himself is now predicting very low future returns…

    While not really a assumption, I once had to forfeit 100% of an employer vest in my 401k after the employer fired me. Argh! It just goes to show…read the very fine print on those plans. The employer may have a few ‘tricks’ up their sleeve to claw-back that match.

    • I do know what they say, Mr. Tako. Makes a** out of u and me.

      In the scenario described, you might have assumed you wouldn’t get fired just for dating your supervisor’s daughter. You assumed wrong 😉


  13. I work in an engineering area and I think everyone is pretty well versed in the pension specifics, and if not I still vested years ago. Around here the question among the under 50 crowd is if there will be a pension buy out before we all retire. I know a lot of people who are using the “monthly income” calculator, but I’m not convinced that’s the best way to go. I did a conservative pension value to cash calculator to figure my FI number. Though if the rubber meets the road and I retire before we’re vested in the pension (husband has the same employer) it could get interesting balancing cash flow with net worth.

    • I hear you, S.G. I didn’t ask many questions when I signed on. I would not have guessed I’d be planning such an early exit. I’m glad I finally got a handle on the specifics of the vesting now, though.


  14. That’s great news, but you should have know it already. 🙂 It’s logical to vest gradually and not get stuck at 25% for years. It’d be great if you can hold off until 100% vested. That’s less than 2 years to go. Maybe we’ll see you in NZ!

    • True, Joe, I should have known. I just wish it didn’t take multiple e-mails and / or phone calls to have someone explain it. It’s fairly straightforward, but the rules and details are not delineated in any information that is made available to the employee. From the other comments, that appears to be all too typical.

      New Zealand 2018 – see you there!

  15. The handcuffs of slowly vesting in my 401k at the last place kept me in a not great situation for too long, aside from ego of not wanting to have made a mistake to move for the job. This place was going to have a vesting schedule but changed 401k administrator and shortly after announced everyone was vested. They also changed from a straight 3% of the first 6%, to some convoluted calculation that comes put to 4% of 6%. More free money? Thank you very much, sure! Without knowing of my Vanguard funds, the retirement calculator for the work 401k (adding in social security ) estimates me to be fine to retire at 60. I figure using 60 negates the 59.5 issue for calculations. With all things factored in I think I’m in a good spot for now.
    I am very glad the vesting works in your favor.


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