Author Topic: Poke holes in my FI projection tool  (Read 946 times)

firehose

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Poke holes in my FI projection tool
« on: August 12, 2022, 05:52:44 PM »
I have read this great forum, but I think this is my first post (but not last).

Any spreadsheet nerds out there like me? I love tools like the Engaging Data FI calculator, but I want to see it year by year. I have been building a simple FI projection tool in Excel and want you to poke holes in it!? I have automated many calculations but there is still some manual entry in there. It is separated by taxable brokerage accounts and the spouse and I's retirement accounts. Just start by entering your beginning balances and income streams. I have it not withdrawing from brokerage until age 51 and retirement accounts when we turn ~58.5. You can easily adjust returns and withdrawal rate. See link below

I know there are elements I should be accounting for. What am I missing or messing up? Thanks in advance for any comments!

https://docs.google.com/spreadsheets/d/19DcrJFMBWrXbJJss93-dGJ2JXrxOGQgAU7zd5l-THAU/edit?usp=sharing

FIRE 20/20

  • Pencil Stache
  • ****
  • Posts: 808
Re: Poke holes in my FI projection tool
« Reply #1 on: August 13, 2022, 10:33:56 AM »
I tried to view it, but it wanted a google login.  I don't use googledocs very often, but is there a way to make it viewable without logging in to google?

firehose

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Poke holes in my FI projection tool
« Reply #2 on: August 13, 2022, 12:53:42 PM »
Let's try attaching the Excel file directly. Thanks for trying @FIRE 20/20

FIRE 20/20

  • Pencil Stache
  • ****
  • Posts: 808
Re: Poke holes in my FI projection tool
« Reply #3 on: August 13, 2022, 01:49:56 PM »
Many of my comments may come off as criticism but that's not how they're intended.  Your approach is very different from mine, so my intent it more to explain another way of looking at this.  I don't mean to suggest my was is any better than yours.

But first, a few mechanical questions.  Why do you have a 15% tax rate on your withdrawals from your taxable account?  I'm very far from a tax expert, but I wouldn't think you would need to pay the long-term tax rate of 15% (assuming your income is in the right range), but it should only be on the gains rather than the total amount.  You also have a 15% tax rate starting in 2038 on your tax-deferred accounts, but I wouldn't expect that tax rate for different reasons.  Are you planning a Roth ladder?  If so you should be paying less than 15%, I would expect.  It's hard to know what's going on with the tax numbers without knowing more details. 
You also show a 4% withdrawal rate.  I assume you understand that when using the 4% "rule" you do not take 4% out each year, but 4% the first year and then adjust for inflation.  You may just be using 4% each year to simplify.
A more substantive criticism is that you are assuming a steady rate of growth (5%).  As you know, that's not how markets work.  Plans that work very well with static growth rates look great on paper, but just don't match reality.  Using an existing tool like CFireSim or FIRECalc is much better because they run lots of scenarios on real historical data. 

Finally, once you get below a 4% withdrawal rate, and especially below 3.5% then all the planning isn't worth much.  At that point you have more than you need and the planning and optimizing just doesn't add very much. 

And the obligatory facepunch.  Holy crap you spend a shit-ton of money!  If you could get your expenses down from insanely high to just very high you could FIRE much sooner than you're planning.  I'm assuming with those large spending numbers you have a mortgage; are you planning to pay it off or are you planning to keep it forever?  I'm assuming the latter since the spending doesn't drop much until you're 80. 

I kept a spreadsheet like this one early in my FIRE journey.  Ultimately I found that each year something was so substantially different that I had to re-do it frequently.  It didn't add much value for me.  Once I had 25x my planned spending and I had enough to get my Roth ladder going, I basically pulled the plug.  None of my forecasts were accurate on the income, growth, inflation, or spending amounts.  I found I just wasted all the time I put into the spreadsheets.  The time I put into lowering expenses is what had a substantial impact for me.  My initial spreadsheets had me retiring at 55, then 50, then 45, and I ultimately FIREd at 42.  By cutting expenses we saved more and needed less, and that's what got us to freedom sooner than planned.  I feel like I'm living a FatFIRE lifestyle, but I'm closer to half your spending amounts.  But maybe you have 10 kids?

lifeisshort123

  • Bristles
  • ***
  • Posts: 377
Re: Poke holes in my FI projection tool
« Reply #4 on: August 13, 2022, 04:37:45 PM »
A few thoughts about this. 

1. I love the spreadsheet.  Very easy to use design.  Makes a lot of sense to me.
2. I question some of the assumptions you have, it is difficult to understand them without some context.  I think it is optimistic that your spending will “peak” in 2023 and never be higher than that throughout your entire life, for example.  It is hard to know where these beliefs come from.
3. I agree that the tax rates seem a little low.  Also, I realize it is difficult to make this assumption in a spreadsheet, but I would point out the obvious - that money will not be as linear as the spreadsheet indicates.  Anyone looking at their portfolio this year can tell you that.

FIRE 20/20

  • Pencil Stache
  • ****
  • Posts: 808
Re: Poke holes in my FI projection tool
« Reply #5 on: August 14, 2022, 02:25:13 PM »
3. I agree that the tax rates seem a little low. 

I was thinking the opposite.  The tax rates look really high to me, but without knowing # of dependents, how the income is generated, etc. it's impossible to know. 

firehose

  • 5 O'Clock Shadow
  • *
  • Posts: 3
Re: Poke holes in my FI projection tool
« Reply #6 on: August 17, 2022, 05:10:13 PM »
Appreciate the commentary! Much to figure out here to improve and make it more accurate. I actually built this up over a year ago and just getting back to finishing it up. Main aim was to get the feedback on the tool itself. The long-term spending/income still needs to be dialed in.

Taxes, withdrawal best practices, and ROTH ladders are on the list to get up to speed on. I know markets are not linear. Not sure if I (or excel) can model it the way it would need to be most realistic, but it has been a good starting point and then pressure test with FIREcalc.

I know spending is up there. Working on that and it is coming down.  30 yr mortgage with low rates, but I do need to account for when that get paid off in two decades.