I'm new to MMM, thanks for this great thread. Bio: 31, single dad, Adelaide, small savings so far (waiting for a little more from divorce settlement), hoping to start Vangaurd ETFs soon. I'm keen to get more frugal and Mustachio'd (now that I choose my own non-consumerist path!) and FIRE around the time my daughter enters adulthood (about 16 years). Then I want to enjoy my freedom and travel (and pick and choose the occasional piece of work to my liking. I'm a scientist). I'm currently I'm in the 32.5% tax bracket. Maybe in a few years I'll creep into the next one through slight increases in pay (not due to CPI), then that's probably about where my salaried earning potential will end unless I change fields entirely.
I'm sure those of you who are pre FIRE and have this game sorted, already have an optimised procedure for determining exactly how much to put into super PRE-tax. As I aim to FIRE well before the current Age 60 preservation age (and I'd bank that will increase by the time I get there maybe up to a few years), it makes sense to have a nice balanced ratio of non-super and super investments. I'm fairly confident that the 9.5% employer contributions I get, for the remaining ~16 years before I FIRE, would be below the optimum minimum to have in there. Likely, it would be better if I do some pre-tax contributions to take advantage of pre-tax dollars. But the question is, exactly how much? If I put in too much (up to allowed amount), I won't be able to put in much into my non-super investments. This could mean I run short of $$ prior to hitting preservation age.
Is there an easy way to work this out? I have been playing with FIRECalc the last couple of days (just discovered it) and figure I could keep playing with numbers on that (and with the aid of other calculators) increasing the pre-tax $$$ and decreasing inputs to non super investments, until I find a happy medium???
Also, would it be better to wait a few years (maybe five or six) until I put start doing pre-tax super contributions. In the meantime I put the full amount I can save into my non-super investments, then when I get into the next tax bracket (37%) I start pre-tax super contributions as well, but put a larger amount in to make up for the few years I haven't? Pros: 1. non super investments do better earlier, and have longer to compound. 2. By waiting I get better leverage on my tax at 37% rather than 32.5%. Cons: 1. less time for super to compound. 2. Earnings on the super investment have less tax (I think?) so it might be a wash.
The way I'm using FIREcalc so far, I'm trying to avoid failure (and by avoid, I mean minimise probablilty of it happening-not 100%). That's the goal with this calculation. As FIREcalc doesn't simultaneously take into account the potential failure rate of the super stash, having a higher % failure rate of the non-super investment isn't as big a deal if the super stash is rather large. But this is harder to take into account, as I'm putting the Super income in just as a regular "pension" type income in one of the FIREcalc tabs...also I've just been assuming 3.5%SWR for the super stash (whatever that amount happens to be on preservation)...just being slightly conservative on the 4%SWR based on what I've read in some threads on MMM for the Australian situation.
Should I just keep it simple and do one calculation based on two main FIREcalc calculations:
1. Assume maximum pre-tax super input. (a) Calculate left over savings for non super investments for pre-preservation age FIRE (PreSPAFIRE...hehe). Assume no super tax advantage.
2. Do FIREcalc for the 13 years of PreSPAFIRE only using (a). As long as this is a high %, all is good.
3. Do FIREcalc for the x number of years of PostSPAFIRE, using what the super would be to, by fudging it so that I pretend I'm 13 years older than I currently am. As long as this is a high % then maxing on non super investments is fine.
Screwing this method up though, I could miss out on FIRE at an earlier date, if things aren't quite optimised.
Thanks all in advance...apologies if I've confused the way I've written this up, or done too many questions in one post. I guess I could just do a little extra pre-tax Super for now and just concentrate on being happy-stingy. There are other things to add into the mix too, like buying a PPOR (rent currently) at some point.