Author Topic: Retirement calculator  (Read 7814 times)

Lemanensis

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Retirement calculator
« on: October 14, 2014, 11:56:01 AM »
Hi guys. I've tried using the http://networthify.com/calculator/earlyretirement calculator. It really doesn't work for me. I know I have enough money to retire today, if I wanted*. But this calculator tells me I still have many years ahead of me - and that I need far more money than I really would, even if my spending stays at the same level as today.
Another calculator (http://www.calculatorsoup.com/calculators/financial/retirement-savings-calculator.php) I've been using shows me a much more realistic amount, and the one I've been basing all my calculations on. Unless of course someone else on here can point out a major downside to this calculator that is...  :-)

* I'm Swiss and legally I can't touch the money in my official (employer) retirement fund before a certain age. My own parallel retirement fund is smaller, but if the amounts were reversed I'd have retired already. Fortunately I'm in a 'liberal profession' and happy with what I do and especially with the people I can work with (I'm divorced, so I'd be alone at home).

Threshkin

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Re: Retirement calculator
« Reply #1 on: October 14, 2014, 03:55:41 PM »
Both of these calculators are extremely simplistic. 

A better calculator is http://www.cfiresim.com.  It gives you much more control over the data,

Beric01

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Re: Retirement calculator
« Reply #2 on: October 14, 2014, 04:59:26 PM »
Both of these calculators are extremely simplistic. 

A better calculator is http://www.cfiresim.com.  It gives you much more control over the data,

The problem with cFIREsim is you can't receive an expected financial independence year based on your inputs. As such, I've found the best compromise to be to use the networthify calculator to calculate retirement year, and then use cFIREsim to calculate that year's success rate. But it's imperfect.

lauren_knows

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Re: Retirement calculator
« Reply #3 on: October 14, 2014, 06:45:11 PM »
Both of these calculators are extremely simplistic. 

A better calculator is http://www.cfiresim.com.  It gives you much more control over the data,

The problem with cFIREsim is you can't receive an expected financial independence year based on your inputs. As such, I've found the best compromise to be to use the networthify calculator to calculate retirement year, and then use cFIREsim to calculate that year's success rate. But it's imperfect.

I've been on a hiatus for development on cFIREsim (I'm having fun trying to make a game), but this is comes up every so often.  The way that cFIREsim works, I think I'd have to have a separate checkbox for each Spending and Income input that said "Pre-retirement", so that I could optimize the simulation to find the right retirement year.  Because, you could have a savings input that represents a rental property income (which you're getting now until forever) or you could have a savings input that represents 401k contributions (that will end at retirement).

Not TOO hard to do, but it will add a little clutter.

Beric01

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Re: Retirement calculator
« Reply #4 on: October 14, 2014, 06:56:11 PM »
Both of these calculators are extremely simplistic. 

A better calculator is http://www.cfiresim.com.  It gives you much more control over the data,

The problem with cFIREsim is you can't receive an expected financial independence year based on your inputs. As such, I've found the best compromise to be to use the networthify calculator to calculate retirement year, and then use cFIREsim to calculate that year's success rate. But it's imperfect.

I've been on a hiatus for development on cFIREsim (I'm having fun trying to make a game), but this is comes up every so often.  The way that cFIREsim works, I think I'd have to have a separate checkbox for each Spending and Income input that said "Pre-retirement", so that I could optimize the simulation to find the right retirement year.  Because, you could have a savings input that represents a rental property income (which you're getting now until forever) or you could have a savings input that represents 401k contributions (that will end at retirement).

Not TOO hard to do, but it will add a little clutter.

Wow- I'm curious about your game! I don't want to take time away from that :)

The calculator is already amazing as it is. But some sort of feature to, for example, calculate what your retirement year should be to have a 95% success rate would be pretty awesome.

lauren_knows

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Re: Retirement calculator
« Reply #5 on: October 14, 2014, 08:19:46 PM »

Wow- I'm curious about your game! I don't want to take time away from that :)

The calculator is already amazing as it is. But some sort of feature to, for example, calculate what your retirement year should be to have a 95% success rate would be pretty awesome.

Ha, I appreciate the sentiment. I know that it certainly has flaws, though.  When I go on coding binges, I head to a local coffee shop for an afternoon on the weekend. Maybe this weekend I'll give a shot at thinking through the "find retirement year" feature.

About my game...  haha.  I have a tendency to learn a programming language and take on a project entirely too difficult for a novice, as a way of working through new things and learning.  cFIREsim was one of those projects.  This game project was based on doing a few online courses on javascript.  I'm basically creating a turn-based strategy game (like Risk) that is based on a hexagonal grid, that's entirely played in the browser.  I was obsessed with a browser-based clone of Risk about 8 years ago, and I've always wanted to replicate it.  Whenever I get a remotely playable version out, I'll put it in my signature :)

arebelspy

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Re: Retirement calculator
« Reply #6 on: October 14, 2014, 09:20:27 PM »
But some sort of feature to, for example, calculate what your retirement year should be to have a 95% success rate would be pretty awesome.

Well it can already calculate the stache amount needed for a given spending level for an X% success rate, via the investigate function.

So use that to figure the stache amount, then you just need to figure the time to FIRE based on your current amount saved, annual savings amount, and estimated rate of return, pretty basic math.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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Lemanensis

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Re: Retirement calculator
« Reply #7 on: October 15, 2014, 12:17:01 AM »
Both of these calculators are extremely simplistic. 

A better calculator is http://www.cfiresim.com.  It gives you much more control over the data,

But there are still things missing from this. Such as the % I can get on bonds. I already know that I could easily retire today. With this cfiresim calculator, based on my own figures, I'd still not be able to retire even at the age of 150!! Even if I put in 100% bonds! C'mon!!
 

lauren_knows

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Re: Retirement calculator
« Reply #8 on: October 15, 2014, 06:15:19 AM »
But some sort of feature to, for example, calculate what your retirement year should be to have a 95% success rate would be pretty awesome.

Well it can already calculate the stache amount needed for a given spending level for an X% success rate, via the investigate function.

So use that to figure the stache amount, then you just need to figure the time to FIRE based on your current amount saved, annual savings amount, and estimated rate of return, pretty basic math.

That investigate option is solely based on a fixed retirement date, but the stashe amount changes depending on when you retire.  As I mentioned before, if there are income streams that stop at retirement (and you currently set the end date for the same as your retirement date), I currently have no way to track that.  I'd need to know exactly what income/savings streams are tied to the retirement date to be able to accurately guess an FI date.

Quote
But there are still things missing from this. Such as the % I can get on bonds. I already know that I could easily retire today. With this cfiresim calculator, based on my own figures, I'd still not be able to retire even at the age of 150!! Even if I put in 100% bonds! C'mon!!

cFIREsim is mostly for use with historical data, so it uses historical stock/bond return numbers.  If you want to set it to a specific amount, you can click on "Constant Market Growth" in the "Data to use in simulation: (?)"  section.

As for not being able to retire even at age 150... I have no idea what you're putting into the inputs, but 100% bonds for a long retirement is a terrible idea. You'll never beat inflation (historically) as to sustain a decent withdrawal rate.

Lemanensis

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Re: Retirement calculator
« Reply #9 on: October 15, 2014, 09:38:47 AM »


Quote
But there are still things missing from this. Such as the % I can get on bonds. I already know that I could easily retire today. With this cfiresim calculator, based on my own figures, I'd still not be able to retire even at the age of 150!! Even if I put in 100% bonds! C'mon!!

cFIREsim is mostly for use with historical data, so it uses historical stock/bond return numbers.  If you want to set it to a specific amount, you can click on "Constant Market Growth" in the "Data to use in simulation: (?)"  section.

As for not being able to retire even at age 150... I have no idea what you're putting into the inputs, but 100% bonds for a long retirement is a terrible idea. You'll never beat inflation (historically) as to sustain a decent withdrawal rate.
[/quote]

Trust me, I'll have enough from returns (on capital + gearing) not to even touch the capital, ever! :-)

I see (now) what you mean about historical data. So I still think the calculator soup model is more useful for me.

Beric01

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Re: Retirement calculator
« Reply #10 on: October 15, 2014, 04:35:40 PM »

Wow- I'm curious about your game! I don't want to take time away from that :)

The calculator is already amazing as it is. But some sort of feature to, for example, calculate what your retirement year should be to have a 95% success rate would be pretty awesome.

Ha, I appreciate the sentiment. I know that it certainly has flaws, though.  When I go on coding binges, I head to a local coffee shop for an afternoon on the weekend. Maybe this weekend I'll give a shot at thinking through the "find retirement year" feature.

About my game...  haha.  I have a tendency to learn a programming language and take on a project entirely too difficult for a novice, as a way of working through new things and learning.  cFIREsim was one of those projects.  This game project was based on doing a few online courses on javascript.  I'm basically creating a turn-based strategy game (like Risk) that is based on a hexagonal grid, that's entirely played in the browser.  I was obsessed with a browser-based clone of Risk about 8 years ago, and I've always wanted to replicate it.  Whenever I get a remotely playable version out, I'll put it in my signature :)

Sounds awesome! You do great work. The little programming I took in college I really enjoyed - I might just try to pick some up sometime. Writing games would be pretty cool as a pastime.

arebelspy

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Re: Retirement calculator
« Reply #11 on: October 15, 2014, 06:30:17 PM »
But some sort of feature to, for example, calculate what your retirement year should be to have a 95% success rate would be pretty awesome.

Well it can already calculate the stache amount needed for a given spending level for an X% success rate, via the investigate function.

So use that to figure the stache amount, then you just need to figure the time to FIRE based on your current amount saved, annual savings amount, and estimated rate of return, pretty basic math.

That investigate option is solely based on a fixed retirement date, but the stashe amount changes depending on when you retire.  As I mentioned before, if there are income streams that stop at retirement (and you currently set the end date for the same as your retirement date), I currently have no way to track that.  I'd need to know exactly what income/savings streams are tied to the retirement date to be able to accurately guess an FI date.


I'm not quite following (I thought I did, then I reread it and am not sure).

Here's what I'm saying:  Let's say you'd be happy with $X spending and Y% success rate.  Put in that $X spending, your AA, and the Y% into the "Maximum yearly/initial spending for success rate" option, and find out the stache amount you need.
then you just need to figure the time to FIRE based on your current amount saved, annual savings amount, and estimated rate of return, pretty basic math.
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

Beric01

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Re: Retirement calculator
« Reply #12 on: October 15, 2014, 06:46:35 PM »
But some sort of feature to, for example, calculate what your retirement year should be to have a 95% success rate would be pretty awesome.

Well it can already calculate the stache amount needed for a given spending level for an X% success rate, via the investigate function.

So use that to figure the stache amount, then you just need to figure the time to FIRE based on your current amount saved, annual savings amount, and estimated rate of return, pretty basic math.

That investigate option is solely based on a fixed retirement date, but the stashe amount changes depending on when you retire.  As I mentioned before, if there are income streams that stop at retirement (and you currently set the end date for the same as your retirement date), I currently have no way to track that.  I'd need to know exactly what income/savings streams are tied to the retirement date to be able to accurately guess an FI date.


I'm not quite following (I thought I did, then I reread it and am not sure).

Here's what I'm saying:  Let's say you'd be happy with $X spending and Y% success rate.  Put in that $X spending, your AA, and the Y% into the "Maximum yearly/initial spending for success rate" option, and find out the stache amount you need.
then you just need to figure the time to FIRE based on your current amount saved, annual savings amount, and estimated rate of return, pretty basic math.

This is eventually all doable via fairly basic math - I don't disagree.

I was looking more at comparing various scenarios. For example, let's I reduce my expenses by $5K a year (or increase my income my $5K a year) - how does that affect my retirement date? Or what if I'm happy with just a 90% success rate? It's not so easy (though admitted doable) to compute expected retirement date for 10+ scenarios after the fact.

lauren_knows

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Re: Retirement calculator
« Reply #13 on: October 15, 2014, 06:59:40 PM »

I'm not quite following (I thought I did, then I reread it and am not sure).

Here's what I'm saying:  Let's say you'd be happy with $X spending and Y% success rate.  Put in that $X spending, your AA, and the Y% into the "Maximum yearly/initial spending for success rate" option, and find out the stache amount you need.
then you just need to figure the time to FIRE based on your current amount saved, annual savings amount, and estimated rate of return, pretty basic math.

If you use the "Minimum yearly/initial portfolio for success rate" option, you're finding the least amount of stashe you need to retire at your desired spending level for the exact retirement year listed. The "pretty basic math" that you speak of only applies to the very specific scenario where 100% of your savings/income is coming in pre-retirement, then completely stops upon your retirement date, and then all of your expenses are exactly the same throughout retirement (if you want to be accurate about it).  That is the sort of math that MMM uses in the Shockingly Simple Math behind early retirement.

However, in reality, we have different income streams that will be there before AND after retirement, we have one-time expenses, we have expenses or income streams that will be on specific years regardless of the retirement year, etc etc.  So, cFIREsim does a year-by-year calculation using those inputs to figure out your retirement path.  That means that the "simple math" version can't really optimize to find your FI date.

Consider the attached photo.  What I'm talking about, is implementing a "Investigate FI date" feature that has a little checkbox pop up next to every income/savings/expense input. If you click that checkbox for an input, you're telling cFIREsim that this is a strictly pre-retirement input (it ends when retirement happens).  If you leave it unchecked, that input will be simulated no matter when you retire.   In the photo, the 401k would be a pre-retirement only input, but all of the rest would not be.  This would mean that moving the retirement date around would cause some different issues that can't be guessed with the simple math version.

Sorry if that was long-winded.

arebelspy

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Re: Retirement calculator
« Reply #14 on: October 15, 2014, 07:03:22 PM »
This is eventually all doable via fairly basic math - I don't disagree.

I was looking more at comparing various scenarios. For example, let's I reduce my expenses by $5K a year (or increase my income my $5K a year) - how does that affect my retirement date? Or what if I'm happy with just a 90% success rate? It's not so easy (though admitted doable) to compute expected retirement date for 10+ scenarios after the fact.

I mean, I guess it depends on your definition of easy.  I figure in under 5 minutes you could run 20 scenarios ($X spending amount at Y% success rate, $X at Y-5%, etc... then $X-5k at Y%, $X-5k at Y-5%, etc.) so you end up with 20 final portfolio amounts (many of which will overlap) and can then just plug those into excel with the formula that you're using to calculate your time to FI based on current stache amount, estimated portfolio return, and desired ending value, calculating it for each of those 20 ending values, and see your time to FI.

Or just pick the lowest and highest ending values and see what your "range" of time to FI is.  :)

I estimate total time for all of that at under 10 minutes.

I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
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lauren_knows

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Re: Retirement calculator
« Reply #15 on: October 15, 2014, 07:05:17 PM »

I estimate total time for all of that at under 10 minutes.

Fair enough, but it's certainly something that could be coded to and just as easily happen in 5 seconds. :)

arebelspy

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Re: Retirement calculator
« Reply #16 on: October 15, 2014, 07:08:04 PM »
The "pretty basic math" that you speak of only applies to the very specific scenario where 100% of your savings/income is coming in pre-retirement, then completely stops upon your retirement date, and then all of your expenses are exactly the same throughout retirement (if you want to be accurate about it).

Yup.  That's what I'm assuming, and I think it's fair to assume most will want to not have to make any money in FI (any they make will be a bonus), will have roughly their expenses figured out, etc.

I do like your photo, and it sounds fun, but I don't think calculating an FI date is all that difficult.  Given that it will take some pretty damn broad assumptions that will make it way less precise than any particular calculation allows, you can get as close as is possible to within that error range.

Your idea makes an imprecise thing a bit more precise in theory, but the problem is it'll still have that same error range due to the assumptions, which can't be overcome without a crystal ball, so it doesn't necessarily make you any more accurate.

But hey, don't let me stop you from adding features - I think it's neat (and would be very beneficial to my situation in particular, as there isn't a whole lot that does apply to real estate in calculators like cFIREsim).  I just don't know that it changes much in this particular "time to FI" discussion.  :)
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.

arebelspy

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Re: Retirement calculator
« Reply #17 on: October 15, 2014, 07:08:15 PM »

I estimate total time for all of that at under 10 minutes.

Fair enough, but it's certainly something that could be coded to and just as easily happen in 5 seconds. :)

Deal!

;)

Like I said in my previous post, I'm all for adding features and enhancing.  I was just pointing out a way one could do this quite easily with the current features in only a matter of minutes (and I imagine most on here spend far more time than that planning/calculating their ER date).
I am a former teacher who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and am now settled with three kids.
If you want to know more about me, this Business Insider profile tells the story pretty well.
I (rarely) blog at AdventuringAlong.com. Check out the Now page to see what I'm up to currently.