Author Topic: How do you guys calculate 401k/vanguard accounts to get an idea  (Read 855 times)

texxan1

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How do you guys calculate 401k/vanguard accounts to get an idea
« on: October 12, 2017, 06:46:29 PM »
something strikes me as im calculating wrong.

so how do you guys and gulls calculate your amount you have to FIRE, based on amount now, and amount on proposed date of FIRE

if ive been doing this wrong, that's bad on me. Ive been using just a simple interest calculator online....

So here is the scoup

help me see how yall calculate it, so I know im either a dumbass or im just conservative lol

401k   555k
vanguard after tax acct  500k

I am 45, and plan to FIRE at 50....

I will continue to put the max of 53k a year into my 401k and depending on work projections, put 180k away into my vanguard for atleast the next 2.5 years

I don't usually include the vanguard additions, because as stable is my job is I don't think it will last 5 years.

Please help me calculate properly...

Tex

katsiki

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secondcor521

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #2 on: October 12, 2017, 07:32:51 PM »
What I did a long time ago was create a spreadsheet for this.  It started out simple and got more complex over time.

Each row in my spreadsheet represented a month.  Each column in my spreadsheet represented an account.

So you could do something like:

                 401k        Vanguard         Total
Oct-17       555,000    500,000       =sum(401k,Vanguard)
Nov-17       ?
Dec-17

So for November-17 for the 401k, I would put a formula that was something like =(PrevBalance+AnnualContrib)*(AnnualRateOfReturn/12).  Same thing for Vanguard for November-17.

Once you've done that for each account and got the row for November-17 done, you can copy-paste the rows down as far as you want until you see a Total that represents 25x your annual spending or whatever target you've set for yourself.  Right now if your expenses are about $40K you're probably close to retiring.  But you're a high income type so that probably seems too low.  In another 5 years you'll probably be able to withdraw $80K-$90K.  Remember that when you retire you only have to pay for your spending, not your savings.  Also, if you're that high income now, your taxes will likely drop considerably when you stop working, because - roughly speaking - you'll be taxed on the $60K you're spending that year, not the $250K you're no longer earning.

Good luck!
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Rhoon

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #3 on: October 12, 2017, 08:04:21 PM »
Here's a couple of calculations I use:

This makes a calculation based on a 6% return and even monthly contributions totaling $35K/yr and gives me my projected stash by the date I set in S12.

=FV(6%/12, DATEDIF(NOW(),S12,"M"), -35000/12, -L10)

"S12" is my target retire day.
"L10" is my current assets.
 
---

This gives me a projected actual FIRE date based upon the same L10 as listed above with $35K/yr contributions and needing $30K x 25 years of expenses.

=TODAY() +NPER(6%/12,-35000/12, -L10, 30000*25)/12*365.25

Every month I update my current stash and these values recalculate to show how I'm doing towards FIRE.

Side note: I got these formulas from fellow MMM'ers, so I can't take credit for them.

Acastus

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #4 on: October 13, 2017, 09:16:00 AM »
I use the Quicken retirement calculator. I also used Financial Engines, available as a Vanguard investor. Both allow you to add specific extra expenses in specific years, choose the year of retirement and social security separately, college expenses. It makes assumptions based on inflation for your future salary and retirement contributions. Both give you a chance of success, and show spending every year until death. I like that you can look at the results in both nominal and inflation adjusted dollars.

texxan1

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #5 on: October 13, 2017, 12:58:22 PM »
so when you guys calculation the money expected to have later, do you use simple interest or compounded interest?

Liberty Stache

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #6 on: October 13, 2017, 01:31:12 PM »
so when you guys calculation the money expected to have later, do you use simple interest or compounded interest?

Compounded.
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talltexan

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #7 on: October 16, 2017, 12:11:53 PM »
Suppose you have $500,000 in a traditional 401K and $500,000 in a Roth IRA. The money in the Roth IRA is more efficient in meeting your expenses because of the tax implications.

You might even be in a position in which the $500,000 in the Roth is more valuable than having $560,000 in a traditional 401K.

Rhoon

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #8 on: October 16, 2017, 03:59:11 PM »
I use this to compute what the future value may be:

Roth account: $500,000


=FV(6%/12, 2/1/2027, -35000/12, -500000)

6%/12 = percentage Return for a year, divided per month
2/1/2027 = Retire Date
-35000/12 = $35K in contributions per year, divided evenly over 12 months
-500000 = Present value of my Roth.

If you're just letting your stash grow without contributions, then I'd Zero out the $35K.

Goldielocks

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Re: How do you guys calculate 401k/vanguard accounts to get an idea
« Reply #9 on: October 16, 2017, 08:07:07 PM »
so when you guys calculation the money expected to have later, do you use simple interest or compounded interest?

Compounded, always.

But for 5 years, it does not really matter, if your interest rate is fairly low.

Compounded.