Author Topic: *early* retirement calculator  (Read 3275 times)

hoping2retire35

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*early* retirement calculator
« on: December 30, 2015, 12:52:02 PM »
Does anyone use a mortgage calculator to do their real calculations?

I'm 32 at this writing so SS is not really a factor for me in the near(probably not in the later either) future.
basically I know how much I will spend in today's dollars so I take a reasonable return (say 9%) minus inflation (3%) put 6% into the interest rate, plug in a number like $500,000 try to get the Home Value as low as it will allow and tax and PMI rate as low as it will go and see if the "monthly payment" is greater than my monthly expenditures.

I really just want to know if this is a good way to avoid using the online calculators and if anyone else has tried this. I know I am not giving myself a safety margin but you could just lower the interest "rate" to see how much safety you have.

The above scenario (40 year term) comes to $2750 but if the interest rate is 4% it is $2090, that is the monthly "payment" to yourself from investments.

Tyler

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Re: *early* retirement calculator
« Reply #1 on: December 30, 2015, 02:00:07 PM »
I understand what you're trying to do.  Assuming you're modeling a 30-year mortgage and plan to die exactly 30 years after retirement with no money left, it sorta makes sense.  The issue I see is that a mortgage is a contract with a fixed interest rate and payment while investments are variable.  That volatility complicates the retirement calculations and makes numbers from the mortgage method quite a bit more rosy than reality.

I really just want to know if this is a good way to avoid using the online calculators and if anyone else has tried this.

Just curious -- What online early retirement calculators have you tried, and why would you like to avoid them? 

hoping2retire35

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Re: *early* retirement calculator
« Reply #2 on: December 30, 2015, 02:19:20 PM »
I understand what you're trying to do.  Assuming you're modeling a 30-year mortgage and plan to die exactly 30 years after retirement with no money left, it sorta makes sense.  The issue I see is that a mortgage is a contract with a fixed interest rate and payment while investments are variable.  That volatility complicates the retirement calculations and makes numbers from the mortgage method quite a bit more rosy than reality.


well, I just put the term to 50 years or whatever. I also was saying you can put the interest rate lower(basically set it to what you think your SWR is). The benefit from what I have done is to adjust what I think the actual rate of return will be and to insert my own inflation rate(I like to use 4.5% for inflation). So typical market rate from last 10 years or whatever I happen to have researched minus inflation for things like food not just other consumer goods.

Really the reason I like this it to put in my own inflation adjusted rate as opposed to what the calculators say. I would say the inflation rate for things like food, some other staples, or a used car is closer to 4.5%. Computers or other things that get cheaper with technology or economies of scale or other business practices skew the inflation rate to look lower. Case in point; eggs, beef, or price of land.

The other thing that aggravates me is that it works backwards from what I want. If I am saving retirement funds at the same time as saving for down payments on rental properties then it is a little more complicated. Really, it is just a way to view it backwards from how the retirement calculator does.

Tyler

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Re: *early* retirement calculator
« Reply #3 on: December 30, 2015, 02:53:09 PM »
FWIW, both FIREcalc and cFIREsim are quite flexible and allow for lots of tweaks in assumptions.  With the wide selection out there, I imagine there's one that does what you want.

If that doesn't work, I might recommend building your own spreadsheet to model what you want rather than using a mortgage calculator in a way it is not intended.  Just the process of building it will be very educational and will help you understand the underlying assumptions involved.   
« Last Edit: December 30, 2015, 02:56:21 PM by Tyler »

arebelspy

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Re: *early* retirement calculator
« Reply #4 on: December 31, 2015, 03:27:52 AM »
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

hoping2retire35

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arebelspy

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Re: *early* retirement calculator
« Reply #6 on: December 31, 2015, 08:04:32 AM »
We are two former teachers who accumulated a bunch of real estate, retired at 29, spent some time traveling the world full time and are now settled with two kids.
If you want to know more about us, or how we did that, or see lots of pictures, this Business Insider profile tells our story pretty well.
We (rarely) blog at AdventuringAlong.com. Check out our Now page to see what we're up to currently.

hoping2retire35

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Re: *early* retirement calculator
« Reply #7 on: December 31, 2015, 08:38:09 AM »
huh?

Exactly!
lol, it didn't work the first time i loaded the page, it was just blank