Author Topic: Calculating FIRE, if we don't want to fully retire  (Read 2550 times)

Chupi555

• Posts: 11
Calculating FIRE, if we don't want to fully retire
« on: November 18, 2014, 08:19:14 PM »
I'm not sure if this has been talked about somewhere else, I couldn't find anything.

I was just crunching some hypothetical numbers after reading a post on http://earlyretirementextreme.com where he talks about needing your monthly cost of living x 300 to live off the interest. The question I have though, is there anyway to do an simple calculation to figure out this number if we DON'T want to retire, but just want to work less.

So here's my hypothetical projections:

If we can live on 4,000 per month.

Then we need 4,000x300= 1,200,000

@3,000 per month savings      we have 1.2m in 17 years
@5,000 per month         we have 1.2m in 12 years

____________________________

If we can live on 3,800 per month

Then we need 3,800x300 = 1.14m

@3,000            we have 1.15     16 years
@5,000            we have 1.4       12 years
___________________________

\$3,000/m cost of living

@3,000   we have 900k in 14 years
@5,000   we have 900k in 10 years
__________________________

So cool, if we can get our cost of living down to 3k per month and save 5k per month, then we're FIRE in 10 years! But is there a simple way to work into this calculation to see what happens if we can have working income of say 2k or 4k per month after that 10 year point?

• Handlebar Stache
• Posts: 2127
Re: Calculating FIRE, if we don't want to fully retire
« Reply #1 on: November 18, 2014, 08:33:36 PM »
Overly simplified because the lower your spending needs, the smaller amount you will pay in taxes.

At \$4,000 per month you will probably be paying some tax.

At \$3,000 per month you will likely pay no tax.

At \$2,000 per month you might actually get some credits (heathcare, saver's credit)

arebelspy

• Senior Mustachian
• Posts: 28262
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Re: Calculating FIRE, if we don't want to fully retire
« Reply #2 on: December 03, 2014, 03:12:30 PM »
But is there a simple way to work into this calculation to see what happens if we can have working income of say 2k or 4k per month after that 10 year point?

Yes.  Just subtract what you expect to earn from your FIRE budget.  Your stache needs to cover what's left.

Example:  You plan to spend 3k/mo in ER, and you plan to make 2k/mo in ER.  Your stache now needs to be 25x (at a 4% WR) the 12k (1k/mo x 12 months) = 300k.  That commits you to working pretty much indefinitely though.
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Seņora Savings

• Stubble
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• Age: 32
Re: Calculating FIRE, if we don't want to fully retire
« Reply #3 on: December 03, 2014, 04:14:09 PM »
You need two pots of money.  One to cover the gap between what you will earn early on and what you want to spend and one to cover what you'll loose in late retirement from not having the part time job.  That second pool of money gets to grow.

Example: Want 5k per month, will earn 2k per month for 20 years.

Now money: 3k per month or \$900,000

Later money: 2k per month or \$600,000, but not for 20 years.  Assuming 5% interest, you need 600,000/(1.05^20) or \$225,000 right now.

Total needed: \$1,125,000.

Obviously earning extra money in the short term will allow you to retire on much less.  For every \$19,000 that you save, you can earn \$100 less per month in early retirement.

Dodge

• Pencil Stache
• Posts: 790
Re: Calculating FIRE, if we don't want to fully retire
« Reply #4 on: December 03, 2014, 09:51:43 PM »
Once you've done the calculations, and have a plan ready, you can run these type of calculations on cfiresim.com to see what your chance of failure is.