Author Topic: How to figure out FI amount if hitting FI after kids are grown  (Read 2914 times)

avonlea

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How to figure out FI amount if hitting FI after kids are grown
« on: November 12, 2013, 07:32:56 AM »
The one problem that I have whenever I try to use an FI calculator is that our current expenses are not reflective of what they will be around the time when I think we will hit FI.  On FIRE calculators, I'm usually asked to enter current income, savings, and spending.  Problem is, some of the savings is going towards the kids so can't be used in that calculation and we also will be spending quite a bit less once the kids are gone, even if we take an extra trip each year. 

So, this is what I do.  For the future spending calculation, I have been subtracting 75% of the amount that is spent on the kids' food, groceries, activities, etc., but I keep travel expenses the same, even though there will be only two of us visiting places instead of 4.  I take that final number and then multiply that by 25.  Then I use regular retirement calculator that just asks for the current annual savings, current portfolio amount, and the desired final $ number that we think we will need to retire, and use it to find out how many years it will be until FI.  It looks like it will most likely be age 45 when using a fairly conservative growth rate.

Okay, have I confused you enough?  Am I doing this WAY wrong or is this a fairly good way to calculate FI for us?

footenote

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Re: How to figure out FI amount if hitting FI after kids are grown
« Reply #1 on: November 12, 2013, 07:56:50 AM »
Try cfiresim.com (by our own bo_knows). It has much more flexibility than most calculators. You will be able to experiment with your intended FIRE spending (vs the clumsy way most calculators assume it's some percentage of your current income).

Plus you'll see how your portfolio, chosen withdrawal method and planned annual spending would have fared in past historical periods. I've tried (and similar to you been frustrated by) many calculators in the past. cfiresim rocks.

arebelspy

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Re: How to figure out FI amount if hitting FI after kids are grown
« Reply #2 on: November 12, 2013, 08:02:16 AM »
I second cFIREsim as a great tool.

I ran into the same issue you did: spending after FIRE will be different than now.  (For me the opposite though, our spening will go up by at least 50%, perhaps double, rather than go down.)

Since none of the simple retirement calculators like Networthify let you specify expenses before and after FIRE, I use a spreadsheet that lets me input both of those variables (along with other ones, such as current income, SWR, etc., of course).
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avonlea

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Re: How to figure out FI amount if hitting FI after kids are grown
« Reply #3 on: November 12, 2013, 08:59:35 AM »
Thank you, guys!  (And thanks, bo_knows.)   

bo_knows

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Re: How to figure out FI amount if hitting FI after kids are grown
« Reply #4 on: November 12, 2013, 09:35:52 AM »
Haha, thanks.

All you need to do is to set up an "income" for the years after the kids are grown, to offset the previous spending amount.

Example: While kids are in the house, your spending is $50k/yr, but you estimate it'll be $35k when they leave.  Kids move out in 2020.  Set your general "Spending" to $50k, and set up an inflation-adjusted "Savings/Income" input for $15k from 2020 onward, and you effectively changed your spending amount from there on out.  You can use these features to change your savings/spending rates during certain periods of your life.

In my personal calculations, I do this to simulate a part-time job during the earlier portion of my FIRE plans.

Edit: The above example only applies if you're FI'ing before the kids move out (aka your spending change actually matters in the calculation)
« Last Edit: November 12, 2013, 09:38:29 AM by bo_knows »

avonlea

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Re: How to figure out FI amount if hitting FI after kids are grown
« Reply #5 on: November 12, 2013, 11:08:39 AM »
Haha, thanks.

All you need to do is to set up an "income" for the years after the kids are grown, to offset the previous spending amount.

Example: While kids are in the house, your spending is $50k/yr, but you estimate it'll be $35k when they leave.  Kids move out in 2020.  Set your general "Spending" to $50k, and set up an inflation-adjusted "Savings/Income" input for $15k from 2020 onward, and you effectively changed your spending amount from there on out.  You can use these features to change your savings/spending rates during certain periods of your life.

In my personal calculations, I do this to simulate a part-time job during the earlier portion of my FIRE plans.

Edit: The above example only applies if you're FI'ing before the kids move out (aka your spending change actually matters in the calculation)

Thanks for the help and mini tutorial. :)  I'm planning to have a part-time job before the offiicial FI date but didn't know how to throw that into the mix.  I appreciate this!

avonlea

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Re: How to figure out FI amount if hitting FI after kids are grown
« Reply #6 on: November 13, 2013, 07:10:00 AM »
Just wanted to add an update.  I have tried bo_knows's calculator.  And...

It turns out my earlier calculation method wasn't super terrible. Okay, actually, yeah it was. 

With cfiresim.com, I realized that we can actually keep our current spending rate and still hit FI in 7 years (if no emergencies occur, of course).  Before using this calculator, I was overshooting on time until FI by about 4 years and undershooting on how much we could spend annually by $5,000.  I also wasn't taking into account social security income that will eventually be there.

Like arebelspy and footenote, I am now a fan.

footenote

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Re: How to figure out FI amount if hitting FI after kids are grown
« Reply #7 on: November 13, 2013, 07:30:23 AM »
Just wanted to add an update.  I have tried bo_knows's calculator.  And...

It turns out my earlier calculation method wasn't super terrible. Okay, actually, yeah it was. 

With cfiresim.com, I realized that we can actually keep our current spending rate and still hit FI in 7 years (if no emergencies occur, of course).  Before using this calculator, I was overshooting on time until FI by about 4 years and undershooting on how much we could spend annually by $5,000.  I also wasn't taking into account social security income that will eventually be there.

Like arebelspy and footenote, I am now a fan.
Yeah! Four years is a lot of time gained from a YMYL POV.