Author Topic: FIRE - Calculation Help  (Read 2423 times)

TheDesertPlan

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FIRE - Calculation Help
« on: February 08, 2017, 01:22:30 AM »
Currently Live in the Middle East Paying 0 Tax. Our savings rate is 65%.

I keep going around and around in circles trying to figure out my number so I opening myself up to you guys for your thoughts and advice.

-------------------------

I want to have 85,000 Eur spending money per year to retire.

------------------------

My question is - Does the x 25 times include for Tax ? or do I need to up that figure to 150,000 EUR to give me a net amount of 85,000 EUR?

------------------------

Income Tax in Ireland

20% - 0- 42500 EUR
40% - 42500 Eur Upwards

Here is the tax calculator


http://services.deloitte.ie/tc/Default.aspx


-----------------------

85,000 x 25 = ~2,000000 - This will take me ~ 7.5 years assuming a 5% compound interest
150,000 x 25 = ~3,750,000 - This will take me ~12 years assuming a 5% compound interest

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Inputs

Current Principal (net worth) = 300,000
Annual Addition = 177,000
Interest Rate = 5%

------------------------------

The bottom line - I want to have one figure written on my bathroom mirror at home and how long we will have to stay in the middle east to retire back to Ireland.


shuffler

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Re: FIRE - Calculation Help
« Reply #1 on: February 08, 2017, 02:25:49 AM »
Taxes, like batteries, are not included.
They're an expense, just like groceries and rent.

TheDesertPlan

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Re: FIRE - Calculation Help
« Reply #2 on: February 08, 2017, 03:14:54 AM »
Taxes, like batteries, are not included.
They're an expense, just like groceries and rent.

Thanks for the response. I'm looking for a bit more of a detailed answer if possible.


Lews Therin

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Re: FIRE - Calculation Help
« Reply #3 on: February 08, 2017, 05:31:36 AM »
Take the amount of money you want to spend yearly.

Add taxes for that amount of money.

Save that amount of money. *25 for your FIRE stash

We don't know your taxation rate, so up to you now.

former player

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Re: FIRE - Calculation Help
« Reply #4 on: February 08, 2017, 05:33:22 AM »
Do you know what the tax rate will be in Ireland in 12 years time?

boarder42

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Re: FIRE - Calculation Help
« Reply #5 on: February 08, 2017, 06:03:21 AM »
when questions as basic as this come up here they are a major red flag IMO.  This is a pretty basic fundamental of FIRE.  And you will likely have to learn alot more about all the ins and outs of withdrawals and dig much deeper to understand your actual tax loads.  the 4% rule applies to ALL expenses.  every. single. one.  Taxes are an expense so the basic answer is you will have to include them.  The more complex answer is you need to really dig in and understand the ins and outs of FIRE and taxes in your country.  I can't give any input on Ireland but in the US there are creative ways to limit taxes on savings.  I would assume you have some there too.  On the flip side HOLY FSFDSFSF you need to reign in your spending.  I'm not mustachian by any stretch but our number is half of yours including an annual mortgage.  You should be evaluating where money is going on top of understanding everything else about how taxes and withdrawal strategies work.

TheDesertPlan

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Re: FIRE - Calculation Help
« Reply #6 on: February 08, 2017, 10:47:44 PM »
Take the amount of money you want to spend yearly.

Add taxes for that amount of money.

Save that amount of money. *25 for your FIRE stash

We don't know your taxation rate, so up to you now.

Thanks Buddy. I just wanted to know if an amount was estimated for tax in the x25 times figure. Thanks for confirming that it is not and needs to be added before the the multiplication.

TheDesertPlan

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Re: FIRE - Calculation Help
« Reply #7 on: February 08, 2017, 11:05:01 PM »
when questions as basic as this come up here they are a major red flag IMO.  This is a pretty basic fundamental of FIRE.  And you will likely have to learn alot more about all the ins and outs of withdrawals and dig much deeper to understand your actual tax loads.  the 4% rule applies to ALL expenses.  every. single. one.  Taxes are an expense so the basic answer is you will have to include them.  The more complex answer is you need to really dig in and understand the ins and outs of FIRE and taxes in your country.  I can't give any input on Ireland but in the US there are creative ways to limit taxes on savings.  I would assume you have some there too.  On the flip side HOLY FSFDSFSF you need to reign in your spending.  I'm not mustachian by any stretch but our number is half of yours including an annual mortgage.  You should be evaluating where money is going on top of understanding everything else about how taxes and withdrawal strategies work.

Hi Boarder42,

Thanks for the response and the information helped. I am reading as much as I can at the moment.

I am obviously new to this and I am here to learn. What did you mean by the "red flag" comment? That I should not be on the forum until I am more up to speed? My opinion is like any forum, there will be stupid questions from Noobs but that's how you learn. Probably a good idea not to make them feel like sh*t about it don't you think ?

Attached is a breakdown of my current spend.

Obvious Issues:

  • Saving for a wedding in June.
    Rent is big - But I live in Doha, Qatar. Rent is big everywhere. We have a standard two bedroom apartment.
    Cleaner - Obviously a Clanger here :) This represents 1.22% of annual spend - We both work 6am to 5pm and sometimes onwards. This helps us alot and helps us not get into fights with each other over stupid things. Before we were in the middle east we never had a cleaner. Still open to advice on this.

Open to advise.

Kalergie

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Re: FIRE - Calculation Help
« Reply #8 on: February 09, 2017, 12:00:00 AM »
Hey mate,
First off, nobody says you don't belong here. People here spent a lot of time learning the MMM way of life as well as the science of FIRE. People just remind you to do your research before you pull the trigger. So in 20-30 years you won't regret going this route, god forbid, blaming the community because you didn't follow the rules.

With that out of the way: I'm also European. I have been living in Dubai for a decade. I know your problems. Rents are sick high here and both Doha and Dubai are designed to separate you from your hard earned money. That's totally cool for me. It's any country's right to chose what to do. After all, I have the choice to leave!

My number 1 advise is to stay away from any venue-entertainment such as brunches, after work drinks, entertainer voucher books and all that "I live away from home in the desert, I am lonely, I am miserable if I don't spend money and I want to live my life, I deserve this"-crap! Trust me, I have seen so many people earning GOOD money for years living a life of leisure but returning home broke, sick (from all the booze) and even jailed (due to financial delinquencies) simply because they don't have their budget in check!

My number 2 advise on living an expat life in Dubai/Doha/Abu Dhabi/Bahrain etc, make good friends. They don't have to be super close. Spend time with good people who are on the same track with regards to finance. Meaning, do not get involved with those bar stars and brunch people. You will piss away 500-700$ a weekend, fuck up your kidney and lose a lot of time which you could use to improve yourself. Make friends who like to spend time with you, not to show off their new BMW.

Number 3: I get why you have a cleaner. I don't but since labor is cheap, I get it. I have two issues with this though. First and foremost, why do you and your spouse get into fights if you have to clean your apartment? You won't have a cleaner when you go back to Ireland. So why don't you start working on that issue first so you won't run into marital issues down the line. The 2nd issue: Some people stare in disbelieve and with a smirk on their face asking me why on earth I clean my own apartment. Yes I do. I wouldn't have a cleaner back at home so why would I get one here. All it does is hedonic adaptation. I get used to getting my toilette cleaned. Once I go home, it'll be much harder to get back in the normal world routine!

Number 4: When I first learned about MMM, I read every single blog post Pete published. It took me about a week. Some blog posts, I have in my favorite list for the occasional re-read. I had that red-pill moment once reading all of MMM's posts. I don't need any of this crap to be happy! This would have been useful in any country, but it is especially living here in Dubai.

boarder42

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Re: FIRE - Calculation Help
« Reply #9 on: February 09, 2017, 05:48:10 AM »
wasnt saying you dont belong you just really need to learn the math. you should throw down a full on case study and be open and let people rip you apart.  with real numbers none of this percentage crap. but that choice is up to you.

former player

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Re: FIRE - Calculation Help
« Reply #10 on: February 09, 2017, 06:06:46 AM »
I don't get the idea that a full case study is the issue here: OP is looking for early retirement rather than the full way of the mustache, and has the income to do it.

OP: MMM's post on savings rate vs years to retirement is your bible -

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

There will be a number of variables.  You don't know what the tax rates in Ireland will be in 7 or 12 years' time.  You may have found somewhere you would rather go than Ireland.  You may have found a passion in life that will take you in a different direction entirely.  You might have a disability (hope not) or family who have become dependent on you.  Depending on where your investments are, you may need a lower % than the 4% which is generally applicable in the USA (in the UK its 3% to get the same level of assurance).   All you can do is find out the upper and lower range you are comfortable with and take a punt on the mean/median or average for your number on the mirror.  What you can control is the basic maths: the more you earn and the less you spend the sooner the end date will come.

One other thing: I hope that the 1.22% of your income that you pay your cleaner is not exploitative.

Best of luck.

yachi

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Re: FIRE - Calculation Help
« Reply #11 on: February 09, 2017, 06:51:06 AM »
Currently Live in the Middle East Paying 0 Tax. Our savings rate is 65%.

I keep going around and around in circles trying to figure out my number so I opening myself up to you guys for your thoughts and advice.

-------------------------

I want to have 85,000 Eur spending money per year to retire.

------------------------

My question is - Does the x 25 times include for Tax ? or do I need to up that figure to 150,000 EUR to give me a net amount of 85,000 EUR?

------------------------

Income Tax in Ireland

20% - 0- 42500 EUR
40% - 42500 Eur Upwards

Here is the tax calculator


http://services.deloitte.ie/tc/Default.aspx


-----------------------

85,000 x 25 = ~2,000000 - This will take me ~ 7.5 years assuming a 5% compound interest
150,000 x 25 = ~3,750,000 - This will take me ~12 years assuming a 5% compound interest

http://www.moneychimp.com/calculator/compound_interest_calculator.htm

Inputs

Current Principal (net worth) = 300,000
Annual Addition = 177,000
Interest Rate = 5%

------------------------------

The bottom line - I want to have one figure written on my bathroom mirror at home and how long we will have to stay in the middle east to retire back to Ireland.

The 25x expenses is because of the 4% rule, where you can withdrawal 4% of your portfolio per year and it would have lasted 30 years in all past periods.  The rule is based on the historic performance of US stocks and bonds.  It doesn't care if the withdrawal is spent on hookers and booze or taxes, it's still withdrawn.

Your savings rate was a little misleading at first since you're counting the money being set aside for the wedding.  The shockingly simple math is a good way of looking at savings rates, but it assumes you're already living the live you'll live during retirement:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

TheDesertPlan

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Re: FIRE - Calculation Help
« Reply #12 on: February 12, 2017, 10:50:58 PM »
Hey mate,
First off, nobody says you don't belong here. People here spent a lot of time learning the MMM way of life as well as the science of FIRE. People just remind you to do your research before you pull the trigger. So in 20-30 years you won't regret going this route, god forbid, blaming the community because you didn't follow the rules.

With that out of the way: I'm also European. I have been living in Dubai for a decade. I know your problems. Rents are sick high here and both Doha and Dubai are designed to separate you from your hard earned money. That's totally cool for me. It's any country's right to chose what to do. After all, I have the choice to leave!

My number 1 advise is to stay away from any venue-entertainment such as brunches, after work drinks, entertainer voucher books and all that "I live away from home in the desert, I am lonely, I am miserable if I don't spend money and I want to live my life, I deserve this"-crap! Trust me, I have seen so many people earning GOOD money for years living a life of leisure but returning home broke, sick (from all the booze) and even jailed (due to financial delinquencies) simply because they don't have their budget in check!

My number 2 advise on living an expat life in Dubai/Doha/Abu Dhabi/Bahrain etc, make good friends. They don't have to be super close. Spend time with good people who are on the same track with regards to finance. Meaning, do not get involved with those bar stars and brunch people. You will piss away 500-700$ a weekend, fuck up your kidney and lose a lot of time which you could use to improve yourself. Make friends who like to spend time with you, not to show off their new BMW.

Number 3: I get why you have a cleaner. I don't but since labor is cheap, I get it. I have two issues with this though. First and foremost, why do you and your spouse get into fights if you have to clean your apartment? You won't have a cleaner when you go back to Ireland. So why don't you start working on that issue first so you won't run into marital issues down the line. The 2nd issue: Some people stare in disbelieve and with a smirk on their face asking me why on earth I clean my own apartment. Yes I do. I wouldn't have a cleaner back at home so why would I get one here. All it does is hedonic adaptation. I get used to getting my toilette cleaned. Once I go home, it'll be much harder to get back in the normal world routine!

Number 4: When I first learned about MMM, I read every single blog post Pete published. It took me about a week. Some blog posts, I have in my favorite list for the occasional re-read. I had that red-pill moment once reading all of MMM's posts. I don't need any of this crap to be happy! This would have been useful in any country, but it is especially living here in Dubai.

Thanks so much for your advise. I really appreciate it. I actually quite like life here in doha so I try my best not to play the "I'm living in the middle east and need to treat myself" role.

I will take your advise on board.

TheDesertPlan

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Re: FIRE - Calculation Help
« Reply #13 on: February 12, 2017, 10:56:29 PM »
I don't get the idea that a full case study is the issue here: OP is looking for early retirement rather than the full way of the mustache, and has the income to do it.

OP: MMM's post on savings rate vs years to retirement is your bible -

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

There will be a number of variables.  You don't know what the tax rates in Ireland will be in 7 or 12 years' time.  You may have found somewhere you would rather go than Ireland.  You may have found a passion in life that will take you in a different direction entirely.  You might have a disability (hope not) or family who have become dependent on you.  Depending on where your investments are, you may need a lower % than the 4% which is generally applicable in the USA (in the UK its 3% to get the same level of assurance).   All you can do is find out the upper and lower range you are comfortable with and take a punt on the mean/median or average for your number on the mirror.  What you can control is the basic maths: the more you earn and the less you spend the sooner the end date will come.

One other thing: I hope that the 1.22% of your income that you pay your cleaner is not exploitative.

Best of luck.

It isnt at all - Although I would rather employ the cleaner direct rather than through a company to make sure that she actually gets all the money.

Thanks for your comments. I get that I need to make changes and I will work on that hard with my Fiance over the next while.

My Values are definitely changing with age, all I have really been concentrating on to date was being as successful as possible at bringing in more money and not necessarily spending less.


TheDesertPlan

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Re: FIRE - Calculation Help
« Reply #14 on: February 12, 2017, 10:57:09 PM »
wasnt saying you dont belong you just really need to learn the math. you should throw down a full on case study and be open and let people rip you apart.  with real numbers none of this percentage crap. but that choice is up to you.

Happy to do it and to hear you comments.