The Money Mustache Community
Learning, Sharing, and Teaching => Ask a Mustachian => Topic started by: alaskacobalt on January 12, 2015, 06:56:20 AM
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How are you guys calculating your fire age? I have been trying to find a blend of calculators, but haven't found one that I feel is accurate. They all tell me that I need $3 million to retire, but I can do basic math and feel like they are way off base.
Basically, when I look at it, I figure I can retire when my earnings on my money are enough to cover my expenses. For example, I expect a rate of return of about 5% into retirement. I expect to be debt free when I retire (or I wont retire) and will only need about $30k a year (pre-tax), which seems high to me with no debt, but I want to be comfortable. So I assume this means I need about $600k to retire comfortably. And this doesn't even factor in SSN or the fact that I have $600k to pull from. That would be my safety net.
Am I oversimplifying this? Why would my fire number be so dramatically different from the "experts"? Why would anyone need $3 million to retire on? Does this assume everyone will carry the same expenses into retirement?
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A safe bet is 4% withdrawal rate. Which means once you have 25 times your yearly expenses invested, then you can retire.
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Have you seen http://mustachecalc.com/ (http://mustachecalc.com/) ?
Are not well linked and I am not sure of the official relation to mmm but some good tools there.
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Am I oversimplifying this? Why would my fire number be so dramatically different from the "experts"? Why would anyone need $3 million to retire on? Does this assume everyone will carry the same expenses into retirement?
No, you are on the right track. Check out CFiresim (http://www.cfiresim.com/input.php) or Fire Calc (http://www.firecalc.com/) for a more detailed breakdown.
Most experts or financial institutions usually rely on income as a factor for determining what your retirement income will need to be. Usually I see 80% of your income when you are working. IE if you are earning 100k/yr in retirement you need 80K per year. So a portfolio worth about 2,000,000.
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I also like the AARP calculator. It allows you to change your spending % in retirement. It is pretty accurate.
Though, we are currently using a 4% SWR, plus paid off house. Which is 25x current expenses, plus a buffer of 5-10k per year, plus a paid off house.