### Author Topic: Is MMM's simple math  (Read 7466 times)

#### CommonCents

• Handlebar Stache
• Posts: 2386
##### Is MMM's simple math
« on: July 25, 2014, 08:36:26 AM »
table/graph based off of pre-tax or post-tax savings rates?

#### boarder42

• Walrus Stache
• Posts: 7849
##### Re: Is MMM's simple math
« Reply #1 on: July 25, 2014, 08:39:21 AM »
his graph doesnt really matter ...

what matters is how much you plan to spend in retirement each year including any taxes... just take that *25 and then go use a compound interest calculator to see how many years @6% on whatever you plan to invest each year will take to grow ... and that will get you in the ball park.

#### matchewed

• Magnum Stache
• Posts: 4334
• Location: CT
##### Re: Is MMM's simple math
« Reply #2 on: July 25, 2014, 08:49:54 AM »
It's just a rule of thumb, a guideline to demonstrate the concept that saving more money = faster FIRE, that and the fact that FIRE can exist. I wouldn't use it to calculate any specifics just a rough generalization.

#### neo von retorch

• Magnum Stache
• Posts: 3356
• Location: SE PA
##### Re: Is MMM's simple math
« Reply #3 on: July 25, 2014, 08:55:14 AM »
Though it "doesn't matter" - it's TAKE HOME for a reason. You can't SPEND your gross income.

If you earn a MILLION dollars but it's taxed at 95% but then you only spend \$25,000 / year you're still saving 50% of your take home pay. And it'll still take ~16 years to put enough away in investable assets to retire.

You can figure in pre-tax contributions like 401(k) to a degree. They will contribute to investable assets - but you'll have to figure for some tax spending in retirement as you withdraw it (though you can keep this pretty low, especially on <= \$25k / year expenses.)
« Last Edit: July 25, 2014, 09:09:27 AM by neogodless »

#### matchewed

• Magnum Stache
• Posts: 4334
• Location: CT
##### Re: Is MMM's simple math
« Reply #4 on: July 25, 2014, 09:04:15 AM »
Also from the original blog post-
Quote
It’s quite amazing, especially at the less Mustachian end of the spectrum. A middle-class family with a 50k take-home pay who saves 10% of their income (\$5k) is actually better than average these days. But unfortunately, “better than average” is still pretty bad, since they are on track for having to work for 51 years.

Bolded for emphasis.

#### CommonCents

• Handlebar Stache
• Posts: 2386
##### Re: Is MMM's simple math
« Reply #5 on: July 25, 2014, 09:25:16 AM »
Thanks Matchewed

I'm not using it to calculate specifics, but mentally it does makes a huge difference.  Using hypothetical saving rate, suppose I am saving 30% of my pre-tax money.  Well, we pay perhaps 35% in taxes, so that would mean we are saving perhaps 47% of post-tax money.  That a difference between approximately 28 years till retirement versus 18 years to retirement.  I'm obviously not going to set my retirement watch by that calculation....but it's a pretty big discrepancy hence my question.

#### JoyBlogette

• Stubble
• Posts: 242
##### Re: Is MMM's simple math
« Reply #6 on: July 25, 2014, 12:47:19 PM »
table/graph based off of pre-tax or post-tax savings rates?

I always use post-tax savings.

#### sheepstache

• Handlebar Stache
• Posts: 2424
##### Re: Is MMM's simple math
« Reply #7 on: July 25, 2014, 01:11:31 PM »
CC, have you tried calculating years to retirement with the networthify thingimajig

It lets you input both income and expenses so it takes the guesswork out of what's meant by percentage.  Since you won't have taxes in retirement, I would just put your post-tax earnings in the income field (or if you think you'll pay some taxes, add what you estimate they'll be to the expenses fields).
FireCalc is the one that let's you get the most detailed, but I like this one for back-of-the-envelope.  I believe it was made by someone on the forum.

« Last Edit: July 25, 2014, 01:21:01 PM by sheepstache »

#### Beric01

• Handlebar Stache
• Posts: 1156
• Age: 29
• Location: SF Bay Area
• Law-abiding cyclist
##### Re: Is MMM's simple math
« Reply #8 on: July 25, 2014, 01:15:47 PM »
CC, have you tried calculating years to retirement with the networthify thingimajig

It lets you input both income and expenses so it takes the guesswork out of what's meant by percentage.  Since you won't have taxes in retirement, I would just put your post-tax earnings in the income field (or if you think you'll pay some taxes, add what you estimate they'll be to the expenses fields).
FireCalc is the one that let's you get the most detailed, but I like this one for back-of-the-envelope.  I believe it was made by someone on the forum.

#### CommonCents

• Handlebar Stache
• Posts: 2386
##### Re: Is MMM's simple math
« Reply #9 on: July 25, 2014, 01:37:36 PM »
CC, have you tried calculating years to retirement with the networthify thingimajig

It lets you input both income and expenses so it takes the guesswork out of what's meant by percentage.  Since you won't have taxes in retirement, I would just put your post-tax earnings in the income field (or if you think you'll pay some taxes, add what you estimate they'll be to the expenses fields).
FireCalc is the one that let's you get the most detailed, but I like this one for back-of-the-envelope.  I believe it was made by someone on the forum.

I've tried that site multiple times (including just now) and unfortunately never got it to work.  Not sure if it's because I'm using an old browser or what.  It never shows me a table or anything other than the default terms it has up.

#### neo von retorch

• Magnum Stache
• Posts: 3356
• Location: SE PA
##### Re: Is MMM's simple math
« Reply #10 on: July 25, 2014, 01:47:50 PM »

#### dandarc

• Magnum Stache
• Posts: 3467
• Age: 36
##### Re: Is MMM's simple math
« Reply #11 on: July 25, 2014, 03:17:33 PM »
The way I figure income is take after-tax income, and add back 401k and 457 contributions.  This is the amount of income we have under our control - we either spend each dollar or save it (401k, 457, roth IRA, additional mortgage payments, taxable account).

The other factor that I personally ignore is my wife's defined-contribution plan at work - I ignore this from savings rate calculations because we don't control it - she has a mandatory 3% contribution with a 3.21% match - we can't change either of these numbers.  I suppose our savings rate figure is about 1% lower than it would be accounting for this, but I like to err on the side of caution there.  Added bonus is that there is just a little bit more upward pressure on the 'stache than we are planning on - makes it more likely that we'll hit the projections.  If you do want to account for this, be sure to add the deferral AND the match to both numerator and denominator, lest things look a bit more rosy than they actually are.

I think figuring the savings rate on pre-tax income is unnecessarily discouraging.  Once retired, you'll have much more control over your taxable income - post FIRE tax rate can be 0%, or at least very low.

#### arebelspy

• Senior Mustachian
• Posts: 28008
• Age: -999
• Location: Seattle, WA
##### Re: Is MMM's simple math
« Reply #12 on: August 14, 2014, 09:23:06 AM »
CC, have you tried calculating years to retirement with the networthify thingimajig

It lets you input both income and expenses so it takes the guesswork out of what's meant by percentage.  Since you won't have taxes in retirement, I would just put your post-tax earnings in the income field (or if you think you'll pay some taxes, add what you estimate they'll be to the expenses fields).
FireCalc is the one that let's you get the most detailed, but I like this one for back-of-the-envelope.  I believe it was made by someone on the forum.

I've tried that site multiple times (including just now) and unfortunately never got it to work.  Not sure if it's because I'm using an old browser or what.  It never shows me a table or anything other than the default terms it has up.

Try a different browser.

I've used it a lot, and never had it not work.  (I use Chrome, FWIW.)
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.

#### CommonCents

• Handlebar Stache
• Posts: 2386
##### Re: Is MMM's simple math
« Reply #13 on: August 14, 2014, 09:51:23 AM »
CC, have you tried calculating years to retirement with the networthify thingimajig

It lets you input both income and expenses so it takes the guesswork out of what's meant by percentage.  Since you won't have taxes in retirement, I would just put your post-tax earnings in the income field (or if you think you'll pay some taxes, add what you estimate they'll be to the expenses fields).
FireCalc is the one that let's you get the most detailed, but I like this one for back-of-the-envelope.  I believe it was made by someone on the forum.

I've tried that site multiple times (including just now) and unfortunately never got it to work.  Not sure if it's because I'm using an old browser or what.  It never shows me a table or anything other than the default terms it has up.

Try a different browser.

I've used it a lot, and never had it not work.  (I use Chrome, FWIW.)

I would love to, but regretably at least during the day I'm stuck with whatever browser my work gives to me.  Which happens to a musuem quality piece, one with discontinued browser/system support.  We apparently like to invite hackers to come play and send us viruses.  That coupled with a requirement we save and archive *every single email* makes for fun times.

Anyways, #firstworldproblems, I just need to remember to try it out on a different browser when I'm home.  (Which is also on a discontinued system...but at least I have browser options beyond IE.)

#### arebelspy

• Senior Mustachian
• Posts: 28008
• Age: -999
• Location: Seattle, WA
##### Re: Is MMM's simple math
« Reply #14 on: August 14, 2014, 10:14:27 AM »
No smartphone?  Works fine on Chrome on iOS for me. I'd assume ditto Android.

Otherwise, yeah, home works.
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.

#### CommonCents

• Handlebar Stache
• Posts: 2386
##### Re: Is MMM's simple math
« Reply #15 on: August 18, 2014, 11:20:01 AM »
So that link does work when you use the right browser.  :)  I had wondered why everyone kept recommending a broken link...  Anyways, also nice is that the back of envelope calculations I've done, taking into account things like reduced income tax etc. are generally on target with what the site suggests for retirement date.  Good to know my high school math skills aren't too rusty, even if my calculus recollections are long gone.