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Learning, Sharing, and Teaching => Investor Alley => Topic started by: uppy on February 07, 2014, 05:34:54 PM

Title: How long to FI?
Post by: uppy on February 07, 2014, 05:34:54 PM
Noob investment math question here. How do I calculate the number of years to reach $X using compound interest formulas?

I thought I remembered the formula but I can't get it to make any sense...trying to calculate years to FI given a certain amount $ invested annually at say 7% interest rate of return.

In other words, how do I add in the amount I am investing each year into the formula?
Title: Re: How long to FI?
Post by: juanofthesedays on February 07, 2014, 09:35:01 PM
Have you tried using goal seek and a =fv() function in excel?
Title: Re: How long to FI?
Post by: uppy on February 08, 2014, 09:49:25 AM
Have you tried using goal seek and a =fv() function in excel?

Thanks juanofthesedays.

What's "goal seek"? I looked up and used an =fv() function and got these numbers:

$33,000 invested at the end of each year @ 7% interest would yield $455,942.78 at the end of 10 years.

Does this seem correct? I used "=FV(0.07;10;-33000;0;0)"


Title: Re: How long to FI?
Post by: arebelspy on February 08, 2014, 10:00:15 AM
There's some basic tools like:
www.mustachecalc.com
and
www.networthify.com/calculator/earlyretirement

And an advanced, but amazing, tool in:
www.cfiresim.com
Title: Re: How long to FI?
Post by: pom on February 08, 2014, 10:02:12 AM
Yes, it is correct.

Dont forget to take inflation into account. Usually I just reduce my expected return on assets by the expected inflation rate, it is a very good approximation.

Goalseek is under data, scenario analysis ... anyway in my version of excel.

You can also use the solver add on. To install it you can go to option, add on and chose the solver. It is a pretty cool tool for excel.
Title: Re: How long to FI?
Post by: uppy on February 08, 2014, 11:14:13 AM
Yes, it is correct.

Dont forget to take inflation into account. Usually I just reduce my expected return on assets by the expected inflation rate, it is a very good approximation.

Goalseek is under data, scenario analysis ... anyway in my version of excel.

You can also use the solver add on. To install it you can go to option, add on and chose the solver. It is a pretty cool tool for excel.

Awesome. I am actually using Calc, but it's usually pretty much the same.

Thanks all for the tips.

Re. Inflation rates: how do you estimate future rates of inflation? Historically it looks a little all over the place.
Title: Re: How long to FI?
Post by: arebelspy on February 08, 2014, 12:40:44 PM
Re. Inflation rates: how do you estimate future rates of inflation? Historically it looks a little all over the place.

I use historical inflation (and returns) via cFIREsim
Title: Re: How long to FI?
Post by: pom on February 20, 2014, 08:34:08 AM
Re. Inflation rates: how do you estimate future rates of inflation? Historically it looks a little all over the place.

I usually use 3% in average. The important thing is that the assumption that you makes is consistent with your return assumption.

You can't have 12% long term return on stock with a 2% inflation rate for exemple.