Author Topic: Investment/retirement calculations  (Read 2067 times)

Alf91

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Investment/retirement calculations
« on: May 25, 2017, 02:50:19 PM »
I have looked online for a calculator to figure this out but I can't find one that will let me input the info I want.

Assumptions
-I live to age 90
-I need $24,000/year to live on from now until then (I am 34 now)
-4% rate of return on investment
-I receive $1400/month from government, between age 65-90

Is there a calculation I can do that will tell me I need to invest $_________ if I want to stop working at age __________.
So for example, if I want to retire at age 60 I need to invest this much, vs if I want to retire at age 50 I need to invest this much.
It's calculating the compound interest that I can't figure out.

I'm not great with math!

SeattleCPA

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Re: Investment/retirement calculations
« Reply #1 on: May 25, 2017, 03:43:07 PM »
You can probably get pretty close using the Excel workbook that accompanies this blog post:

http://evergreensmallbusiness.com/income-allocation-versus-asset-allocation-why-income-allocation-is-more-important/

What you'll do is play with the inputs (worksheet calls D4:D7 and D10:D13) until you balance out your working years and retirement years income.

BTW, the other thing you can do is divide your $24K requirement by 4% to get a $600K nest egg... and the calculate the combinations of savings and returns that provide this value.

E.g., saving $5500 a year for 35 years is one way to accumulate roughly $600K in savings.
« Last Edit: May 25, 2017, 03:45:33 PM by SeattleCPA »

mgarf

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Re: Investment/retirement calculations
« Reply #2 on: May 26, 2017, 09:08:37 PM »
Have you checked out cfiresim? http://www.cfiresim.com It should be able to do the job... it has the option to input when you expect social security to jump in.

I've also made a simple calculator: http://www.investlogic.ca/retire_calc.html... but it doesn't do the social security stuff.

Rosy

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Re: Investment/retirement calculations
« Reply #3 on: May 27, 2017, 07:56:09 AM »
Have you checked out the retirement calculator/info on the AARP website?


MDM

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Re: Investment/retirement calculations
« Reply #4 on: May 27, 2017, 01:01:26 PM »
I have looked online for a calculator to figure this out but I can't find one that will let me input the info I want.

Assumptions
-I live to age 90
-I need $24,000/year to live on from now until then (I am 34 now)
-4% rate of return on investment
-I receive $1400/month from government, between age 65-90

Is there a calculation I can do that will tell me I need to invest $_________ if I want to stop working at age __________.
Short answer:

Retire
at      Requires/yr
40      $62,886
45      $27,991
50      $15,088
55      $8,466
60      $4,498
65      $1,896

Done using Excel's PMT and FV functions, some extra input cells on the 'Misc. calcs' tab of the case study spreadsheet, and Excel's Goal Seek feature.

If you are interested in a summary of the gory details...:

1) Added input cells for the items below
Code: [Select]
Age now 34
Stop at age 40
SS start 65
SS benefit 16800
Need 24000
Death 90

2) Used 4%, 1, and 0 respectively for rows 18, 20, and 21 in columns C, D, and F

3) Entered formulas for row 19, using the "added input cells" above

4) Put "=F22" in C16 and "=D22" in D16.

5) Picked a number for "Stop at age"

6) Used Goal Seek to drive cell D22 to 0 by adjusting cell F22.

There are probably easier ways. :)

Note that this assumes steady returns, and thus ignores "sequence of returns" risk.  But it gives you a ballpark....