The Money Mustache Community
Learning, Sharing, and Teaching => Investor Alley => Topic started by: Alf91 on May 25, 2017, 02:50:19 PM
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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!
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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.
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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.
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Have you checked out the retirement calculator/info on the AARP website?
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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 (http://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/), 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
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....