Author Topic: Need help figuring out how to project when we'll reach FI  (Read 2662 times)

quelinda

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Need help figuring out how to project when we'll reach FI
« on: June 28, 2016, 02:46:01 PM »
I'm sure this has been addressed before, but I'm not sure how to search for it. I'm wondering about the best way to project when we might reach FI. At this point I don't think DH (I'm a SAHM) could retire early, but we need to be more intentional about retirement period.

Beyond just throwing everything we can into index funds, is there a way to project when we will reach the 4% rule? A spreadsheet or something? I just don't know if we should factor in some kind of stock market growth or not.

TIA!

Livewell

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Re: Need help figuring out how to project when we'll reach FI
« Reply #1 on: June 28, 2016, 02:58:08 PM »
Tons of info out there, and be forewarned it's easy to overthink this stuff.

The basics are track your expenses over time, 25x the yearly total to determine FI amount.   MMM writes about this http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

Also recommend this article http://www.gocurrycracker.com/financial-independence-how-long-will-it-take/

From there, you can really get in deep if you want to on estimates around Net Present Value, factoring in Social Security, adjusting for inflation estimate, adding in one time or periodic extra expenses like your kids getting married or buying a car, assessing your risk tolerance, how to factor in one time or rare upside events like inheritance, bonus, ACA/Obamocare, taxes in FIRE, etc.   You really can go on and on.  I think it's good to understand what might go right and wrong and to plan knowing you'll need to be flexible, and to assess where you will be comfortable.   

nereo

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Re: Need help figuring out how to project when we'll reach FI
« Reply #2 on: June 28, 2016, 03:24:27 PM »
I'm sure this has been addressed before, but I'm not sure how to search for it. I'm wondering about the best way to project when we might reach FI. At this point I don't think DH (I'm a SAHM) could retire early, but we need to be more intentional about retirement period.

Beyond just throwing everything we can into index funds, is there a way to project when we will reach the 4% rule? A spreadsheet or something? I just don't know if we should factor in some kind of stock market growth or not.

TIA!

Since you are on this forum, why not do a full case study?
If you provided things like your income, age, savings, debt, expenses etc. along with some specific questions there are many here that will help you run through various scenarios and give you an idea of when you can retire and what steps you could take to speed you along the way.

Whenever I hear someone say that they "don't think [we] could retire early" I assume they are either already at least 55 or they simply don't realize how obtainable ER is in the developed world as long as you are willing to look critically at your expenses and live a slightly less expensive existence.

tonysemail

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Spork

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Re: Need help figuring out how to project when we'll reach FI
« Reply #4 on: June 28, 2016, 04:03:46 PM »
I tracked it several different ways (with all sorts of nifty graphiness).  Over time, I tracked spending and savings.  I used spending to determine the approximate amount I needed and savings to determine how fast I was headed there.  So... I plotted "time to retirement"... computed several ways:

* using data from the last 365 days, ugly brute force calculation where
   $goal = $expense365d / 0.04;  #  4% swr
   $savings = ($income365d - $expense365d) / 12;  # savings per month
   $months = <very ugly brute force calculation where I count months, add in average savings and interest>
* same as above, but using 5year data
* same as above, but using 30 day data
* same as above, but using 90 day data
* automated run of firecalc using data from the last 365 days... to determine when retirement would be possible
  (http://www.firecalc.com/)
* same as above with data from last 5 years

Here is an example output graph...  This is 5 year data, so my brute force ugly method and the firecalc method with 5 year data.  The big spike 2011-2012 was me thinking I was smart and "optimizing" the calculations to factor out the costs associated with us building a house.  I thought I accounted for it in a special way... and ended up factoring in the costs twice.  The awful thing was it took me a year to notice I had done it.

Kaspian

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Re: Need help figuring out how to project when we'll reach FI
« Reply #5 on: June 28, 2016, 10:34:42 PM »
Since I'm still about 6 years away from FI, I've always used https://networthify.com/calculator/earlyretirement to ballpark and tell me approximately how much I'll have and need. 

Phenix

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Re: Need help figuring out how to project when we'll reach FI
« Reply #6 on: June 29, 2016, 09:01:21 AM »
I'm a big fan of The Mad Fientist's FI Spreadsheet.  I condensed it down to 2 tabs (I believe his sheet has 4).  One for Net Worth and one for Monthly Expenditures.  Definitely a great sheet to build from.

http://www.madfientist.com/financial-independence-spreadsheet/

Tyler

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Re: Need help figuring out how to project when we'll reach FI
« Reply #7 on: June 29, 2016, 09:22:36 AM »
One more recommendation: https://portfoliocharts.com/portfolio/financial-independence/

This will help you study how asset allocation, investment uncertainty, and savings rate all affect financial independence timing.  Be sure to read the "More Info" link for an explanation. 

quelinda

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Re: Need help figuring out how to project when we'll reach FI
« Reply #8 on: June 29, 2016, 05:08:31 PM »
Whenever I hear someone say that they "don't think [we] could retire early" I assume they are either already at least 55 or they simply don't realize how obtainable ER is in the developed world as long as you are willing to look critically at your expenses and live a slightly less expensive existence.

Well, my husband is 51 & likes his job. I mostly just wanted an easy calculator/spreadsheet to help me in planning, since I feel pretty comfortable with our expenditures right now.

quelinda

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Re: Need help figuring out how to project when we'll reach FI
« Reply #9 on: June 29, 2016, 05:09:20 PM »
Thanks, everyone! I think the calculator on Networthify is pretty much what I was looking for!