Anybody have comments on this article?
http://thefirestarter.co.uk/calculating-savings-rate/
The various methods all work, as long as they are applied consistently. For instance, with mortgage, if you are including mortgage payments in the savings rate, then you need to include future mortgage payments in the expenses. If you're planning to be FIRE only after the house is paid off, then you wouldn't need to consider both. But if the goal is to die with no money left, but not with debt, then the home equity would be tapped at some point, because dying with a paid off house missed the mark. If you aren't going to have the house paid off when FIRE, then that monthly mortgage payment becomes part of your monthly expenses going forward, and you'll need more stash to pay for it.
You need to draw a line and then stick with it, making consistent assumptions for your calculation.
To do a thorough calculation, for myself, it ended up requiring a truly massive spreadsheet that tracks cash flow and net worth, with projected values to provide a range of estimates. I update it monthly with the real values of various accounts and updated estimates of savings based on past performance, to see in real time how my choices are affecting my end date. Included in this spreadsheet is my expected withdrawal strategies
and their tax implications. Doing withdrawal wrong makes a difference of
years.
It took me a couple of hours to build this thing, but it gives me more information about where I'm going wrong and what the improvements I make will affect.
It is, of course, wrong, but the date is consistently getting farther away, which is progress :Pd:
My morbid sense of humor actually had me build it not to show when I could retire, but how soon I needed to die to not be broke if I retired today vs various time horizons...
So the unknowns in my sheet are:
1. What the market will do. I use 7% for future returns, and then as I fill in each month the actual experience fills in how I did. Graphs from the past performance help with motivation! (Ride that bull baby!)
2. What social security will do. I use 75% of the SS benefit estimator calculations, which reflects my new-found optimism ( I used to use no social security) and age 70.5 for benefit start.
3. What healthcare will do. I use $2,000/yr as an estimate of that cost post FIRE, but that is a wild-ass-guess.
4. What taxes will do, and what the rules on retirement accounts will be. I use the current rule-set, with brackets and deductions.
5. The things I don't know about. As a for instance, did you know some states charge a percentage of a vehicles value as the registration fee? I'm thinking of relocating once I FIRE but that's the sort of shit that catches me by surprise, I don't even know what questions to ask. I also don't know how much marijuana costs but once I'm not subject to employer drug testing I think it's going to come up.
To retire now I'd have to die before I turn 63. Since I can't count on that...it's back to work tomorrow...
What I learned most from the track-everything exercise was how much January costs. More than 1/3 of my annual expenses occur in January, so I can probably heavily mitigate the impact of a recession by thinking of November-January as my "working" season for any part-time stuff I try to do. That works out as lots of places look to hire on extra folks around then.
