Author Topic: Calculating years to early retirement if you're not starting from zero  (Read 2610 times)

struggleism

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Hi gang, not sure if general discussion is the place for this, but...

We're all familiar with the table https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/ that presents years to retirement for various savings rates. If I'm understanding it, it assumes the saver is starting today with zero already saved. Is there an easy way to calculate years to retirement from today if you've already got a positive net worth of $X?

Thanks!

nereo

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #1 on: January 30, 2020, 09:01:12 AM »
There’s a number of calculators out there, from the very simple. (E.g. Moneychimp’s compound interest calculator) to the more complex historical simulators (e.g. cFireSim or FireCalc, which model $ and returns against historical data). 

If you just want a ballpark, ‘when might my current ‘stache’ grow to be $XXX,XXX” I’d play around with a compound interest calculator.

Or.... you could do what I do - and make a spreadsheet.  Column A will be your current principle,  column B = annual savings, and then columns C, D, E... can be (A +B) * expected market gain (e.g. 6% ‘real’ returns).  You can do a column for a bunch of different returns.  Then plot.

Obviously the spreadsheet method won’t be realistic as markets don’t move upwards at a steady trend, but it will give you a rough idea of where you are and how long it will take you to get to where you want to go under various scenarios.

struggleism

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #2 on: January 30, 2020, 09:07:07 AM »
Thank you for the quick and thoughtful response, nereo. I appreciate it

crking

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #3 on: January 30, 2020, 09:42:44 AM »
I use a spreadsheet similar to Nereo's. In mine, the real return, principle, and savings get updated every January to reflect the actual numbers of the previous year. This keeps the projection as accurate as possible without being psychic.

nereo

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #4 on: January 30, 2020, 09:51:37 AM »
Some useful links;
Simple compound interest calculator, with inputs of current portfolio, annual savings and return%
http://www.moneychimp.com/calculator/compound_interest_calculator.htm

cFireSim: a more advanced 'simulator'-type calculator, which models portfolio performance based on historical data (i.e. annual returns of the SP500).  Allows for extra inputs such as social security, pension and one-time 'windfalls' (e.g. sale of business, inheretence). 
http://www.cfiresim.com/

FireCalc:  many find this easier to use at first than cFireSim if your goal is simply to know whether $X will last you in retirement, but both calculators have their place.  See "Not Retired?" tab for running future simulations
https://www.firecalc.com/

Chris @ Saturday Financial

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #5 on: January 30, 2020, 12:34:37 PM »
I use the Case Study spreadsheet created by our very own @MDM to give me a "best estimate" time frame to FI: https://forum.mrmoneymustache.com/forum-information-faqs/case-study-spreadsheet-updates/

It takes a little bit of time to plug in your info the first time, but the payoff is wonderful. It also helps you predict taxes and evaluate various "what if" scenarios. How would downshifting affect my taxes and my FI date? How would getting a raise affect my taxes and my FI date? How would reducing my spending affect my FI date? Etc, etc, etc.

struggleism

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #6 on: January 30, 2020, 01:14:56 PM »
Thanks Chris, CRKing, and nereo for the tips!

MDM

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #7 on: January 30, 2020, 01:15:19 PM »
For gory details on "Time to FI" derivation: http://forum.mrmoneymustache.com/ask-a-mustachian/fire-in-8-years/.

See also NPER function - Office Support.

Easy enough to calculate.  Hardest part is picking the investment return....

Chris, good to see the CSS is proving useful!

swashbucklinstache

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #8 on: January 30, 2020, 03:25:21 PM »
If you want more back-of-the-napkin stuff (which is what the shockingly simple math is) this site spits out an answer: https://networthify.com/calculator/earlyretirement

No idea how correct it is given inputs, and of course it's all a bit of a guess of what's to come, models only the same rate of return forever etc. Shows some additional info that might be helpful, broken out by year. Might have to play with one or the other inputs to make it reflect your situation.

nereo

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #9 on: January 30, 2020, 03:48:35 PM »
If you want more back-of-the-napkin stuff (which is what the shockingly simple math is) this site spits out an answer: https://networthify.com/calculator/earlyretirement
Good catch.  IIRC this calculator was made by a MMM forum user and featured on a blog post several years ago.

Chris @ Saturday Financial

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #10 on: January 31, 2020, 06:45:27 AM »
Chris, good to see the CSS is proving useful!

Indeed! It's hands-down my favorite tool for tax planning and for estimating what impact life decisions would have on my FI date. 

I lean toward the CoastFIRE / SlowFI approach. The spreadsheet has helped me see that the best approach to FI in my life is to pursue interesting work I enjoy now, because FI will eventually come. The more my stash grows, the more I'm able to feel the freedom to enjoy the work I do now as well as look towards building fun side-hustles in the near future.

dignam

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #11 on: January 31, 2020, 06:53:07 AM »
I made my own spreadsheet for roughly estimating this, a few years ago.  I made a copy of it, feel free to use it:

https://docs.google.com/spreadsheets/d/1cIZhVYq9XQVKhmrqyi9wnxKUC39tPFSYsWOZUAhkI_0/edit?usp=sharing

Hvillian

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #12 on: January 31, 2020, 12:29:39 PM »
I really like balance of simplicity and complexity in the calculators that our own @CCA puts together.

https://engaging-data.com/fire-calculator/

BrightFIRE

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Re: Calculating years to early retirement if you're not starting from zero
« Reply #13 on: January 31, 2020, 12:30:52 PM »
This is a super quick one http://engaging-data.com/freedom-calculator/#calendarupdate. You put in your current net worth, target spending, safe withdrawal rate (it assumed 4%) and done. It puts it on a 365 day calendar, so you can see how far along you are on being totally free.