Author Topic: Early Retirement Calculator Math Help - From Shockingly Simple Math  (Read 2111 times)

The_Stash

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Hello,

I created a calculator within my excel budget portfolio very similar to the one created by MMM in the shockingly simple math post, aka the Networthify early retirement calculator.

Using his calculator showed slight variances in our results ranging from pennies to hundreds of dollars, as the years progress.
This got me curious so I tried changing my calculator to include/altering other variables to see if this made a difference.
I could not get the same results no matter what I tried.

So I wondered if this was a glitch with my dollar amounts.

I tried various other values and still our results differed ever so slightly.

One observance I found is that our savings rate would vary.
As an example: Trying an annual income of $100,000 and expenses of $25,000 his calculator shows savings rate of 76%
I think this is where our equations differ as mine indicates I save 75%

I am thinking I am having a brain fart or overlooking something.
Does anyone have a breakdown of the equations so that I may compare and understand the actual math he uses.

Forgive me if this has been asked before. I did run a search on the forums and could not find anything.

Thank you

PS: My current calculations are as follows.
ANNUAL SAVINGS = Annual Income (Post tax) - Annual Expenses
RETURN = ((Prior years net+annual savings)*RateOfReturn(adjustable input, but I use 5%))-((prior years net+annual savings)*Portfolio expense fee(adjustable input, but I use .16%)
GAIN = Annual savings+return
NET = Prior years net+gain
REPEAT

NOTE: I ran simplified variations with no expense fees considered/taken at different stages and far more complex versions with attempts at capturing other variables such as withdraw taxes.
« Last Edit: January 24, 2017, 12:01:33 AM by The_Stash »

MDM

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Re: Early Retirement Calculator Math Help - From Shockingly Simple Math
« Reply #1 on: January 27, 2017, 03:51:46 PM »
You could look at Getting Confused Trying to Calculate Savings Rate.

See also the 'Misc. calcs' tab in the case study spreadsheet.

If you can get two approaches to give you the same number, and a third approach is different, there is a good (but not certain) chance the two are correct. :)

 

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