pretty colors at radicalpersonalfinance

[sol]

This post by a commenter at radicalpersonalfinance.com has been getting a lot of views around the internet today.

Basically, he just took the shockingly simple math formula and converted "years you have to work" into "age at retirement, based on current age".  So if you save 95% of your income, you can retire in approximately one year regardless of your age.  If you save 50%, he converts an 18 year working career into an expected retirement age by adding 18 years to current age.  It's only done for a fixed 4% ROI, unlike MMM's version which assumes 5% but is easy enough to change in the downloadable spreadsheet.  The blogger and the commenter are both clearly familiar with MMM and ERE posts, even referencing them directly.

I'm not sure how I feel about the pretty colors, but it's at least a useful tool for people who want to target a particular retirement age to estimate what their savings rate would need to be based on their current age.

Of course, it has all of the same problems we've previously discussed here.  Social security and pensions aren't included.  The 4% rule assumption is pretty damn conservative, considering that 6% is the historical average for a 30 year retirement.  The longer retirement duration due to retiring early isn't included.  Rising income over your career isn't included, and expenses are assumed to remain a fixed percentage of working income.  Variable retirement expenses over time aren't included, even though they are known to decrease over time.  Lots of problems, obviously, but still a conveniently simple first look for noobs.

Current age is on the left, your savings rate is on the top, and age at retirement (based on 25x expenses) is in the grid.


Head starts aren't included either.  I'm 38 and save about 60% of my income, and I'll retire WAY before the age of 51 that this chart suggests because I already have a bunch of money in the bank.  So the chart is only relevant for people starting from zero, or to some past version of yourself when you were at zero.

edit:  I had misattributed the source of this work to another blog, but I think it's correct above now.  Original spreadsheet is here.

[MonkeyJenga]

Anything that gets the unwashed masses intrigued is a positive, in my mind. The pretty colors are a necessity if you want otherwise indifferent people to share it.

[HappyMargo]

Without taking into account my starting stash, the chart says I'll work till 64.
Actually, I'm slated to FIRE 10 years sooner at 54.

But, I'm with Monkey, if it gets people thinking & saving earlier, then it's a good start!

(I'm still delivering face-punches to myself for being a consumer sucka for too long.  If I'd seen a similar chart or MMM-style musings earlier, FIRE could've been 44!)

[soccerluvof4]

I agree its great for the masses. Be good for teachers out there as a rough guide to start talking with students about I would think

[honeybbq]

Good points, pretty picture.

Yeah, the part where it doesn't include NW or prior savings is where it loses it's usefulness to me. But it's fun to look at.

[Guesl982374]

I think the colors are a bad thing. I thought about a buddy of mine who is effectively at $0 right now at 30. Showing "his cell" as red for saving 25% to retire at age 65, when he's currently saving 0% is going to be very discouraging. He'd probably default to the "see, no one can retire unless you make a shit ton of money and save most of it by living like a monk."

The vast majority of people will look at this table, go to their age and savings rate and see an older age than what is accurate because it doesn't account SS, existing savings, etc. I like the idea, I think it needs some work to account for additional factors.

[TheAnonOne]

I like it!

You need to modify what your looking at a bit.

For instance, I am 25, but I started this when I was 23, and my savings rate hasn't been consistent. So my numbers more accurately follow the 22-23 year old than the 25.

[okits]

I think the colors are a bad thing. I thought about a buddy of mine who is effectively at $0 right now at 30. Showing "his cell" as red for saving 25% to retire at age 65, when he's currently saving 0% is going to be very discouraging. He'd probably default to the "see, no one can retire unless you make a shit ton of money and save most of it by living like a monk."

The vast majority of people will look at this table, go to their age and savings rate and see an older age than what is accurate because it doesn't account SS, existing savings, etc. I like the idea, I think it needs some work to account for additional factors.

The colours remind me of a BMI chart.

Green = healthy
Yellow = caution
Red = bad
Grey = ?  Death imminent?  :)

I agree it's a simple tool to get people interested and understanding the impact of SR.  Just looks a bit dire with the traffic-light colour scheme and half the board a grey "dead zone".

[Tyler]

Really cool chart!  I like how it shows specific retirement ages, as that nicely personalizes the data.  The color choices may carry some implied good/bad connotations that could trip people up, but I do find the visual distinctions helpful. 

FWIW, people who find this interesting will probably also like this.  It's a Time-to-FIRE calculator I worked on that accounts for some of the other variables Sol mentions as well as a few more like how asset allocation affects the calculations.

(Edited to be less of a distraction from the very helpful OP)

[TrMama]

I love the ages in the bottom left section of the chart. While I agree that they'd be really discouraging for older people, I bet they'd be super motivating to younger people. Kind of like, "You'd better save for retirement when you're young, or you'll end up working till you're 136!".

[steveo]

What's interesting to me is the 5% saving rate. If you save that amount its a long long time until retirement. It also shows how important it is to get ahead of the curve. If you start saving 50% at an early age you can retire pretty early.

[sol]

If you start saving 50% at an early age you can retire pretty early.

Right, starting early is key if you're targeting a retirement age.  Retiring at 50 years old isn't so hard if you're 25, but it's pretty damn tough if you're already 55.

I think I still prefer the MMM approach of calculating the number of years you have to work, because that number applies to people of any age.  This age-based approach just confuses the issue a bit.

One interesting use of this chart, I think, it to look at the required increases in savings rate that result from delaying starting your retirement savings.  A 22 year old college grad who wants to retire at age 40 has to (conservatively speaking) save up to half of his income, but if he waits five or six years to get his shit together, which seems pretty common, suddenly he needs to save an extra 15% on top of that.  Those few goof-off years will cost him an additional $600/month of required savings once he gets on track, for a median US salary of $50k. 

[steveo]

If you start saving 50% at an early age you can retire pretty early.

Right, starting early is key if you're targeting a retirement age.  Retiring at 50 years old isn't so hard if you're 25, but it's pretty damn tough if you're already 55.

I think I still prefer the MMM approach of calculating the number of years you have to work, because that number applies to people of any age.  This age-based approach just confuses the issue a bit.

One interesting use of this chart, I think, it to look at the required increases in savings rate that result from delaying starting your retirement savings.  A 22 year old college grad who wants to retire at age 40 has to (conservatively speaking) save up to half of his income, but if he waits five or six years to get his shit together, which seems pretty common, suddenly he needs to save an extra 15% on top of that.  Those few goof-off years will cost him an additional $600/month of required savings once he gets on track, for a median US salary of $50k.

I'm 42 and the house will only be paid off this year so we are behind the curve in that regards. I also don't include the house in our FI assets as it doesn't earn us anything. At the same time I won't be paying any rent. We also have some FI assets now though so overall that chart doesn't fit into my circumstances. I use the one on networthify. It works pretty well for me.

[Tyler]

One interesting use of this chart, I think, it to look at the required increases in savings rate that result from delaying starting your retirement savings.  A 22 year old college grad who wants to retire at age 40 has to (conservatively speaking) save up to half of his income, but if he waits five or six years to get his shit together, which seems pretty common, suddenly he needs to save an extra 15% on top of that.  Those few goof-off years will cost him an additional $600/month of required savings once he gets on track, for a median US salary of $50k.

I like that perspective.  Sometimes it's easy to blow off planning for the future because you "still have tons of time", but a chart like this helps visualize how decisions today push back your eventual goal down the line. 

[arebelspy]

Yeah, I saw this on lifehacker. It was a comment on a blog (which only supports a podcast) from months ago (but new comment).  My question was how did this suddenly pop up everywhere?  Did the author of the blog comment (and spreadsheet) submit it to a bunch of places or something?

Neat, regardless, I was just curious about that (a random comment on a not big blog on a months old blog post--how did it even get noticed?).  :)