How to financially prepare for early retirement

[Rafifte]

Hi,

I'm new to this forum, and early retirement concept in general. Started to think about this for some time now, but the biggest issue for me is financial planning. The rest is there. I have my plans of what I want to do after leaving the 9-5 daily routine, family is sorted, so only need to ensure my financial future is sorted as well.
I was wandering if there is a good tool out there, which can help me plan my financial asset flow, taking into account future event, as much as I can see them today, income and expenditure, and also play with the figures so that I can see the impact of various scenarios.
Anything you are using?

Much appreciate your advice.

 

[W2R]

Hi Rafifte, and welcome to the Early Retirement Forum.

Many of us use FIRECalc for planning (link at the bottom of the page). It seems to be one of the best, and it is completely free to use.

All of us started planning at some point, and congratulations on beginning to plan your financial independence and early retirement.

 

[obgyn65]

I have used FIRECalc. I also like the Merrill Lynch retirement calculator.

Welcome to the forum.

Hi,

I'm new to this forum, and early retirement concept in general. Started to think about this for some time now, but the biggest issue for me is financial planning. The rest is there. I have my plans of what I want to do after leaving the 9-5 daily routine, family is sorted, so only need to ensure my financial future is sorted as well.
I was wandering if there is a good tool out there, which can help me plan my financial asset flow, taking into account future event, as much as I can see them today, income and expenditure, and also play with the figures so that I can see the impact of various scenarios.
Anything you are using?

Much appreciate your advice.

 

[Animorph]

FIRECalc gives you results from historical data. Also look for something that uses Monte Carlo modeling so you can compare the two.

http://www.i-orp.com/ is a good calc that is more detailed and considers taxes.

 

[Rafifte]

Thanks

Thanks Chaps, I much appreciate your rapid advice.

I have tried FIRECalc before, and it is one of the reasons I posted my original note.
Also the other two provide their output along the same lines, even though that using the Monte Carlo modelling adds more credibility to the results.
However, basing such an important decision over a one-off calculation is risky.
I am looking for a tool that I can buy/download, and can be used over time, with the right level of details, to refine the figures, so that my confidence will the results is high.
Anything like that around?

 

[Alan]

Thanks Chaps, I much appreciate your rapid advice.

I have tried FIRECalc before, and it is one of the reasons I posted my original note.
Also the other two provide their output along the same lines, even though that using the Monte Carlo modelling adds more credibility to the results.
However, basing such an important decision over a one-off calculation is risky.
I am looking for a tool that I can buy/download, and can be used over time, with the right level of details, to refine the figures, so that my confidence will the results is high.
Anything like that around?

Fidelity Retirement Income Planner is an excellent tool that allows you set detailed budgets, remembers all your data for the future etc. It is free even if you don't have to be a customer but you have to register as a member and set up a username (otherwise it can't remember your data when you go back to use it again, and again ....)

Retirement Income Planner - Fidelity

 

[martyp]

Are you looking for a tool to forecast investments or something to manage your personal expenditures? I put together an Excel spreadsheet to track monthly expenses and income. The columns got out month by month for 25 yrs. You can make simple models of whatever scenarios you want. I suppose investments too. I've found it useful as a way to look at month to month variations.

I haven't used Quicken in many years but it probably does expenses and investment forecasting too. I've found online tools to be helpful up to a point. Everyone's situation is individual and at some point you need to dig into the weeds of your specific life.

 

[MBAustin]

Have you checked out ESPlanner? It was developed by a well-known economist and professor, Laurence Kotlikoff. I bought an earlier version quite a few years ago and found it very powerful and interesting, but didn't continue paying the annual fees to keep it current. You might try out the free version first to see if you think it's worth investing in the full package. Home Page | ESPlanner Inc.

 

[pb4uski]

Hi,

I'm new to this forum, and early retirement concept in general. Started to think about this for some time now, but the biggest issue for me is financial planning. The rest is there. I have my plans of what I want to do after leaving the 9-5 daily routine, family is sorted, so only need to ensure my financial future is sorted as well.
I was wandering if there is a good tool out there, which can help me plan my financial asset flow, taking into account future event, as much as I can see them today, income and expenditure, and also play with the figures so that I can see the impact of various scenarios.
Anything you are using?

Much appreciate your advice.

I use Quicken Lifetime Planner for my basic retirement plan. It is part of Quicken Deluxe or higher. You will need to enter your portfolio (tickers and share amounts) in Quicken and then go to the Lifetime Planner and work through the various screens that cover your assumptions as to rates of return, inflation, taxes, living expenses, college expenses, special expenses, pensions and SS, etc. and based on the information that you provide it will do a year-by-year projection of your retirement assets. While it has its imperfections, it is a good place to start, get a basic plan and think through all the various things that will financially affect your retirement.

Once you have a base plan in place, you can do what-if analysis using different assumptions and it provides a line graph showing the growth/decay of your retirement nestegg under each set of assumptions. If you think the what-if set is more realistic, you can reset your base plan to use those assumptions with a single click.

I then supplement the QLP analysis with FireCalc, Vanguard's Monte Carlo analysis, and Financial Engines which adds a stochastic test of the plan.

 

[Rafifte]

HI,

I have tries to find additional tools, and ESPlanner was one that was recommended.
I also found something on eBay under 'Can I retire', which may seem to me along the lines suggested above.

 

[REWahoo]

Also the other two provide their output along the same lines, even though that using the Monte Carlo modelling adds more credibility to the results.

Some, including me, think the credibility nod goes to the actual history used by FIRECalc - which BTW also has a Monte Carlo option available.

 

[Midpack]

I am looking for a tool that I can buy/download, and can be used over time, with the right level of details, to refine the figures, so that my confidence will the results is high.

Welcome Rafifte.

Confidence isn't in any tool, and never will be. Too many variables, too many unknowns. Confidence comes from what probability of success you build in to your plan, and having contingency plans as well (aka Plan B, C, D etc.). Tools show you the range of possibilities based on past history and/or statistical probabilities, that's all.

I've owned or run every one mentioned so far, and a few others. None of them provide more confidence, just more information (which has some value).

 

[GT1 Doug]

We based our decision to retire early, first on an extremely accurate set of records over 10 years of our expenditures (Excel spreadsheet). From this we were able to determine our required minimum expenses as well as discretionary expenses. Looking ahead, we looked at large planned expenditures such as cars, home repairs, significant travel expenses and long term health care. In addition, we also added a healthy contingency to determine an annual budget. We are also very fortunate to have good retirement health insurance. We used FIRECalc and other models (such as Fidelity) for forecasting investment growth. Being conservative, we ensured our budget kept our withdrawal rates at about 3% or less. This resulted in a "success" rate of 100% in FIRECalc (obviously there are no guarantees). We have a diversified portfolio of investments to hopefully weather the inevitable bumps in the road. We avoided counting Social Security. And lastly, we implemented our desired retirement investment strategy about 5 years before we retired to get an idea of how stable it would be (the 2007-2012 ride was quite...interesting). Granted we are probably too conservative, but in the end this is what gave us the confidence that we needed to make the jump. Six months into retirement, we are significantly under our budget without trying and having a great time.