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Calculating FIRE date / portfolio (newbie question)
Old 07-01-2007, 07:59 PM   #1
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Calculating FIRE date / portfolio (newbie question)

Ok, so, in looking at where we spend money, how we plan to live in the future (farm with a half acre garden, solar / wind power, small house), and factoring in a significant cushion, I want 1-1.5mm invested.

Now, here's the deal. That's in today's dollars. Assuming I quit today and withdrew 3.5%, that's what I'd need. So, how do I project that out to determine when I'm FIREd? I assume I'd want to adjust for CPI but, obviously, I'm trying to solve for x and y on my plot... is that the right approach? Adust my 'need' by a 3-4% CPI increase every year, track expected contributions and earnings of our investments, where the two line up is our FIRE threshold?

Seems simple enough... but still. Oh, and any spreadsheeds lying around for this sort of thing?
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Old 07-01-2007, 08:19 PM   #2
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If it will be a few years until you ER, then yes, I would assume an inflation rate and project that on out to figure your expenses. You are smart to be remembering to take inflation into account.

If it applies to you, don't forget that you may receive cost of living increases in your salary along the way. These will make it easier to meet your increased savings goals.

It will be easier to nail down a more exact date as you get closer to it.
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Old 07-01-2007, 08:47 PM   #3
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Have you tried FireCalc? Test out your assumptions using different retirement years and aim for 100% success. See how close to this year you can get.......
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Old 07-01-2007, 09:05 PM   #4
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Have you tried FireCalc? Test out your assumptions using different retirement years and aim for 100% success. See how close to this year you can get.......
FireCalc shows me that I can hit 100% success rate at $1.5mm and 3.33% withdrawl. But, since I'm at $140k right now, I'm rather a bit far off. So, I want to plug things in and say "Honey, we're retiring on September 18th, 2025 at 1:58 pm".. you know, give or take a minute.

Edit: Thanks Want2. I think I'll put things together with inflation at 3 and 4% a year and see where I hit.
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Old 07-01-2007, 10:25 PM   #5
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I have an Excel spreadsheet that does what you describe. I'm retiring April 1, 2022. Of course, that's an approximate plan, because a lot can happen in the next 15 years.

At the core of my spreadsheet is two columns: The first is my retirement assets, and the second is my monthly spending. The first row is what those numbers are today. I then increase my assets by what I expect my investments to grow by, and I increase my spending by inflation.

I then do the math in a third column to tell me what my annual spending rate is as a percentage of my assets. Once that gets to 4%, that is my retirement date.

From there you can make it as complicated as you want. My retirement spreadsheet has 46 columns and 447 rows, but it started out pretty simple.

I'd share except I think there is a great deal of value in developing it yourself. Not least in this value is that you know all of the assumptions you're making. Secondly, my assumptions and model may not apply in your case.

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Old 07-02-2007, 09:31 AM   #6
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I find it easier to use inflation-adjusted investment and savings assumptions. For example, if you expect your salary to grow by 5%, investment results to be 6%, and inflation to be 3%, then use 2% salary growth and 3% investment results in your projection.

If you want to track inflated dollars you can adjust your need by 3-4% each year as you said.
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Old 07-02-2007, 10:18 AM   #7
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Thanks for the help all. I did run across this awesome spreadsheet over on the retire early homepage: Millennium Edition Generation-X Retirement Calculator.

I want to come up with my own, just in case this one is too optimistic. Plugging everything in, it looks like we can retire between 12 and 17 years from now (12 if we downsize, 17 if we don't... we don't have a heck of a lot of size to down at this point).

Now, talk about getting someone supercharged to save! 5 years if we give up eating!
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Old 07-02-2007, 12:17 PM   #8
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5 years if we give up eating!
Now there's a thought!

I keep trying to get those expenses down!
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