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Measuring progress to FIRE while w*rking
Old 02-22-2010, 05:56 AM   #1
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Measuring progress to FIRE while w*rking

I have a chart I use to measure progress.

My question is two fold- if the chart makes sense (will explain later), is it accurate? And is this typical for people which want to FIRE, or am I "behind" on my savings.

I set aside 20% of gross to 401k+Roth for wife and I, but I am questioning whether its enough.



The chart
make an annual expenses "guess"
60k in my case

Pick an age to retire
55 in my case

25X 60k=$1.5 M
pick a % return (9%) and use rule of 72

the chart (reduce age by 8 and cut dollar amounts in half as checkpoints) 8 is 72/9 for rule of 72.

age 55 $ 1.6 M
age 47 $800k
age 39 $400k
age 31 $200k

I did not have 200k by age 31 and getting $400k by 39 is a stretch (it will be close, but accounts currently have just less than 200k in them, and I am 37). Annual contributions range from 19k-25k depending on employer matches (2008 had higher contributions than 2009 because matches were reduced/eliminated on both 401ks).


My question again- when you are (were) working... when did FIRE become a reality more than it was a goal? It appears so far away, but at same time I think I am doing "all I can" to reach the goal.

Thoughts?
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Old 02-22-2010, 06:18 AM   #2
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I did not follow your logic, you mean that if you have 400K by age 40 then you dont need to save anymore since 400K will be 1.6M by age 55, sufficient to retire? I guess you would still be saving some amount after age 40. I think getting 9% real return is difficult if not impossible.
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Old 02-22-2010, 06:34 AM   #3
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FIRE has been a goal since I was in college. My goal was FI by 45 (and I believe I achieved "entry level FI" somewhere between 45 and 46). I am now 48 and moderately FI. My target is getting the kids thru college and very highly FI by 51, at which age I intend to RE. If I really like what I am doing at that time, I may take on another year at a time, but will not likely accept further 3-4 year assignments.

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Old 02-22-2010, 07:20 AM   #4
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Quote:
Originally Posted by landover View Post
I did not follow your logic, you mean that if you have 400K by age 40 then you dont need to save anymore since 400K will be 1.6M by age 55, sufficient to retire? I guess you would still be saving some amount after age 40. I think getting 9% real return is difficult if not impossible.
Two points- you do not think market will return 9%? If it doesn't, even 8% puts me close the goals I have.
And I would not "stop" contributions, just shift some of them to paying down mortgage or building up a cash buffer in a taxable account. But I would not want to shift if the current contributions are not enough. This would also imply any new contributions either helps me retire earlier, or allow a lower (safer) withdraw rate, or allow me to withdraw more money.



Thank you for reply.
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Old 02-22-2010, 07:42 AM   #5
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You might be interested in the Wall Chart method from Your Money or Your Life.
Basically you're comparing the interest/dividends, etc that you're currently making on your investments to your current expenses (and estimated retirement expenses).

By charting this you can roughly project the timing of FI.

I also have a part of an Excel spreadsheet where I do a similar calculation to what you are indicating.

It includes: current amount of savings + average amount added to savings every month (or year) X estimated interest rate. Then I have a line for every year, calculating the approximate interest generated each year. I compare this to my guesstimated retirement expenses to determine at what age FIRE is possible.

Currently I am still quite a few years away (about 20% FI) so I haven't been making any adjustments for inflation or salary increases as I suspect inflation will roughly match salary increases. We will likely be able to decrease our expenses in retirement as well. So right now calculations are pretty rough.
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Old 02-22-2010, 11:26 AM   #6
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I sort of approached this from another angle.

I put everything I could aside for retirement, and then computed how much I could spend in retirement if I retired at the first possible moment of eligibility (last November). My goal was a spending level, not a time.

But then, I am 61 years old, older than some here, so maybe that provided me with a different point of view.
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Old 02-22-2010, 11:30 AM   #7
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I've tried this and abandoned it -- the manic depressions and temper tantrums of Mister Market have convinced me that my "percent complete to FIRE" status is not something I can really know, since in mid-2007 it looked like I could retire 5 years earlier than in early 2009, for example. And now, maybe it's moved 3 years closer again with the market's recovery. Who knows what it'll be in a few months or years?

It's tough to do, especially for those of us relying mostly on our own investments for retirement income.

At some point, it's my hope that I can run the numbers and realize I'm there with a fairly comfortable margin (while hoping to avoid "one more year syndrome").
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Old 02-22-2010, 12:13 PM   #8
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Quote:
Originally Posted by ziggy29 View Post
I've tried this and abandoned it -- the manic depressions and temper tantrums of Mister Market have convinced me that my "percent complete to FIRE" status is not something I can really know, since in mid-2007 it looked like I could retire 5 years earlier than in early 2009, for example. And now, maybe it's moved 3 years closer again with the market's recovery. Who knows what it'll be in a few months or years?

It's tough to do, especially for those of us relying mostly on our own investments for retirement income.

At some point, it's my hope that I can run the numbers and realize I'm there with a fairly comfortable margin (while hoping to avoid "one more year syndrome").

Ziggy-

I agree that a date (age) I pick 16 years out is rather arbitrary. I think any of us more than 5-6 years away probably cannot rely on some linear graph, or rely on a given compounding curve. I made the assumption to create a plan, but know that is one of the assumptions I have the most control over, and allows for higher success rates should the numbers not come out right.

What I was hoping for was some of the retirees here give some anecdotal responses like maybe Did people needing my level of income have the same amount saved 16 years out or planning ER was not "real" until half the money was saved or it was not real until 25% was saved. In my case I know once I have half, if it takes me more than 10 years to retire, there is a problem, and I hope its closer to 8 years than 10 to get that last portfolio double.


Quote:
Originally Posted by W2R View Post
I sort of approached this from another angle.

I put everything I could aside for retirement, and then computed how much I could spend in retirement if I retired at the first possible moment of eligibility (last November). My goal was a spending level, not a time.

But then, I am 61 years old, older than some here, so maybe that provided me with a different point of view.
What were you eligible for at 61 that you were not eligible for at 60? Pension I am guessing, possibly SS?

The 60k expenses includes our mortgage (so I have budgeted high), but I do agree I can control expenses within reason by either paying off mortgage early, downsizing house or working longer.

I appreciate your answer because I do agree, if I have $1.4 M at age 52, the probability I wait that one more year is silly- might as well change expenses and live the good life 12 months earlier than try to reach some fictitious target that is filled with assumptions I made a few years ago.


Let me ask you a different question, when you were 8 years away from RE, did you have half your retirement savings set aside (half of what you retired on)? When you were 16 years from retiring, did you have a quarter of the savings in your retirement accounts? Even if you adjusted spending to the amount you could withdraw, I am "guessing" you knew 4-8 years out it would work based on some performance assumptions.

Thx again for reply.
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Old 02-22-2010, 12:35 PM   #9
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What were you eligible for at 61 that you were not eligible for at 60? Pension I am guessing, possibly SS?
Very tiny pension and subsidized health care.

Quote:
Let me ask you a different question, when you were 8 years away from RE, did you have half your retirement savings set aside (half of what you retired on)? When you were 16 years from retiring, did you have a quarter of the savings in your retirement accounts? Even if you adjusted spending to the amount you could withdraw, I am "guessing" you knew 4-8 years out it would work based on some performance assumptions.

Thx again for reply.
My net worth was negative ten years ago. I decided I was going to retire in November, 2009 anyway. I planned out the whole thing from square one and fleshed out the details of my financial plan as I progressed. I "lived like a student" (maxing out my retirement accounts and then living on a very small fraction of my take-home pay), became debt free, then bought a cheap house with 20% down in 2002 and paid it off in 2006, and was right on track to retire at within $100/month of my goal budget at that time. I was still struggling with that last $100/month! After paying off the house, my taxable savings just exploded (as I had planned, since all that effort was diverted to savings). I came into a completely unexpected inheritance shortly before "R-Day", but would have retired on that day anyway (just on the lower budget that I had planned). I had a backup date of next July 31st in mind, in case of emergencies that I could not foresee. For a while I thought I would have to use that backup date due to Katrina, but it turned out that was promoted and I was able to revert back to November 2009.

I "knew" it would work, based not so much on performance assumptions, but based on my faith in myself to LBYM to the extent necessary and to LBYM as much from square one, while working, as I would have to do when retired. I looked at performance after the fact to see how I was progressing to my goal budget and I estimated that progress based on a number of different assumptions (depending on my pessimism of the day), including historical market conditions and how I had done from 2000 to the date of the estimate. It became a game to me, to see how much more I could pinch a penny to reach that goal budget based on different assumptions. Also I took a big chance and invested my TSP almost entirely in small cap and international between 2003-2006, which paid off. In fact, the whole effort was a gamble but I figured it was worth a shot.
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Old 02-22-2010, 12:52 PM   #10
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My question again- when you are (were) working... when did FIRE become a reality more than it was a goal? It appears so far away, but at same time I think I am doing "all I can" to reach the goal.

Thoughts?
I suppose it came in reality a couple of years before DH left his job. At that time I was 49 and DH 53. However he stayed 2 more years to receive retiree benefits consisting of a larger pension and medical benefits. Since he stayed longer, we are able to only take 3% from our portfolio (I am the conservative one). It also allowed us to have a 25% (of our yearly expenses) fudge factor that helps us sleep at night.

It can seem far away; I know. However understanding how to invest and keeping track of your expenses is a major part of the battle. Keep on, keepin' on.
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Old 02-22-2010, 01:01 PM   #11
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I measured progress continually, but didn't put myself on any kind of schedule. That would have driven me mad, with all the gyrations of the financial markets. My aim was just to save abundantly, invest rationally, and keep doing it until w*rk became utterly intolerable. It all happened. You might be surprised at how quickly it sneaks up on you.
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Old 02-22-2010, 01:22 PM   #12
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Five years ago I came up with the following time line to help measure progress towards our FIRE goals:

To remain on track, our portfolio value had to exceed:
6X annual expenses by age 35
11X annual expenses by age 40
17X annual expenses by age 45
24X annual expenses by age 50
33X annual expenses by age 55

Today, at age 36, we are way ahead of schedule, but FIRE is still more a goal than reality.
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Old 02-22-2010, 01:45 PM   #13
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Originally Posted by Onward View Post
I measured progress continually, but didn't put myself on any kind of schedule. That would have driven me mad, with all the gyrations of the financial markets. My aim was just to save abundantly, invest rationally, and keep doing it until w*rk became utterly intolerable. It all happened. You might be surprised at how quickly it sneaks up on you.
Rhetorical question

can you have progress if you don't have a schedule?

LOL

I get what you mean, I don't focus on my portfolio value that deeply (just once year when I fill out my performance spreadsheet)- at that time I check if I am close to the age 31 goal or age 39 goal (I am 37). I would only "change" my plans if I missed the goal (I am probably going to miss the age 39 goal unless I get 100% returns over next 24 months). Change plans means I either try to hit the age 47 goal instead, change retirement date, or do nothing because it was an early goal and meant little.
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