jIMOh
Thinks s/he gets paid by the post
NO. It is based on expenses/ spending levels. It's primary role is to give me checkpoints- ages which should have a certain amount set aside by- to be able to communicate to wife and me if we are saving enough for retirement. For example we got an IRR of 9% last year, so I know to look at 9% column for most realistic measurement.
Another reason for no inflation factor- because I am so far from retirement (20-40 years), I base most retirement planning on my income level, as my income level determines current spending patterns. My biggest risk now is "return risk"- I need to get highest returns possible now... and set aside a reasonable amount possible. No reason to "guess" inflation because my salary should keep up, which will adjust spreadsheet spending level as time elapses. In addition, if my investments are ever 33X my expenses (3.3% SWR) I know can retire early (before 52). After age 52, if the investments are 25X my expenses, I can retire "normal".
The spreadsheet:
It takes a current level of income (or expenses), allows for a "bump up" (meaning increase in spending or income), asks for a retirement age, then backtracks.
There are columns for 7%, 8%, 9%, 10% and 11% returns already on sheet. Once the top info is filled in, the table is built.
So for me I would enter:
48k expenses.
25% bump up (I want to spend 25% more than I do now in retirement)
age 60 as the retirement age.
It then divided 48k+25%=60k by .04 to come up with amount needed (1.5 M), and puts age 60 next to it.
In 7% return column pair it reduces age by 72/7 and halves the 1.5 M number. It repeats the equation the row below and so forth.
In 8% column is reduces age by 72/8 and halves the 1.5 M.
and 9%-10%-11% follow same pattern.
I will try to insert a graphic (40k used as example in graphic):
