I had the intention of working forever, never retiring. Francisco Fiuza Are cable TV and Starbucks worth having two income earners each work an extra eight years for??? If a figure looks surprisingly high, you can click in to see the detailed transactions in the various accounts that were added together to make that category. Say a bank loans me $200,000 for a house, they might only have as little as $20,000 of that actually on deposit from other customers. business clothes, any transportation to and from work, work equipment, costs incurred through social functions necessary to be successful at work, etc. I don’t want them waiting on my death to get rich and feeling rooked if I preserve my life and drain my funds to do it. How exactly do you pull money out of your ETF’ account to spend every month? The 5% return on your investments is unrealistic. So if your mort rate is 3.9%, by paying it down, you get a risk-free return of about 3.9% over what you can get in the market. Of course, if you do plug in a <1% return instead of 0.04 because your stash is entirely in a savings account, you'll see the numbers look much worse! As another reasonably well-paid Canadian. Many stock market cynics do calculations like this based on the quote price of the index itself, while neglecting the real reason we own stocks: the flow of cash they provide in the form of dividends. This is great! January 13, 2012, 10:20 am. (note that this blog earns affiliate income from some companies mentioned herein – see my affiliates policy). February 21, 2014, 12:51 am. El Beardo Numero Uno January 13, 2012, 4:03 pm. Isn’t this taken care of by the second footnote: But if you want the short version, if you using a 401k or anything like that, you should ignore your “Take home pay” which is in contrast to how you describe it above and do the following calculation instead: S.Rate = Total Savings / ( Total Savings + Expenses ) * 100. Thanks for your willingness to share this with others Ok, the markets have come back, but it took five years and the interest rates are way down. 2. I’m a 20something professional living in a Third World country (which makes it harder, but also more imperative, to save). January 18, 2013, 10:35 am. It’s the simple idea behind owning a business (either a real business, or rental houses, or a business through stock ownership which pays dividends). Socially Responsible Investing: Is It Also More Profitable? Light bulb moment! I can see that Vanguard ETFS (VOO specifically), have increased in value around 15% the last few years and I know there’s a likely-hood the market will dip or plateau since we’ve had an extremely long bull market. Hi JJ, If your increased taxes are roughly equivalent* to an insurance premium, your savings for that tragic event were just over $5,000, not $495,000. But if you don’t have any heirs it seems inefficient not to use at least some of the principle. You would have the same expected return, but with less risk. It came out of research (the “Trinity Study”) into safe withdrawal rates for a traditional 30 year retirement. As a civil servant and military reservist, I have a couple of those in my future, though I plan to FIRE well before they kick in so I generally exclude them from my math. Yabusame This is what I always say about faster than light travel in spacetime! Also, I am single but if I settle down with a special lady and am able to split costs then my financial independence will come even sooner. Mr. Mustachio, great blog! Thanks for the post, Having said all of that, here’s one calculator I just looked up that seems to calculate what you were talking about: http://apps.finra.org/investor_information/calculators/1/retirementcalc.aspx. – Pessimism about market returns is unusually high due to the Great Recession and the irrational human recency effect right now. cool! January 19, 2013, 10:42 pm. January 13, 2012, 4:05 pm. In a broad sense, we used a lot of the principles to save over the past 30+ years. Also as they get older they start developing their own interests ie. You want to preserve your nest egg and never, oh my gosh, ever, touch your principle. Of course you are right, but what I was trying to point out is that the article seems to assume that the lifestyle you are living while you are working is the one you want to live after you retire. Dragline It might surprise you to learn that many of the portfolios studied did not even last that long! So that is 9% additional savings, but in my mind does not correlate to my take-home pay. Really, it is just a way to view it backwards from how the retirement calculator … But you say, I can make 8% in the market. At least not until you are at that age. On the other hand, rental houses in some areas are still great, and even Lending Club still seems to be doing very well for me. Thanks a million (maybe literally) for the inspiration! On this page, you can find a variety of early retirement calculator tools along with other easy methods to see the fruits of your frugal labor. The shockingly simple/complicated/random math behind saving. Marcia @Frugal Healthy Simple January 19, 2013, 2:30 am. If your assumption is correct then in 20 years the stock will be paying a dividend of 8.7%. He lives in Longmont, Colorado. I start by saying that I do not live in US so some things do no apply. Or, for super-Badass mode, build your Excel skills and chart it year by year, month by month, adding historical average investment earnings to known pension payouts and subtracting spending. https://docs.google.com/spreadsheet/ccc?key=0AgEx7EZh8s8RdGNhSU9DQ2M0WG1UdW50UHRGQVh5c3c. In 2011, I saved 65% (due mostly to an unexpected salary boost). Thanks Russell! If I am saving retirement funds at the same time as saving for down payments on rental properties then it is a little more complicated. Then do a “substantially equal distribution” from the IRA. Don’t bank on it, but also don’t follow the crowd! We pay no universtiy education but we try to help them out in other ways ie. My problem with retirement calculators (and not for bragging purposes) is that I’m in an old school, (vested) defined benefit pension plan. :), drewstees Does anyone else have information that can confirm or deny this? Renting vs. Buying: The True Cost of Home Ownership . As a guy who spent >30 years in the investment business, I’m pretty sure (you can never be 100% sure) that 5% is high from today’s starting point. I do plan to go back to a higher paying job again in a few years and my husband and I are motivated to put a lot away and still retire earlier than most. No income, early retirement? I currently save 10% of my check to savings and another 5% goes into 401k. So the answer to “Do I pay down the mortgage or invest the money?” is often just “yes.”. I had a fair number of investments at that stage which have enabled me to live quite comfortably, but the consulting still gave me the benefits of working. My goal for early retirement is a nest egg of $1,000,000. I have still never written any examples like that. If you type “retirement calculator” into a search engine these days, and enter some basic stats about yourself, you will find some very strange assumptions that are guiding you to think you need an absolute shitload of money to retire. January 13, 2012, 9:10 am. Andrew – after reading more of MMM’s articles and thinking about this more myself, my plan of action is to actually reduce my contribution to my 401(k) down to 6%. Buying power is the blog was born when he looked around at his friends who had good jobs but still! Pay for it, but you say, car or credit card companies mr money mustache retirement calculator easy a... 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