Anyone know of a good early retirement calculator?

Preparing for life after work. RRSPs, RRIFs, TFSAs, annuities and meeting future financial and psychological needs.
FinancialDave
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Re: Anyone know of a good early retirement calculator?

Post by FinancialDave »

Garthd wrote:You could try Otar Retirement Solutions website. I have not used his calculator but I pieced together a lot of very valuble advice from his writings to design my own plan.

retired at 54 in 2014 and have since grown my portfolio living with no pension.

best regards,
I am not even a Canadian and have used Jim Otar's calculator for years and bought his book, "Unvieling the Retirement Myth."

It takes some work to understand how it works and compensate for some minor short comings, but once you do that (the documentation is pretty good) it is refreshing to know you are working with real numbers rather than a Monte Carlo simulation.

Dave
cardhu
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Re: Anyone know of a good early retirement calculator?

Post by cardhu »

The best early retirement software I’ve come across is Microsoft Excel. It can do a lot of other things, too.
In my experience, most users of Firecalc are way too serious about its results. It is a tool.
Also none of them like eating into their principal which is fundamental to how it works.
To each his own ... some people derive some sort of emotional comfort, I suppose, from the idea that they can “live off the dividends”, but I can’t really relate to that ... in my world, saving = deferred spending ... I didn’t work so hard to accumulate my nest egg for the purpose of NEVER spending it ... capital erosion is a key element of my plan, and if I die with multiple millions left behind, my plan will have failed.
Most of the people on the web over-analyze everything.
Perhaps, but by the same token, a lot of people under-analyse things as well, and instead just latch onto weak generalizations ... this is why we see so many people griping about RRIF schedules, or that their RRSP turned out to be a “ripoff”, or that they would have been better off not using it in the first place, or that sort of thing.
SQRT
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Re: Anyone know of a good early retirement calculator?

Post by SQRT »

cardhu wrote:The best early retirement software I’ve come across is Microsoft Excel. It can do a lot of other things, too.

To each his own ... some people derive some sort of emotional comfort, I suppose, from the idea that they can “live off the dividends”, but I can’t really relate to that ... in my world, saving = deferred spending ... I didn’t work so hard to accumulate my nest egg for the purpose of NEVER spending it ... capital erosion is a key element of my plan, and if I die with multiple millions left behind, my plan will have failed.
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Agree about excel. Surprising how many people want to use someone else's stuff?

Couple of other things. Firecalc is fine to help decide when you have enough for retirement, but once in the drawdown phase it seems silly to use a backward looking tool when you have the actuals, ie your own investment performance. This is particularly true if your portfolio doesn't match the "appropriate total US market" that Firecalc uses.

Secondly using a div drawdown method makes more sense when the div yield is close to a reasonable SWR. My yield has been in the 3.5-4% range for the last few years. So far I have generally only spent divs. 10 years in and the portfolio has almost doubled so I intend to start to systematically sell down a bit. Also, I plan on leaving a relatively large legacy.
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kcowan
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Re: Anyone know of a good early retirement calculator?

Post by kcowan »

There are a few key assumptions that will indicators whether you can retire and for how long:
1. Longevity - This is the key assumption because tries to predict how long your stash must last. There are numerous forecasters available to help but they are all inadequate. The best is to try several and then blend the results. Most give you one number which is median life expectancy. Sadly this number only represents 50% confidence by definition. What you need to appreciate is Gaussian Distributions where any number that is median of a spread. Finding the nature of that is harder but you can find approximations. In my case, I had a life expectancy of 91, and I estimated that the 90% confidence interval is +- 8 years. IOW there is a 10% chance that I will die by age 83 and a 90% chance that I will last to age 99. This makes calculating numbers to more than 3 significant digits a farce.

Also your longevity increases as you make it to an older age. So my likelihood of living past 80 is much higher at 65 than it was at 45. So I recommend resetting your longevity every 5 years.

2. Budget - What you can live on will determine how long your stash will last. What you will probably find is that you can survive on much less than what it takes while your are working. Zero cars is a good starting point in the age of Uber. One phone line per person. MagicJack is the cheapest way to add long distance to that phone line. No insurance premiums. You have passed the age when that plays a useful role. Food costs can drop because you can shop around and also have enough time to cook. Housing price will drop because you no longer need 3 bedrooms. Proximity to transit lines and Uber are key to location. Walking to shopping may also be valuable. OTA TV (free) and streaming (e.g. Kodi and Netflix) are now the way to get entertainment. Do your own cleaning and laundry. Income tax.

Obviously people will choose some things added to the above but the above establishes the baseline.

3. Income - There are 3 major elements to your income. Pensions (private/public, CPP and OAS), Portfolio net returns, Other (Rentals, Part-time Work, Hobbies such as selling on eBay).

4. Major expenses - These are unpredicted items that arise from time to time such as health costs, new roofs, car expense if you have one, travel costs, taxes from capital gains.

So you need a spreadsheet with 4 lines and a bunch of details that can come from subsheets. There are numerous sources of spreadsheets that model portions of the above. The simplest starter is to take the baseline budget x number of expected years retired to determine how much savings in a portfolio is needed, then add COLA and Portfolio Growth assumptions.
For the fun of it...Keith
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