Yes, reduced expenses are like tax free dividends, and this makes the mortgage case a bit more complicated, because as the saying goes, “you have to live somewhere.”. Thanks for correcting me. I understand the desire to be conservative, but I would still totally disagree with the idea of going for an even lower SWR. 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. But potential medical expenses do scare me a bit – just wanted to hear your thoughts on that specifically. If you think you are hardcore enough to handle Maximum Mustache, feel free to start at the first article and read your way up to the present using the links at the bottom of each article.. For more casual sampling, have a look at this complete list of all posts since the beginning of time or download the mobile app. Really, there has to be consideration for the lifestyle required after retirement in determining the saving level. All Rights Reserved |, cutting your spending rate is much more powerful than increasing your income, Getting Started in Carpentry – Tools of the Trade, Two Years Without Health Insurance (and What I’m Doing Now), The Man Who Retired at 27: Why You Should Consider House-Hacking. I am working full time for 10 years now. 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%. your lifetime is a sufficiently long term to reach quite close to an average like that. Important Notes, before You dinar Bitcoin windfall order. I started saving for retirement in 1993. Ex: for 15 years I’ve been saving 10-20% of my take home pay. My company contributes a straight 3% plus matches up to an additional 6%, which of course I am taking full advantage of. I spend only about 50% or less of my income. I think that any advice that relies on the old “safe assumptions” of 5-8% annual investment returns is hopelessly ignorant and out of date, and I think holding on to those figures will only give your readers false hope and lead them astray. Who cares about the +1/-1 percentages bits of return gains/losses on the way to retirement, if you understood the true power of the savings rate? Help!! Might want to include links to OpenOffice (and LibreOffice, which I prefer these days) for those that aren’t familiar with the software. And having expense flexibility is a point that is often overlooked. Nords did a similar post with the math behind early retirement here: I simply have a goal of having it paid off when I retire and I base my extra payments on that goal. At 51, with 4 kids, we’re on a good path, but this is really energizing me. If want to retire within 10 years, the formula is right there in front of you – simply live on 35% of your take-home pay**, which is approximately what I did without even realizing it during my own younger years. If inflation is 3%, then my buying power is the same as the year before. Your current expenses are still a good proxy for what your retirement expenses will be. cool! You have a nice low-cost lifestyle with a wide variety of useful skills, and you’ve read lots of books on investing and other subjects. User:Blood Lines Of Darkness - Wikipedia, The Free Encyclopedia The % paper valuation drop during a bad year does not matter unless you SELL. That’s the way of the Mustachian. You said who can forget 2008? If stock price went down, I would still get my 5% yield on the price paid. The Mr. Money Mustache app includes many Financial Independence blogs bringing a variety of perspectives. Do you still use your OHIP card up here in Ontario, or do you pay for it all down there? The Money Mustache Community » Learning, Sharing, and Teaching » Investor Alley » Investment/retirement calculations « previous next » Print; Pages: 1. For most people, this occurs at a traditional retirement age, if at all. Then, if you have more left over and if the student loans are about 4% or so, you might as well wipe those out first (effectively guaranteed return that affects your everyday cashflow). But don’t forget, a big item in of most people’s expenses doesn’t go up: your mortgage (assuming a fixed rate product). – constantly increasing spending according to the CPI (no further increase in frugality skills) But, I think the important thing is that trading your time to save money is more powerful than than trading your time to make money. GamingYourFinances Bullseye Grace McCarter The standard approach of save enough till you can live off 4% plus inflation would mean years of extra working before you could retire, and likely dying with a sizable estate. Your mortgage payment has a 3.9% return. Does the relationship assume cost-of-living (or “spend level”) in the “before” and “after” timing buckets (with all the averages, assumptions, escalations applied) to be the same? In 2011, I saved 65% (due mostly to an unexpected salary boost). AND I WOULD PREFER TO HAVE THE TIME INSTEAD OF THE MONEY BECAUSE IT MAKES ME HAPPY TO HAVE TIME TO ENJOY LIFE. Books. I’ve only read a few posts thus far, but this one actually surprised me. Though the new job is a little too good for me to want to leave at the moment. I think RRSPs are better suited for early retirees than “traditional” ones. 5% is a very conservative and reasonable long-term goal. I didn’t. (which is still 17-20 years away, or retiring at age 50-53 but I thought I was going to have to retire at 67 like my social security statement says). There are social aspects, educational opportunities, satisfaction with completing a project and so on. – no income at all for the rest of your life That said, I make a little over $30,000(pre-taxes) a year, am 23 and in college. So I guess you could say your annual budget is $27,000 plus how much it would cost if you had to rent to live in your place. Almost like FI and mustachianism were complete mysteries to us before we stumbled upon this blog or our first FI book and began to question our spending lifestyles, investments/income generators if any, and future goals. Here’s how many years you will have to work for a range of possible savings rates, starting from a net worth of zero: It’s quite amazing, especially at the less Mustachian end of the spectrum. What would a retired mustachian at various ages today spend and how would that average spend compare to pre-retirement spend? I’m Canadian too and I have to agree with mugwump. We are pretty frugal and enjoy a simple and efficient life-style. If I have $25k in dividends and $25k in expenses at beginning of year 1, and the companies I hold raise their dividends on average by 3%, then I have $25,750 in income that year. This is a good question I hope mmm gets to it. http://the-military-guide.com/2011/01/03/how-many-years-does-it-take-to-become-financially-independent-2/. Your article inspires me to keep on saving by keeping the end in mind: not only am I working towards a comfortable early retirement, I also enjoy the peace of mind that comes from having a solid emergency fund. pachipres We talk about “financial independence” because too many people want to argue over the definition of retirement. I admit there is high standard deviation with these results and Mr. Money Mustache’s approach of a 10-year time horizon adds to the variability. Re: Wrote a retirement calculator because i-orp.com didn't do what I want « Reply #31 on: March 12, 2017, 08:53:01 AM » Quote from: Cheddar Stacker on March 11, 2017, 08:44:39 PM Gypsy Geek I agree, I love this post, its been specifically bookmarked and I visit it weekly. February 19, 2013, 5:12 pm. The rub is that it is not easy to change habits especially when one is surrounded by non-Mustachians. If your paid off house is worth 100K and you could earn 8% on that money elsewhere, your rent is $8000 per year. Yes we pay higher taxes, but don’t underestimate the cost savings for health care. Dividends as a percentage of current share price. Canada’s inflation rate is around 3%. You just save 100% of your extra cashflow. Whatever amount you come to isn’t all of the money you’ll have for the rest of your life. Then do a “substantially equal distribution” from the IRA. January 13, 2012, 8:59 am. Use our retirement calculator to determine if you will have enough money to enjoy a happy and secure retirement. Calculating this with your level of taxation is a great way to get thrift motivation. At first I was psyched because they would even let me change the default 85% assumption. Ensure that the income is inflation protected. My time frame is around four years, so I’m not as assured that the numbers will work. Heck, maybe I should have already retired. So that's even MORE buffer??? I’ll get there, but it’s going to take time. If you earn an extra $1,000 in a year, it’s really more like $850 after taxes. Of course the leveraging is eliminated as the mortgage is paid off but so is the risk of foreclosure. January 17, 2013, 9:19 am. Here at Mr. Money Mustache, we talk about all sorts of fancy stuff like investment fundamentals, lifestyle changes that save money, entrepreneurial ideas that help you make money, and philosophy that allows you to make these changes a positive thing instead of a sacrifice. The most useful comments are those written with the goal of learning from or helping out other readers – after reading the whole article and all the earlier comments. I would disagree and suggest that 4% is still not all that far off the mark. FIrst off, I just want to say what a big fan I am of this philosophy and so glad I found the site. Agree that RRSP’s are a fantastic tool for early retirees. However, after reading ERE and MMM, I’ve recently spent more time on the spending side of the equation and I’ve been shocked by the impact on my time to retirement (I plan to retire later this year!). Joe User ** definition of take-home pay: gross income minus all taxes. There are lots of people who spend tons of cash, but are miserable. BTW, I am calculating my figures using a simple software representation of excel’s XIRR, assuming continually compounding interest.
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