Show HN: When can you retire? An early retirement calculator | Hacker News Reader

Show HN: When can you retire? An early retirement calculator

networthify.com

6 pointskablamo8 comments

I think this is an interesting tool, and it's very easy to use. I had a couple of thoughts:

1)What does the withdrawal rate measure? I took it to mean the % of your portfolio value needed to cover your annual expenses after retirement. Might be worth clarifying this somewhere.

2) Would be cool to see a similar chart for annual rate of return (if for nothing more than to drive home the importance of savings rate).

Either way, I think it does a great job of highlighting just how big an impact little changes can have.

Thanks! I like the idea of a chart for annual rates of return.

The withdrawal rate is a little tricky. The withdrawal rate is the percentage of your retirement nest egg you will be spending each year. If you decrease your withdrawal rate you will need to save a bigger lump sum to compensate for the smaller amount of income you are generating. Therefore it will take longer for you to retire.

Oh I see, because you've fixed retirement expenses to equal working expenses. Thanks for the clarification

It would be helpful to see at what age you will run out of money for a given withdrawal rate. Without that it's difficult to know what rate of withdrawal to enter.

The calculator assumes you never want to draw down your nest egg -- ie your savings will only grow larger. It also assumes you will spend the same amount in retirement that you spend now. Your rate of withdrawal is pretty much a wild guess as it depends on your rate of return, taxes in the future and inflation in the future. Historically 4% has been a good bet. See this article for a summary of this topic:

http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need...

and this article for more in depth writing:

http://financialmentor.com/free-articles/retirement-planning...

Let me know if you want help with anything related to the finance and tax calculations. One thing I'd mention is that these calculators are fairly common, but the problem is that most people dont understand them. Putting them into context would probably much more useful. I'm a CPA, JD by trade so I have a good amount of experience in this.

I'd love to hear any ideas/reviews. I was inspired to create this calculator after reading this Mr Money Mustache article:

http://www.mrmoneymustache.com/2012/01/13/the-shockingly-sim...

If you are interested in the math behind the calculator see my blog post about it here:

http://blog.networthify.com/math/the-math-behind-the-calcula...

I'd like to see a way of incorporating real life variances in there. For example the probability of getting the same inflation adjusted salary for the remaining time is zero. Many are likely to experience periods of unemployment or temporary higher expenses. Similarly the markets don't give such a predictable return. Throw in a business cycle and the numbers are far less certain.

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