I realize that my ideas are not the mainstream and this reguires a shift in pov. Let me attempt to persuade you.
One problem with spending down all your assets is you can't predict when you will die. On average, Americans live until about 80. But thats the average. Half of everyone will live longer than that. What will you do if you live to age 100?
If you retire at 50 and live until 80 you will spend 30 years in retirement. Thats a long time. Trying to predict the exact moment you will die and budgeting just enough for that is impossible and risky.
You need to be thinking like a B-list celebrity. You made a small pile of money, but your career is over and no one wants to hire you anymore and you need to find a way to make that money last another 30 - 50 years which will probably include a big recession or even a depression or two. The way to do that is not spend down your principle.
Also there are definitely any places in the world where this might be difficult, but I don't think its out of reach of most people who make > $50,00 a year and live in the US.
Got a new cert. I used letsencrypt.org so this should be a lot simpler in the future and hopefully won't happen again.
Those are sample transactions. It is a little weird. But having no transactions seemed weird too. Need think about this one
fwiw, I finally open sourced the site: https://github.com/kablamo/Networthify
Hey those are really good ideas. I don't have a repo for this. But I totally should. I'll try to make that happen tomorrow. I'll update here when I do.
Thanks for commenting! Good question. Its not a glitch. Its because you're withdrawal rate is less than your rate of return.
Your withdrawal rate is 4% and your rate of return is 5%. So at 6 years you are making 75k every year due to your 5% rate of return. However you're withdrawal that year will be less than 75k because your withdrawal rate is 4%.
5% of your nest egg = $75k.
4%of your nest egg = some number less than $75k
In other words your nest egg isn't big enough to cover your expenses yet.
Thanks for commenting. Atm the caclulator only supports positive savings rates.
Thanks for the comment.
Its not backward. The calculator assumes your current expenses are the same as your expenses after retirement. Another words the amount being withdrawn in retirement is the same as your expenses before retirement -- regardless of what you set the withdrawal rate to be.
Lets try an example. Lets say you're expenses are $40,000 a year before retirement. The calculator assumes your expenses are $40,000 a year after retirement -- regardless of what you set the withdrawal rate to be.
The withdrawal rate = amount withdrawn / total nest egg. Since the amount withdrawn is $40,000, the only thing which is going to change in this equation is the size of your total nest egg -- it has to go up. So it will take you longer to retire.
If you save $1,000,000 and withdraw 4% each year you will get $40,000 to spend each year.
If you save $1,333,333 and withdraw 3% each year you will get $40,000 to spend each year.
But it will take you longer to save up a larger nest egg with the 3% withdrawal rate than the 4% withdrawal rate.
The calculator is working. It updates as soon as you move to the next field.
What doesn't work. Works for me.
No, you should not include equity from your primary residence. Here is why:
You will be financially independent when your investment income generates enough money annually to equal your spending. The equity in your primary residence will not generate any money for you.
The withdrawal rate is the rate at which you withdraw money from your nest egg (portfolio) after you retire. For example, your portolio may earn an avg annual return of 7%. But you decide to only with draw 4% each year and reinvest the remaining 3%.
If you save $1 million and withdraw 4% each year you will get $40,000 to spend each year.
If you save $1 million and withdraw 3% each year you will get $30,000 to spend each year.
The calculator assumes your current expenses are the same as your expenses after retirement. I generally want to live have the same standard of living after retirement as I do now.
So if you spend $40,000 a year want a withdrawal rate of 4% you will need to save $1 million to retire. If you spend $40,000 a year and want a withdrawal rate of 3% you will need to save more than $1 million so it will take you longer to retire.
You can read more about withdrawal rates here:
Hi David. Thanks for bringing this up.
I had been thinking this site is geared towards people doing early retirement. If you are doing early retirement -- say 5 years from now, the goal is usually to replace your current salary with money earned from investments on your nest egg. In this scenario it usually makes sense to assume expenses now are the same as expenses in retirement. Also most people hate lowering their standard of living. And many retirees are either healthy and spending money on adventure or unhealthy and spending money on healthcare.
*However* if you will have a house paid off, for example, I can see that you have a fair point. Some people have suggested adding in a mortgage calculator. I like that idea. But your idea might be simpler and easier to implement. Let me think it over.
I just want to add that that is something quite a few people mention when they first learn about Networthify. So I probably do need to address the issue even though its hard.
Thanks Julia. Yeah thats ambitious. But it would be awesome. I think I would start with just building a brand new mortgage calculator and then integrate that ... somehow with the existing calculator. I am planning to build more calculators and a mortgage calculator is probably on the list. So this feature might actually exist at some point in the very distant future.
Thanks Andrew! I have put some thought into how this might work and I think its doable. Its something I want to do but there are a lot of things on my Networthify todo list! I have some other Networthify projects in the works. But its good that you put it here so people can vote to raise it in my priority list.