In my last post, my May update, I mentioned that I would keep working on my program that does my charts for me and probably I would adjust it some. I did. In what I posted that day, I did not post the fact that I did not include taxes. Now most of our retirement money is not in Roth accounts, so there will be some taxes. Using the current tax rates, I had to add a fair amount to what our current spending is to account for what we would need to keep up with that after tax spending in my budget. Now while I expect we will have our mortgage paid off in 10 years or so, I also expect that there will be a lot of things I don’t expect. So, to that end, I erred on the side of higher taxes, lets say topping out at the 25% bracket, and that we would have expenses equivalent to our mortgage. I like fudge factors, and as we close in on that number, we can always decide. After all, we are talking about 10 to 15 years from now.
So if we don’t save any more money, we should still be able to retire in our late 50s assuming a rate of return of 5% or better. This is not what one would really call a FIRE, but this is also a higher amount of money saved than we probably need.
It’s important to note that I have not gone into detail about how different accounts have different tax benefits, so we might be able to withdraw with a lower tax burden, and thus have a lower need. Still, it can’t hurt to plan for more now, and then we can always drop off later if we want to.
Now if we keep saving the way we have at about 20% of our income, then we will be able to retire with the same money 5 years earlier. I expect the 3% to 4% scenario is the most likely in the next 10 to 15% years, so by that logic, we may be less lucky in this regard. Still, if we can average 5% then 10 years will do it, and that is our early 50s. That would be better.
We are currently saving a lot of money for our son each year to get him a good amount for college. Who knows what college will cost for him when he goes, but he’s not yet in kindergarten, and we are targeting to have a good chunk of money to help him out. To do that, though it will only take us 6 or 7 years at our current addition rate, and then we can give that money back to ourselves. We are still saving many times more for ourselves than what we are putting aside for him.
What’s nice about my program is that I can test other scenarios, and see what it means. If we could add another 5% of our income to our savings rate then we could be free about 1 to 2 years earlier. That would mean a lot of scrimping, and not living the next few years. I do not think the value proposition is there. Still, it’s nice to know that we have the option. Remaking this table literally took about 2s for the program to run and another second for me to adjust the savings rate variable. Now that I have this tool, I suspect it will be most helpful as time goes by. I still plan on adding more charts and tables, as I have a few ideas. I think a graphic pie chart for my net worth breakdown would be fun, and the module I have makes that easy. I just need to RTFM if you take my meaning; Read the “Fraking” Manual for those who don’t know the acronym.
To Sum Up
Now that the core of my program is written, I have some easy ways to expand this further. I think this will be fun to do, and I have the motivation to do it. One thing I would like to see is if I take the mortgage out of the equation leaving only the mortgage taxes. Most of the code to do that is there, but I need some more time to add that. I also see myself tweaking these tables a bit more. What would you like me to add, or what do you have that you think I should consider?