# Calculating and Recalculating

This is a guest post by Dave, who is also looking to retire no later than 45, but unlike Tim has no kids and doesn’t want any.  Dave is from Ontario and is working towards his CGA certification.

Every once in a while I will spend a considerable amount of time (to the point where I think my wife thinks I’ve become obsessed) researching various interests.  In the past year or so I have researched the following topics to death: my diet, different gambling topics, investing strategies, and optimal exercise routines.  Over the past couple of weeks, I have spent some time playing around with retirement calculators (mostly firecalc), trying to figure out (again) my end retirement goals.

I realized three things when I did these calculations:

1) The amount that I need to retire is not really all that high:  If I set my spending level to \$25,000 (the approximate level that I spend currently), I should easily be able to retire by age 45 with a buffer of money available if I need it to an age of 103 (just in case I live significantly longer than average).  If I had no other inflow of cash coming in during retirement, I would need about \$685,000 to maintain the lifestyle I currently lead (adjusted for inflation).

2) Other money coming in significantly reduces the amount I need to have invested: For example, the additional inflow of CPP and my company pension plan significantly reduces  the amount that I actually have to have save for retirement.  According to the government of Canada, average CPP payments in 2010 were \$502 – even at half that amount, my spouse and I would receive approximately \$6000 per year combined (I think that half is conservative).  Add in around \$1000 per month of my expected company pension plan and I don’t really need a large amount of money from age 65 on.  For security’s sake, I won’t really count these pension amounts in (as a buffer to possible spending increases in old-age), but realistically I should have a significant portfolio going into my later years.

3) I’m still on track with my current plan: I find it useful to have periodic checks on my plan every year or so.  Between those periods I don’t really even think about what I’m doing money-wise as it is all automatic.  It is nice to know that I am still on pace to retire when I want to and I should be fine when I get to that point.

My plans could of course change significantly in the next few years, I might find a career that is significantly more enjoyable, but pays a lot less.  Yet if it was my choice, prior to changing jobs I would probably run the numbers again and find out what impact this change in pay would have on my future plans.

Have you ever done these sort of retirement calculation checks?  If so, do you have any idea whether you will have over/under saved for retirement?

## 6 thoughts on “Calculating and Recalculating”

1. Ross says:

My in-laws (recognizing my obsessive saving habits) recently asked me when my goal retirement age was. I told them I don’t have one, they of course didn’t believe me. The trust is though that I don’t actually have one. The reason for this is that there are to many variables that may come into play in the next twenty years before I turn 50. Although I may use retirement calculators, I do not by any means rely on them as a certainty. My goal right now is to save as much as possible to ensure that I can retire when I want to. That being said, maybe by the time I reach that point I may decide I like my work and don’t mind working an extra year or two to afford additional vacations and so on.

The point is is that there are no certainties, in investing or life. If you put to much emphasis on retiring at a certain age you may only retire at that age because you said you would, not because you actually want to. Happiness should always be the ultimate goal and retirement is simply one means to that end.

2. jon_snow says:

I run the numbers several times a week… a bit obsessive I’ll admit. My situation is bit unique in that I am likely to receive a large inheritance one day – not something one should count on in retirement planning I suppose, but it is another factor that should allow me to retire at 45, if not before.

3. deegee says:

Dave, you are doing pretty much what I did in the year or two leading up to my ER back in 2008. I charted my ER budget including individual health insurance (here in the USA it is very costly). I projected its growth separate from the growth of the rest of my expenses so I could assign to it a different inflation rate.

I charted my budget out to only age 60 because that is when I can tap into the first of my “reinforcements” – my IRA, followed by my frozen company pension and Social Security a few years later in my 60s. I used Fidelity’s Retirement Planner software for a longer-term budgetary outlook and have met with their reps a few times along the way. Their software showed me in excellent shape. I recall viewing this spreadsheet just about every day as I was nearing my ER especially when one of the big missing pieces was falling into place.

Like you, I built in a cushion, or surplus, in my ER years to cover any unforseen expenses. I also have done this because I expect to run small deficits in my late 50s and will have to tap into some principal because my divdends will not be enough to cover my expenses. [I have not updated my budget yet to account for a likely change to a less expensive but less broad individual health insurance plan. This may eliminate future deficits.]

4. My wife and I had a minimum threshold of getting 40K per year in side income by the age of 40, which means we needed about 400K to 500K in aggressively working money. This should cover our living expenses and let us hit financial independence.

Well, I’m happy to say that the money worked TOO hard! We hit over double our annual target the last two years and I’m only 37 because if some good investments over the last five years. So we are above our threshold yet not retired because we’re not 40. We’re confused 🙂

However, I have switched jobs, to a less intense one. My wife works only part time and she started a master’s degree last year. I spend a lot more time investing and doing ventures, and I’ve started a new parenting blog to document the awesomeness of my 3 (soon 4) kids and my equally awesome parenting style, kids games, teaching tips, etc.

As an aside, read Time Magazine: The year 2045 when man becomes immortal. You may need more \$ than ca just take you to 103 yrs old.