Retirement Planning Made Basic

“Congratulations. I’ve never seen someone work so hard to determine when they can stop working.”

This is the message I got from my husband when I told him I had updated our retirement spreadsheets and that we were currently 19 years from retirement.

Weeeee!

Now, that seems pretty far away right now. But that 19 year date is a little iffy. It assumes a few things:

  • we’ve paid off our house
  • we’ve paid off our cars
  • we are receiving no other income except the income from our main 401Ks.
  • lastly, it also assumes BOTH of us are retiring.

Realistically, my husband is planning to continue working long past when I throw in the towel. And, I’ve held back a few retirement vehicles from this initial estimate because I’m not sure if they’ll still be there in 20 years (anyone else due a pension they’re not sure will exist when they’re 55? You’re not alone!). I also assume that I will be working my side job in some capacity (so bringing in some supplemental income) after I retire from my full-time job.

So, looking at all those variables, it’s very probable that with some happy budgeting and a little more care I can retire in the next 15 years or so.

CRAZY RIGHT?!

Here’s a tip. If you’re an impulsive shopper like me, put together a cool, fun, colorful retirement asset tracking spreadsheet. Then, any time you’re tempted to make an impulse purchase go to that spreadsheet and decrease your net worth by that amount. Watch the number of years until you can retire grow. All because you needed to buy a new InstantPot! You’re so basic.

That all said, I’m guessing you all want to see my retirement tracking spreadsheet. It’s pretty awesome.

But… I’m not sure I should share it here. You see… I didn’t make it myself!

*GASP*

Oh, go scratch.

Why should I reinvent the wheel? There are way smarter people out there than me who have ALREADY RETIRED EARLY. So, it makes sense that I take a page from their book and look at how they did it.

The spreadsheet I use is based on this spreadsheet from Mad Fientist. It’s pretty awesome and I only had to do a little bit of tweaking to get it into a format I really liked.

My favorite part of this spreadsheet is how fluid it is. I can put in different numbers and watch our time to retirement grow or decline.

For example, I really want a pool. Like really really want a pool. But do I want a pool so bad I’d be willing to work an extra FOUR years to pay for one? Maybe. And maybe there’s something to be said for really wanting something so badly you understand ALL the costs associated with that item. But maybe this will make me work harder at my jobs to come up with supplemental cash so I can have my pool and my early retirement?

Here’s the thing. You don’t need a complicated spreadsheet if you’re not a numbers person. It’s pretty easy to do.

I mean, if you’re seriously thinking about telling your boss to fuck off because you’re retiring at 32 and you haven’t crunched the numbers yet then maybe you should rethink that terrible plan. But, you can get a good idea of what you need to retire with just the following information.

  • How much is currently in your retirement vehicles?
  • How much can you add to your retirement vehicles each year?
  • Assume a 7% rate of return on those vehicles (5-6% if your more conservative)
  • Assume you can withdraw 4% of your total each year to live on

Let’s pretend that I make 100K a year and that I am putting 30% of my paycheck (30K) into retirement savings each year. If I start now, in 15 years I will have three-quarters of a million dollars in my retirement accounts.

Don’t believe me? Let’s run the numbers.

Year Amount Currently in Retirement Vehicles Amount You will Add to that Each Year Return (7%) Total
2017 $30,000.00 $30,000.00 $2,100.00 $32,100.00
2018 $62,100.00 $30,000.00 $4,347.00 $66,447.00
2019 $96,447.00 $30,000.00 $6,751.29 $103,198.29
2020 $133,198.29 $30,000.00 $9,323.88 $142,522.17
2021 $172,522.17 $30,000.00 $12,076.55 $184,598.72
2022 $214,598.72 $30,000.00 $15,021.91 $229,620.63
2023 $259,620.63 $30,000.00 $18,173.44 $277,794.08
2024 $307,794.08 $30,000.00 $21,545.59 $329,339.66
2025 $359,339.66 $30,000.00 $25,153.78 $384,493.44
2026 $414,493.44 $30,000.00 $29,014.54 $443,507.98
2027 $473,507.98 $30,000.00 $33,145.56 $506,653.54
2028 $536,653.54 $30,000.00 $37,565.75 $574,219.29
2029 $604,219.29 $30,000.00 $42,295.35 $646,514.64
2030 $676,514.64 $30,000.00 $47,356.02 $723,870.66
2031 $753,870.66 $30,000.00 $52,770.95 $806,641.61

 

Now, what if you put 30% of your income away AND your employer matches you 5%? Wait until you see how much that matters!

 

Year Amount Currently in Retirement Vehicles Amount You will Add to that Each Year Employer Match (5%) Return (7%) Total
2017 $30,000.00 $30,000.00 $1,500.00 $2,100.00 $33,600.00
2018 $63,600.00 $30,000.00 $3,180.00 $4,452.00 $71,232.00
2019 $101,232.00 $30,000.00 $5,061.60 $7,086.24 $113,379.84
2020 $143,379.84 $30,000.00 $7,168.99 $10,036.59 $160,585.42
2021 $190,585.42 $30,000.00 $9,529.27 $13,340.98 $213,455.67
2022 $243,455.67 $30,000.00 $12,172.78 $17,041.90 $272,670.35
2023 $302,670.35 $30,000.00 $15,133.52 $21,186.92 $338,990.79
2024 $368,990.79 $30,000.00 $18,449.54 $25,829.36 $413,269.69
2025 $443,269.69 $30,000.00 $22,163.48 $31,028.88 $496,462.05
2026 $526,462.05 $30,000.00 $26,323.10 $36,852.34 $589,637.50
2027 $619,637.50 $30,000.00 $30,981.87 $43,374.62 $693,994.00
2028 $723,994.00 $30,000.00 $36,199.70 $50,679.58 $810,873.28
2029 $840,873.28 $30,000.00 $42,043.66 $58,861.13 $941,778.07
2030 $971,778.07 $30,000.00 $48,588.90 $68,024.46 $1,088,391.44
2031 $1,118,391.44 $30,000.00 $55,919.57 $78,287.40 $1,252,598.41

Holy shit! That’s a TON of money to be throwing away by not investing enough money in your 401K to get the employer match!

Now, is 1.2 million dollars enough for you to retire on? That depends.

The 4% rule is one of those things that has been floating around the personal finance world for so long that I’m not sure anyone knows who came up with it. But basically, it assumes that a safe rate of withdrawals from your retirement vehicles is about 4% annually.

So, if you’re put together your household budget and you know that you spend 60K a year on household expenses, then you need to be able to draw 60K a year from your retirement vehicles and that 60K has to be equal to or less than 4% of your total balance.

Looking at our first chart of a total balance of $806,641.61 and a 4% withdrawal rate would let us withdraw $32,265 per year. That’s not enough to live off of if we’re used to spending 60K a year.

If we calculate 4% of $1,252,598 – that gives us $50,103 a year to spend! Now we’re getting closer to our goal.

This is where the number crunching comes in. We have a couple of options if we’re determined to retire after only 15 years.  

1. Find a way to make another 10K a year through a side hustle

2. Get your spending down to 50K annually

–OR–

3. Get another job now that can help you get your retirement accounts up to the $1.5 million mark in the next 15 years.

See! Isn’t this fun!?

No?

Well… fuck off then.

Just kidding. It is fun! But it’s also enlightening and terrifying and ridiculous and all those things.

The goal here is not to scare people into freaking out about how long it will take them to retire. The goal is to get people waking up to the idea that one day you will NEED to retire.

Not everyone can or wants to work until they drop dead. Planning for the future now takes so much weight and stress and worry of your mind.

There are so many more variables here than what I’ve talked about – but I’m hoping this serves as an introductory primer to those who haven’t really considered what they’re doing for retirement savings and how much money they’ll actually need in the future.

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2 Responses

  1. September 11, 2017

    […] I’d really like to retire at age 55. […]

  2. February 20, 2018

    […] when I made this post about my retirement planning worksheet? It’s a pretty cool worksheet, I’ll give you […]

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