40 Plus Finance

Follow My Journey Managing Finances At 40 Years Plus

  • Home
  • Features
  • Quick Reads
  • Resources
  • Financial Freedom Journal
  • About
  • Facebook
  • Twitter
  • YouTube
Financial Freedom Calculator – What I Used To Find Out I Wouldn’t Retire Until 85

Financial Freedom Calculator – What I Used To Find Out I Wouldn’t Retire Until 85

July 4, 2020 By Kurt 2 Comments

Bonus Material: Get the full financial freedom calculator that will calculate your returns to retire in 10 years or less

In this article, I’m going to show you how you can determine exactly when you can retire based on your current income, annual savings, and current total savings, all using a free calculator, which I’ll refer to as the financial freedom calculator.

After you are done reading this post and using the calculator, you will know exactly what age you will be able to retire using your current saving strategy. More importantly you will know if you need to adjust your savings plan in order to meet your financial or retirement goals.

When I first went through this exercise I was SHOCKED to find out I wouldn’t be able to retire until I was 85.1 years old!

Financial Calculator First Results

Table Of Contents

  • What this calculator is about and what it will give you:
    • Basic Calculator
  • Assumptions built into the calculator:
  • Step 1: Inputs Into The Calculator :
    •  Age
    • Annual Savings Amount 
    • Current Assets
    • Current Income 
    •  
  • Step 2: Review Outputs From The Calculator:
    • Required Retirement Assets
    • Age At Which You Can Retire
  • Step 3: How to Interpret Your Results

How To Use The Financial Freedom Calculator

What is calculator is about and what it will give you

The purpose of this calculator is to let you know exactly if your financial freedom / financial independence / retirement plan is going to work. Specifically it will tell you at what age you are going to be able to retire at given the current plan you are working on.

I’ve found that there is alot of “traditional” advice, such as “save 10%” or “start young” or “25x your expenses” which is just so incredibly non-specific that it won’t work.

I’ll refer to this as goldfish advice from financial advisors or “talking heads” on the internet or social media that just aren’t workable when you put pen to paper and run your actual numbers. They just regurgitate commonly held financial thoughts without actually applying any numbers to it.

Goldfish Financial Advisor

Goldfish ONLY know what is in their own little fishbowl and can’t see outside of the water they have been living in for years.

At the end, you’ll get an age at which you’ll be able to retire based on your current situation

Click the button below to make a copy of the calculator to use yourself.

 

Click Here For The Financial Freedom Calculator

 

 

Assumptions Built Into The Financial Freedom Calculator

There are three main assumptions built into the calculator.

First is the average annual rate of return of 5.29%. This is based on a 2018 study titled “Dalbar Quantitative Analysis Of Investor Behavior” and is referenced in the calculator itself.

When you use the calculator you can use whatever number you’d like. Increase the number at your own peril.

The second assumption is that of a 4% withdrawal rate annually once you are ready to retire or want to be financially free. This is based upon research done by Wade Pfau, PhD and CFA and this research is cited in the calculator as well.

The third assumption is what we didn’t include was taxes and inflation into the calculator. Those are simply too hard to gauge and based on many many factors. This is one of the primary reasons we use income here vs expenses in the calculator. Keep this in mind!

Step 1: Provide Inputs Into The Financial Freedom Calculator

Here are the inputs or fields you will need to supply in order to make the calculator applicable for your situation:

Age – Pretty self explanatory, type your age into the required cell.
Annual Savings Amount – This is the dollar amount that you annually put towards your financial freedom/retirement goals. In the example given on the calculator, I used the standard 10% of gross current income. However, you need to input your own number based on your own situation.
Current Assets- This is the current amount of assets currently saved up. These could be in a 401k or IRA or Mutual fund. You just need to total them up and input the total into the required cell
Current Income – Put your overall gross income into this cell. This is used to determine what your “goal” is for accumulating assets based upon the 4% rule referenced above in the assumptions section.  I recommend income here since there are so many variables to the calculation, including healthcare costs, rising lifestyle levels, additional taxes increases, etc.  Put whatever number you feel comfortable with.

Step 2: Review Outputs From the Financial Freedom Calculator

Bonus Material: Get the full calculator that will calculate your returns to retire in 10 years or less

Required Retirement Assets – This is the gross total of assets you will need to accumulate in order to meet your retirement goals, and is based upon the 4% rule for withdrawals.

Age You Can Retire – This is the age that you can actually retire based on the inputs. From this you can analyze if you current financial plan will get you to your retirement goals at the age you are aiming for.

Step 3 : Interpret Your Results

There are generally one of two ways to interpret your results:

Interpreting Your Financial Freedom Calculator Reults

#1) The resulting age is exactly what you have planned, or even younger. For example, if your plan calls for you to retire at 65, and the age that the calculator
So now that you have your results from the calculator, this begs the question, especially for those of us over 40, what if your age calculated is far too old?

What if you need to compress your time to retirement into 10 years or less, like alot of us need to for a full financial freedom plan?

That is why we designed the bonus calculator titled, “The Math Is The Path Tool” and it will give you your required rate of return in order to achieve financial freedom in 10 years (or whatever your number is) or less.

Bonus Materiel: Get the full calculator that will calculate your returns to retire in 10 years or less

Related posts:

  1. Return on Investment vs. Return of Attention
  2. Financial Freedom Report – April 2020
  3. Wealth Snowball Strategy: My Financial Freedom Plan In My 40s Even After A Financial Meltdown
  4. Phantom Income

Filed Under: Classics, Features

Comments

  1. Kat Rucker says

    July 4, 2020 at 8:57 pm

    Great post! Thanks for breaking down all of the assumptions built into the calculator, I think that a lot of times people forget to take that into account when they are doing their financial planning… and it can change things by years! It is interesting that you mention Wade Pfau and it looks like he did more research beyond the original Trinity Study that we see referenced often. I’d be curious to learn more about how his research differs/ matches the original study as quite some time has past. Thanks for sharing!

    Reply
    • Kurt says

      July 4, 2020 at 9:22 pm

      Thanks for checking out the article! I do agree about the assumptions can get people really off by a long time.

      Reply

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Inside 40 Plus Finance

About Us

Contact Us

 

Financial Freedom

Monthly Financial Freedom Reports

Financial Freedom Calculator

Reviews

Cash Flow Tactics Review

Categories

  • Classics
  • Features
  • Financial Freedom Monthly
  • Summary

Connect With 40 Plus Finance

  • Facebook
  • Twitter
  • YouTube

Recent Posts

  • How to Build Your Credit Score
  • The Mindset Shift That Changed Everything
  • Can It Keep Going Up?
  • 5 Classes Your High Schooler Should Take to Start on the Right Financial Footing
  • 6 Smart Ways to Outsource Your Liability

Contact Us · Privacy Policy · About · Affiliate Disclosure ·
Copyright © 2022 · Forty Plus Finance

Disclaimer: 40 Plus Finance is for purely educational purposes only and is not selling investments, insurance, real estate, securities, or anything other than education and is not providing tax advice, legal advice, or investment advisory products. You need to become educated about any financial product before purchase and consult a CPA and/or attorney in order to make the best financial decisions for yourself.