I’ve made it no secret that I like talking finance at work and my co-workers know that. I try hard to not be a pest about it and pay attention to the conversation dynamic, so that when co-workers get the 1000 yard stare, I reel it back in. This constant talk of finance has finally started to get some good results. For instance, I’ve had a co-worker ask me to figure out whether or not paying PMI was worth it. We worked it up in ~10 minutes on my whiteboard and figured out that she’d be paying ~$13k over 4 yrs to PMI versus putting that same amount aside towards a down payment. She’s still saving for the 20% mortgage down payment instead of pulling the trigger on buying a home a year ago.
Other wins have been handing out 5 copies of the millionaire next door to younger colleagues, and getting good feedback on it after they’ve finished reading it. I’ve also been compiling an ever growing word document (for download below) with links to different blogs, investing sources, investing definitions, savings art links, etc… I keep the master and delete and add links as needed to cater to whatever question I get at the time. I’ve sent it out to my team, one of my supervisors, and more. It’s gotten positive feedback each time, so I just keep growing and editing it.
Yesterday came the biggest win of all so far! I mentor a younger person at work, and while we do talk a lot about work related things, one of the other things I keep talking about is investing now to give yourself choices later in life. I hadn’t felt too much success at any of this talk making any impression on my mentee, so I’d backed off on it and only offered advice when asked. I was super excited when I was recently asked about 401k elections and starting a taxable account outside of their 401k.
For 5 months this year, I’ve been training for a single race, the Kemah Olympic Triathlon, and this past weekend I completed it! Woohoo! It was scheduled to be run in April, however, due to some poor planning and lack of knowledge of TX DOT’s paving schedule, it was rescheduled only 2 weeks before the event. Yes, 2 weeks before the race, they moved the date 6 months later. I had been training for it for about 2.5 months at that point, and I was pretty frustrated to say the least. I looked for a similar race nearby so my training wouldn’t go to waste and I was able to sign up for the Texasman Olympic Triathlon just north of Dallas. While I was able to complete both races, they both had unexpected issues pop up that I had to work around. It reminded me that whether you’re planning for a race, for FIRE (Financial Independence/Retire Early), FFLC (Fully Funded Lifestyle Change), or anything else solid preparation is good, but being able to deal with adversity is key!
We’re almost a year away from starting our FFLC journey and we feel pretty solid with all of our planning. Since we don’t know for sure how that planning aligns with reality, we are going to spend 2018 test driving our FFLC budget and see if we hit any unexpected bumps in the road, like I have in my races. Like race prep, training is essential to make sure you’re ready, but the mental aspect accounts for a lot as well.
This past weekend we attended my brother-in-law’s wedding at the Isle of Palms in South Carolina. All the planning had been done by “Jill” (now his wife) so that she could cut costs where necessary and still keep the wedding affordable. We got our flights booked early enough that they weren’t exorbitant. We also split a house with Mrs. SSC’s parents and Aunt to defray those costs. As a bonus, on the weekend of the wedding I found out that the father-in-law offered to cover the housing cost. That news was a nice surprise indeed! While I was expecting a nice, modest sort of ceremony, reception, etc… because of so much talk of “keeping the wedding affordable” man, was I surprised how this “affordable wedding” fit my version of a really nice wedding. It reminded me that you see the same differences in perspective of affordable and extravagant, whether you’re talking about planning a wedding or planning for retirement and financial independence.
This summer has seemed to fly by. We spent the first part of it researching and meeting with different homebuilders for our Canyon Lake property. That was followed by a month long road trip for Mrs. SSC and the kids, and I got to catch up with them for the last half in Montana and Idaho. I even got to spend a day solo exploring Seattle on my way out there.
I even met up with a reader who was kind enough to let me pay homage to one of my childhood idols, Bruce Lee. Thanks again for the ride, Max!
We didn’t escape the heat of Texas, but you can’t match the beauty of Glacier NP anywhere in Texas I’ve seen yet. Coeur D’Alene was beautiful too and we spent almost a week there as well.
We were home just a short time before heading out to San Destin to spend a week on the beach.
With one of the kids in school, our vacation is now timed with every other family with school aged children. Sigh… On the plus side, we were able to not have either kid in daycare/preschool over the summer and that saved a lot of coin. Woohoo! Our spending was good for most of the summer, even including the big road trip and beach vacation, but man was August spendy! We had a lot of big expenditures hit as we are starting to prep the house for sale in a few years. Why start this far out? Well, we want to enjoy some of those things as well and not just make improvements immediately before moving out.
I used to think that One More Year syndrome was due to people not really wanting to retire or not having anything to retire to. Lately, I totally understand why people would get caught in the One More Year cycle. It’s not about having enough money, it’s more about the psychological traps that come along with leaving a comfortable work environment and lifestyle, to venture into the unknown. A situation that’s new, possibly uncomfortable, possibly more stressful, and definitely more challenging than the known present situation. It makes it hard to envision the potentially stressful or uncomfortable retirement scenario as a “good” scenario. Especially when you’re like me and you really like your job and corporation (minus the rare bizarro meeting).
“Give me one good reason why I should never make a change?”
Well, I have lots of reasons why I should make changes, but it’s the big 3 that I keep reminding myself about and that’s the wife and kids.
There are a lot of things I can focus on that could go wrong with our plan and I have. Working on solutions and getting comfortable with the level of risk associated with those uncertainties is what I have to come to accept. I think Abe Lincoln said it better than I can.
“Determine that the thing can and shall be done, and then we shall find the way.”
I knew things were off the rails when Mrs. SSC said, “I wouldn’t say we’re back to square one, but…” Yep, we’ve been having lots of “those types” of discussions. I think it’s a confluence of a few things really.
The stark reality that when we start building this house, our Lifestyle Change plan is set in motion. Eeeepp!!! That adds a WHOLE lot of gravity to the situation.
What the F are going to do about healthcare and how much is it going to cost us? Depending on the yet unknown cost, we could be way under on our FI number, and need to juggle stuff, find work with insurance, or a side gig that could cover that unexpected cost over what we’re planning for now.
We both turn 40 this year, yipe!! The weight of that milestone (mid-life crises anyone) along with beginning the last leg of our FFLC (Fully Funded Lifestyle Change) journey has us asking a lot of questions. What will our ikigai be in “retirement”? We don’t want to “retire” just to wither away and die early. Do we want to be snowbirds and go live in New England or some other allegedly cooler destination over the hot summer? How does our budget work for that? Do we want to take a “gap year” between leaving the workforce and entering our Lifestyle Change/Early Retirement? Hahaha, a gap year before retirement – what a hilarious thought!
What do we want out of life? See point 3 for why we’re asking ourselves this question a lot more often than we used to. Will we be satisfied with living in Canyon Lake, or anywhere for that matter. In researching for the ikigai post, I discovered that people that had an ikigai (reason to live something driving them to get up every morning, but not necessarily a job) outlived those that didn’t. So, what in our life are we passionate about that will give us that satisfaction. After a summer of being a full time stay at home mom, I think Mrs. SSC is ready to deem it “really hard, and not quite as rewarding as you may think.” I haven’t gotten that opportunity yet, but it is my fear that my current job is WAY easier than becoming the “default parent” once I leave the corporate world.
Those are all the things that have been on our mind lately, and here’s what we’ve discovered.
What a week it has been around the office. I’ve been back for a week from our most recent vacation up to the MT/ID area, and I was feeling pretty refreshed.
I had gone the whole vacation not even thinking about work, and after I got back I was even feeling super recharged from a Personal Finance (PF) standpoint. The field I’ve been working the last 3 years is almost ready for drilling and we’re just finalizing the field development plan. The other project I’ve been working on has gotten extended as we’ve come up with more ideas to test than upper management was expecting, so that has been fun too. There was even another minor reorg/power shift while I was gone and I lost 2 of my 7 bosses, so now I’m back to having only 5 baby, yeah! All, in all it was looking up. And then the rails came off of the train… I essentially got ambushed in a meeting that wasn’t even my group, and taken to task for things I didn’t work on and wasn’t responsible for. It didn’t matter though because I was the one that was there accounting for any and all work done on that project. Let me back up and set the stage for one of the weirdest, bizarre, and unprofessional experiences I’ve ever dealt with in my career, and how knowing where we were in relation to Financial Independence Retire Early (FIRE) helped me keep perspective and make the best out of a wack-a-doo situation.
Last week I was on some random PF site and I saw a retirement calculator at the bottom of their site. Just for grins I threw in some numbers similar to our projections and OMG was I surprised at the outcome. According to this calculator I won’t be able to retire – ever… I mean, this particular calculator said that I’d need $10 million to retire based on my inputs. Really, $10 million?! Because of course I can’t live off of less than $500k per year, I mean, seriously, who does that? Well for starters, we don’t and according to the Census Bureau the median household income was only ~$54k which is only $450k short of our “recommended” retirement goal. While these inputs weren’t specific to our numbers, they’re close enough that we can ground truth them with our personal retirement spreadsheet.
For these calculators to get those kinds of numbers, the assumptions they make have to be pretty ridiculous, but it makes me think that these calculators can be misleading for the uninitiated. The biggest discrepancy I see is that they don’t ask what your expected income level will be. I only found one calculator that let you put that in, and nope, it wasn’t at Vanguard. I know, I expected them to have a better version of a retirement calculator, but with the screenshots I snagged, we can see why it falls short.
Holy Crazy Assumptions Batman!
Let’s start with the calculator that sparked this whole post. Again, I don’t want to say where I found this or what company is running it, but just google “retirement calculator” and have fun playing with the different versions that are out there. This calculator basically took my assumed income (not really my income, but that would be nice) and the current savings input number (not our actual number but close enough to where we’d like to be at retirement to know if the calculator is telling the truth) and spit out a freaking ridiculous number. How ridiculous you ask? Well, let’s look at it. My assumed income is $200k/yr and evidently I need to save enough to spend $500k/yr because in 25 yrs (assuming I retire at 65) I’ll have more than doubled my spending rate, and hopefully income to support that lifestyle. How it thinks I will spend $42k/month, yes, $42k PER MONTH is mind boggling. Remember that according to the Census Bureau the median US household income is only $53k per year. PER YEAR… And this calculator is telling me that I’ll need to save enough to spend $42k per month?! Holy shit….
I’ll Never Retire…
No wonder people get dismayed when looking at retirement needs and savings levels. I’d be really discouraged if I thought this calculator was for real. I mean, to save $10.7 million I’d have to work another 110 yrs at our current savings levels. Actually to put it in real terms if I exclude compounding growth, I only need to save $376000 per year between now and when I turn 65. Oh yeah, you read that right. This calculator assumes I will magically gain a 53% increase in salary and be able to save ALL of it towards retirement. Wow, just wow… Who the F created this thing?!
Surely Vanguard Can Save Me?
So, I thought surely all calculators can’t be this bad, what about Vanguard, the crème de la crème of institutions that us FIRE folks love. Well, they don’t love early retirees that’s for sure. Evidently in their world you can’t retire before 50, yep, that’s the lowest age that their calculator goes. Boo… I can’t save more than 30% of my salary, because really, who does that? Oh yeah, us and probably most of the PF community. If you don’t save that much, don’t feel badly about it, that’s why it’s called “personal finance”. I’m just pointing out some flaws with their assumptions. I mean building a retirement calculator can’t be much different from building a house right? You start from nothing and design a blueprint, layout, and add all the bells and whistles. So why not make the age for retirement anything before 50 or savings rate anything over 30%? I’m no software engineer, but if you can cut it off at a certain point, why not set that point at a crazy range so people can estimate things outside the box of “early retiree is 50” and we can only save 30% of my income. At least they only assume I’ll spend 60% of my current income in retirement, which we don’t. Maybe closer to 25% of our income would be realistic, but not 60% otherwise, I’d have to work until I’m 65.
Bankrate’s Calculator – A Nice Way to View Retirement Projections
This fairly simple calculator from Bankrate had a different take on it. Basically, you put in your inputs and then it shows you waht your portfolio could generate in monthly income. So, again if you know your monthly needs, you can figure out what you may need to start with to get there.
Really, MarketWatch has a nice Calculator? I’m Pleasantly Surprised
Then I found a nice calculator at Market Watch that didn’t set variables on anything. PLUS, it lets you calculate what you need for retirement income totally removed from assumptions based on what you make now. You can input your yearly retirement income needed based on your assumptions, not any random made up assumptions. Brilliant! PLUS, like the Bankrate calculator, it allows you to set inflation, tax rate, retirement tax rate, rate of return before and after retirement, I mean, it has it all. If you want a quick look at how doable your situation might be. Our spreadsheet also does this, but it gets so complicated explaining it, that um, yeah, this works great for me to play around with. You can see in this scenario we run out of “pre-60” money at 56 yrs old. Yipe! Granted, I could add more tweaks, and get really specific with our numbers and get a more realistic outcome, but the main point is that this is actually a good calculator.
If you want to play around with your numbers, I’d recommend using this one. Cfiresim also has a good calculating system, but it runs your data against all the historical data. So, if you hone in on a situation that you like using this Market Watch calculator, then you can plug the same data into Cfiresim and see how that plays out for you. It also lets you add in additional costs like estimating healthcare costs in the future, additional income and more.
We found that creating our own spreadsheet worked best for us. It’s grown and changed over the years, as we find different things we want to track, but it’s essentially our version of these 2 calculators. I rarely use it, but Mrs. SSC runs different scenarios on it about every other week. I just plug our data into one or both of these calculators and let it run and then discuss specifics with Mrs. SSC. I do use the spreadsheet but I often break it, so it’s good I’m only working with a copy, lol.
What about you? Do you use your own spreadsheet or a different retirement forecasting tool? How comfortable are you with the assumptions these online calculators make? Are they realistic for you or totally off base like I found? Let me know!
A while back I got an email request to do an interview with the guys over at ChooseFI and thanks again to reader Isaac and others who recommended us for an interview. It was really fun to do and was released on their podcast this morning!
In the interview I discuss a lot of our backstory, more so than we’ve gone into on the blog, and how Mrs. SSC is the big driver for our Fully Funded Lifestyle Change (FFLC). You can learn my name (gasp!), even more details about how we got on track for FFLC, find out more about the lure of “the spreadsheet that drives it all” and even more about how dense I was with realizing that “retiring early” was a real concept that could happen without making ridiculous sacrifices. Seriously, it only took me 6 years to believe it could happen. Bonus points to try and see how many times Mrs. SSC come out as the hero in our story. Hint: It’s a lot…