From The Wall Street Journal, Nov 2002:

Online Calculators
Do the Math for You

By JONATHAN CLEMENTS
Staff Reporter of THE WALL STREET JOURNAL

...
[W]ith Web sites, what I particularly look for are slick calculators that can help investors make smarter decisions. At the same time, I also favor instant gratification. Forget plugging in a litany of financial information. I want quick answers. On that score, check out ...

To gauge your strategy's likely success, [FIRECalc] looks at investment returns since 1871. But the calculator doesn't use average historical rates of return. Instead, it analyzes what would have happened if you retired in 1871, in 1872, in 1873 and so on. It then calculates how often your strategy would have panned out historically.

Suppose you retired with $400,000 invested in a low-cost portfolio of 60% stocks and 40% bonds and were looking to spend $20,000 a year for the next 30 years, with your spending rising each year along with inflation. According to the calculator, that strategy would have succeeded 81.5% of the time. What's success? You died before your portfolio did. ...

FIRECalc: A different kind of retirement calculator

(NOTE: You are using FIRECalc 2. Try FIRECalc 3!)

(FIRE: Financial Independence/Retire Early)

Thinking of chucking it all and retiring early, long before you start getting a pension or Social Security, and before you have ready access to your 401k and IRA?

retired early"With what you have today, and what it costs you to live, can you retire and maintain the same lifestyle?"

That's the question FIRECalc addresses.

FIRECalc doesn't require that you predict future inflation rates, market returns, investment volatility, and the like to see if you can retire now.

Rather, it makes a single fundamental assumption:

If your retirement portfolio would have withstood the worst ravages of inflation, the Great Depression, and every other financial calamity the US has seen since 1871, then it is likely to withstand whatever might happen between now and the day you no longer have any need for your retirement funds.

If you accept that assumption, then just tell FIRECalc how much you have and how much you'll be spending, and FIRECalc will tell you whether your retirement plan will last as long as you want it to. Or what you need to change to make it all work.

Try running FIRECalc with the defaults to see how it works. Then change the input to fit your own situation. Then play around! And be sure to come over to the Early Retirement Forum and talk about these topics.

Good luck!

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Temporary cache files are deleted from the server at the end of each run.