Plugged in some current information and it looks like I’m allowed to live to the age of 90. Then the money runs out and I must die.
I can draw $100K/year* and leave my daughter $30K when I kick it at 99.
Presuming I don’t retire until I’m 96.
*I figure in 30 years, that’s about what it will cost to live in this apartment.
One big flaw I see in this app is that it appears to assume that you’ll always be earning the same amount you do right now. Even aside from education, career changes, etc., which can lead to drastic increases, don’t most people still get raises after they’ve been on the job for a while?
Oops. Make that 40 years.
I will NEVER make an assumption that I’ll ever be making MORE than I am at any given time.
I’ve never been able to wrap my head around the kind of mindset that would.
The problem with this is that as you near retirement you change your portfolio out of equities and more towards income producing investments. That’s way too complicated for any on-line calculator that any average person will ever use.
If you are 20 years from retirement swings will even out - if you are 3 years from retirement they won’t. If you retire into a crash you are screwed, if you retire during a boom you can move profits to safer investments.
Really? You don’t think that a new college grad should expect raises?
You can’t even wrap your head around it? For someone that’s been working for 25 years and making, on average, a 3.5% raise every year, I think it’s perfectly reasonable to assume that it will continue. Obviously it’s an assumption, and you have to monitor it over time and adjust your expectations if the situation changes, but for this kind of exercise it’s reasonable.
ETA: It looks like I can time it so I can spend my last dime the second before taking my last breath. Perfect.
Where do you work that you’re reliably getting annual 3.5% raises? In the past decade or so, the raises have been smaller than that. Some years, there were none, not even a raise to match the inflation rate.
I work for a great company (which I’m not going to name), but the point of my post isn’t the actual number, it’s that for purposes of looking prospectively, if you have been receiving regular increases over time it’s reasonable to assume they’ll continue. It’s an assumption, not a commitment. You keep checking in and adjust as necessary.
You’re right.
You’re missing the point.
I want some of whatever you’re smoking. 
KaylasDad says he has no assumption that his income will increase. If that strikes you as absurd, you need to look up the fable about counting your chickens. It is a far more sensible strategy to plan your life as if you are at peak income, then adjust that as your life actually changes, than to plan things out on some blue-sky projection of where your career, income and life might go.
The myths of infinite income, lifetime income, upward employment and retirement are what lure people to their doom on the Sirens’ rocks. Don’t listen.
No problem.
FireCalc is designed to tell you the historical odds of how long your money will last after you retire (and have adjusted your investment allocation).
I retired in 2009 just as the market bottomed, leaving me 40% below 2007. I am fine. I stayed with my plan and have recovered and then some.
Friends who bailed out in 2008-2009 have not done so well. The key is to have a plan and stick with it - over the long term, regardless of ups and downs.
This is crazily bad advice. I hope nobody follows it. Assuming you’re going to earn exactly the same income as you are today for the rest of your life is literally almost as rash and absurd as assuming you’ll earn slightly more.
If you earn $100,000 this year and I assume you will earn $103,000 next year while you count on $100,000, we’re making 97% the same supposedly reckless assumption. It’s practically the same assumption, hardly the difference between some stark realism and “blue sky projections”.
What matters is making a reasonable prediction, not naively assuming you’ll never earn any more money.
Explain how NOT making assumptions about future earnings is bad. Small words, please.
You plan with what you have. You adjust the plans (up or down) when what you have changes. Anything else is complete madness - gambling with your future.
I think its good advice.
Let’s make a not uncommon scenario. You are a recent college graduate - single - and employed. Not far from you, unknown to you, exists a single employed college graduate of your preferred gender. You meet. You marry (if appropriate in your state for your gender combination) and you have children. It is determined that one of you is going to stay home at least while the kids are little. One of you has much less income than they had a few years ago.
Four months ago, I had a six figure income in IT management. Today, I am the stay at home, homeschooling mother of teenagers (my son is having some teenage challenges - my husband took a job where he has traveled about 75% of the time - my job was no longer going to work for us). All of my previous retirement calculations had been made on me continuing to max my 401k for the next fifteen to twenty years. When we made this decision, I reworked them all to account for a five year gap, and a lower income when I return.
I think when you run retirement scenarios, that you run them differently depending on your circumstances with different assumptions - and not just "will inflation be 2 or 3% and will the market return 6 or 12% - but also “what if I can set more aside” “what if I need to set less aside” not only “what if I live to be ninety” but “what if I semi retire at 58 when I get laid off” - and you think that way from the day you start.
Did you have enough income to support not cashing much out? I had it easier, in that I was still working, and not only did not sell but kept on buying at the bottom. Your situation was a lot tougher.
Dan Ariely’s advice was to not open your statement. I followed it.
You make assumptions based on your situation. If you are in the buggy whip sector, planning on raises is a bad idea. If you work for Google it is probably not too risky.
Being too conservative means you forgo good opportunities, like house purchases. Obviously being too optimistic is bad also.
Not everyone is in a deadend job.
It’s literally impossible to not make assumptions about future earnings, unless you just don’t think about the future at all.
If you wanted to be as conservative as possible (I’m being absurd on purpose to illustrate a point), you would have to assume that you’ll lose your job and earn nothing the rest of you life. Plan your finances assuming it all goes to shit Dec 31 and you have to get by with nothing the rest of your life.
Except that’s still an assumption. You’re assuming you stop having an income.
Likewise, assuming your income stays exactly the same is an assumption. It’s way more reasonable than assuming you will earn nothing the rest of your life, which would be ridiculous, but it’s a pretty huge assumption. Plenty of people in their 50s with good paying jobs lost them when the economy tanked and have yet to get equivalent jobs.
If you lost your job as an engineer when you were 50, were out of work 9 months, took a job at Home Depot and have been doing it for 6 years, the sad reality is that you probably aren’t going to get back to your high earning engineer job ever. If, at 49, you assumed you were going to keep earning your engineer salary until you retired, it just turned out to be a really bad assumption.
Was it a reasonable assumption at the time? Of course it was. It would be *unreasonable *to make your future financial plans assuming your career will careen off track and you’ll make way less income or no income. But the point is, you’re still making a big assumption about your future earnings if you assume they’ll stay the same.
Agreed?
So if we’re in agreement that we’re invariably making big assumptions about future earnings, isn’t the best course of action to make the best assumption possible? If you earn a 3.5% raise for the past 10 years, it’s more accurate to assume you’re going to earn some increase in salary in the future.
If you’re like Dewey Finn and haven’t managed to get a raise consistently, of course it would be reckless to assume he’s going to get 3.5% until he retires. But he should make the best assumption he can based on the past and on what he expects from the future.
Sorry, you’re being very reasonable and conventional, but I disagree across the board. The thinking you’re using is old-school conventional but no longer trustworthy in this era.
The assumption that employment will continue on a predictable path - at the same level, at a rising level, or with relatively large jumps due to job or career change - is faulty. The assumption that employment will continue AT ALL is faulty. Look at how many huge discontinuities we’ve seen in just the last dozen years - whole industries go away, into obsolescence or overseas. Beginning with the 1960s or so, we’ve seen one huge, stable, confident workforce after another find itself running out the last days of unemployment - their industry gone or massively downsized, their skills not transferable to another field at comparable compensation, their best option often to move thousands of miles to take a much lower-paying version of their former job. These are not anomalies; they are the new reality.
Complacently assuming you will work a full adult life, at a steady/stable/rising income (if not the frequently-assumed big-jump model of the tech world) is riding for that same cliff. One day you’re a programmer continually pestered by headhunters; the next day your skills and industry are obsolete. If you aren’t 30 and ready to completely restart your life, you’re screwed.
My biggest objection to much of the above discussion is that there’s an implicit idea that it’s okay to piddle around financially and buy lots of toys and spend money… because of course it’s going to be an unending river that only gets bigger and you may as well spend all that extra loot now. Why put off the good life your next $50k in salary will bring in five years - why not spend away now? It’s just money.
How many of the millions upon millions of 30-40-somethings of the last ten years who had a window office one day and a tinfoil watch the next, going from “1%, Here I Come” to running out every unemployment extension, would love to have one lavish vacation, one sailboat, one RV, one sick home theater installation back in cash? How many regret blowing money on restaurants and travel and $5 lattes and leases powermobiles - and not saving any of it?
Nope. Starting with the assumption you’re going to maintain your income and that it’s going to rise steadily until you retire is madness. Work with reality; adjust your planning as reality changes. Not before.
The stories about people finding themselves unemployed in their fifties or early sixties and unable to find another job scare me to death. So what I’ve been doing for a while is to max out my 401(k) and other retirement savings as long as I have a job.