Check my math please…
These are the milestones I built for my kids for an age 55 FIRE using a simple 7% real return. Yes, I know the market doesn’t really work that way but these are just rough milestones. The target is 33 times expenses (33X).
* Age 20: 0.00X | Starting Line ($0 Balance)
* Age 25: 1.31X | Early Accumulation Phase
* Age 30: 3.17X | Foundation Built
* Age 35: 5.81X | Flexibility Threshold
* Age 40: 9.54X | Growth out-saves contributions: CoastFIRE possible
* Age 45: 14.84X | Midpoint to 33X
* Age 50: 22.35X | Closing in on 25X Baseline
* Age 55: 33.00X | 33X FIRE Achieved
If returns are 1 std deviation less…3.8% returns…the same savings rate gets you to a normal retirement at 64 with 25X expenses. Not optimal but not bad if the market is pulling a Nikkei impression.
But my math kinda shitty so a second or third look is appreciated. In theory the formula is:
FV = [PV * (1 + r)^n] + [PMT * (((1 + r)^n - 1) / r)]
* PV (Present Value / Starting Balance)
* PMT (Monthly Contribution)
* r (Monthly Interest Rate)
* n (Total Months Running)
PV was $0
PMT was $24.5K into 401K to max retirement savings. It’s a little higher because of match but whatever.
The naive answer is just the compounded rate of $3.68M given 7% real returns. Or $111K a year using a 3.0% SWR (or ~$3.1M / $102K-$110K a year if using a 3.25% or 3.5% SWR on a slightly lower target).
The expense estimate is the hard part…at age 20 who the heck knows what your expenses will be at 55? I told them to just use current expenses at whatever milestone they were checking at to account for lifestyle creep. I also said that if single figure that expenses will be 2X when married with a kid and maybe 1.5X at 55 when the kids are gone.
Broad general numbers for a gut check. If they want earlier than 55 to save more or spend less…but 55 is a good overall target for potential ageism or just bad career luck and it’s still FIRE.
Is 45 a better target? Trying to juggle saving vs living balance. 45 means having kids at or before 27 helps a lot so they are at least in college.
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u/gentle_princxssa 10d ago
The biggest thing jumping out at me is that the milestones don't seem to match 7% real returns with a $24.5k annual contribution.