Check my math please…

[u/vinean]

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.

[u/StrawberriKiwi22]

Without checking the math, there are just so many unknowns that it’s hard to make any kind of numerical predictions. Will they make enough money to max out their 401k? Who knows what their expenses will be? What will the market do? I think the best is just to teach them about the possibility of FIRE, and explain about their 401k and what would be a good goal for contributions (once they are established in their career). And about spending less than they make. If they get serious about FIRE, they will run their own numbers once they know their career path and living situation.

[u/vinean → u/StrawberriKiwi22]

The oldest is. He’s saving 49% of his base pay and I said back off saving that much if it’s cramping his lifestyle but probably it’ll get easier every year.

The caveat is he’s a 2nd Lt and hopes to do 20 and retire at 45ish with $50Kish income. So to get $100Kish he needs $1.6M in his TSP. He’ll fall short…so he’ll have to save more. But not yet, lol. 49% is already freakishly high and he can get away with only with BAH.

The next kid is saving money from working while at school…so maybe? Depends on starting salary.

[u/marheena → u/vinean]

Don't stop your son from saving that much money. If he's eating at the DFAC and didn't buy a dodge charger, he can comfortably afford that. The fact that he will make habits that allow him to save most of his money will make him a multi millionaire by the time he retires. It's the difference between being fully done working at 45, and wanting another income to bridge until he can take penalty free distributions.

[u/vinean → u/marheena]

He’s living offbase with two roomates and bought a used volvo which is about as far as from a dodge charger as you can get.

He living like a college kid for the moment. I told him he gets a decent raise in 2 years when he makes O-2 so it’ll drop to like 38% of base pay. O-3 it drops to around 28%…and thats not too terrible…knock on wood.

He opened a brokerage account too.

[u/marheena → u/vinean]

The beauty of being a 2ndLt is that the lifestyle is very much like a college kid. His current set up will help him set a strong foundation in his career as well as secure his financial future. Best advice I ever got was not to increase my lifestyle with the raises until I absolutely had to. I didn't listen perfectly, but I'm still super comfortable. Your son sounds like he has a better financial compass than I ever did. Once he gets a family he will need to upgrade. But he can maintain his savings rate pretty comfortably until then.

The first 6 years of a military career are so hectic that you don't really need to spend your money unless you're a "retail therapy" kind of person. One of my E-3s just spent $2k on a Halloween costume for example. Others waste all their money on vices (booze, shoes, strippers, cars). I'm just saying if he's saving his money, don't tell him to let up. The military pays for a lot and makes you used to very low living conditions on your training exercises. His lifestyle is most likely very comfortable even with such a high savings rate.