I’ve written previously about how to determine when you can retire – an article that I think is good background to this post. The key concept underlying this point is establishing when you have amassed sufficient funds to cover all your expenses for the period you will be retired without any income from the workplace. In other words, when you are financially independent (have achieved FI) and can “live off of your investments” for the remainder of your lifetime. So how do you find that number? It’s very easy to get confused by the many powerful yet complex retirement calculators and modeling tools that are out there – it definitely happened to me early on in my own journey. Thinking about this gave me an idea…
There ISN’T an app for that – until now!
I’ve certainly generated my share of spreadsheets for calculating retirement expenses as well as other financial modeling tools. I suspect some of you have as well. That said, I am aware that not everyone enjoys doing that or knows how to do so. In addition, a few people have asked me if there are simple apps available for this purpose. I looked and was surprised that I didn’t find one. Readers of this blog may know that improving my coding skills, specifically in the area of iOS apps (i.e. iPhone and iPad) is part of my plan in this next phase of my life. So I saw an opportunity – albeit one that was a little scary when I originally thought of it. Now that I have just enough experience with app coding to be dangerous, I thought it was time to take it on! Be not afeard, right???
So that is what this post is about: an introduction to my very simple, free-of-charge EZ RetireCalc app! If you have an iPhone, this link will let you download it. For those without an iPhone, fear not! I’ll share a link at the bottom of this post about how you can use a web tool instead. Please read on to get all the information you’ll need!
By way of introduction, let’s talk about what this app is, and is not:
The EZ RetireCalc app is:
- a simple tool that lets you input two pieces of information and from those, estimates the amount of assets needed to consider yourself financially independent (FI)
- a straightforward starting point for your own retirement journey. There will be more work to do but this tool should help provoke thought and action on your part!
- for Apple iPhone – sorry, I don’t presently know how to code for other platforms
- for use as an educational and entertainment source, and is not investment advice
The EZ RetireCalc app is not:
- a detailed retirement modeler that considers other sources of income like Social Security, pension, etc. There are other much more detailed tools out there for that purpose
- a tool for examining asset allocation, considering the tax advantages of particular account types, or one that lets you model your success rate vs. various rates of return in the market
- fancy, beautiful, or likely to win any design awards nor earn stacks of 5-star reviews
- a substitute for talking with a financial advisor, tax professional, or others who are important to consult regarding any financial decisions
How to get started with the EZ RetireCalc app
There are just a few simple screens in this app – “EZ” is in the name, right? The first view you encounter helps you get started – either by reading some brief instructions, diving in with the calculator, or reviewing your past results. Selecting “I’m ready to go!” brings you to the calculator. This screen is where you will input two values: “Monthly Budget” and “Withdrawal Rate”. Slider widgets are used to select a value for each. There is also another link to the instructions here via the ⓘ button in the top-right of this screen. After you choose the two values, tapping the “Calculate” button will take you to the third page, which summarizes the results. You will find a “Need help?” button below “Calculate”. Tapping that will open a browser window that will bring you to this blog post for easy reference in the future. Lastly, the “Save results” button on this page will allow you to record the output to a table. Here, you can view all saved results as well as delete any that you no longer want to retain on your phone.
So, how do you select a Monthly Budget and Withdrawal Rate? Let’s dive in!
Budgeting comes up frequently in this blog – particularly as part of describing my pre-FIRE preparation. That is because determining your monthly retirement budget is an essential part of figuring out how much you need to save. The value you want to enter using this first slider is “what will my anticipated monthly expenses be when I leave the workplace?”. In other words, how much money will you need each month in year one of retirement to cover all of your obligations: bills, mortgage or rent, insurance – everything. Yes, this includes the fun stuff like travel, dining out, etc as well. It also needs to include sufficient buffer for life’s unexpected turns, like out-of-pocket medical bills, pet emergencies, home maintenance, and so on. I use sinking funds in my own budget to account for these expenses. Give some real thought to this number. This is only an estimate for now, but doing a really good job with this estimate pays off down the road when you look back at how your retirement budget is working out!
If you’re already budgeting today, you have a big leg up on coming up with this number! If you are not, you will need to do a bit more work to come to a reasonable estimate. The more that you base this number on actual data (i.e. what you are spending now), the better off you will be. If you will move to a new area in retirement, be sure to adjust your expenses accordingly. If your retirement date is farther out, modeling inflation over time is an important thing to consider in setting this number – many will assume 3% inflation annually, even if this is an overestimate. It’s better to err conservatively here, right?
The second value you need to enter is a bit trickier and warrants some explanation. That is, what is your expected annual withdrawal rate as a percentage of your total assets. That includes cash, retirement savings, brokerage accounts, etc. Many people considering FIRE start with the “Four Percent Rule”, which originates from the so-called “Trinity study”. In brief, this states that if your annual spending (i.e. twelve times the “Monthly Budget” you enter) is no more than 4% of what you have saved, your funds will last through your retirement period. The truth is more complicated since the rule has some assumptions built in. For example, the Trinity study contemplates a 30-year retirement period – too short for what many are aiming to do in early retirement. At the end of the day, it all comes down to calculating your safe withdrawal rate (SWR), which by extension will lead you to how much savings you need to start with. If you save enough, you can withdraw your monthly budget from your assets each year without running out of money before you die.
I’ve stated that the truth is more complicated – so how can we simplify it? First of all, I’m not here to say “don’t use the 4% rule”. Many in the FIRE community are very happy with it and I’m not trying to change their minds. My risk tolerance is lower than many of them, and that’s perfectly fine. To that end, if you are on the FIRE train and aspire to retire early, many believe a more conservative SWR (3.5% is common; this is my own number) is appropriate. If you are retiring in your 60s, 4% is arguably too low in many people’s estimation. In addition, if you expect to have other income – pension, Social Security, rental unit profits, etc. you can model a lower % withdrawal and therefore wouldn’t need as much in savings vs. those who won’t have those sources of income. For myself, I choose to assume no other income to make my model that much “safer” i.e. conservative. The good news is that this app makes it easy to model multiple scenarios and compare your results.
In the app instructions, I linked several good resources on the topic of selecting a withdrawal rate. One I’d highly recommend is from a recent Money Guy Show episode where they share their thoughts on this topic, including using a simple SWR table by age of retirement. Here’s a direct link to that section, though I’d suggest the whole episode (“9 Secrets to Having a Successful Retirement!”) is worthwhile! If you really want to go deep on the topic of withdrawal rate, I’ve got your covered! Early Retirement Now is a great blog and is perhaps most famous for Big ERN’s exhaustive series on Sequence of Return Risk (SRR) and withdrawal rate. I won’t pull any punches: a 40+-part series (!) is not for the faint of heart. But reading it over time took me from extreme anxiety about what my SWR should be to a position of informed confidence. This is highly recommended for the financial nerds among us! It is not required reading to use this app. If you’re considering early retirement, have a look at what 3.5%withdrawal rate yields and go from there.
Drumroll, please…the results!
After you choose your two values and press “Calculate” you are brought to the results page. Here you will find a summary of the two values you selected, plus the answer to the big question: how much would you need to save? If you want to save a copy of the results to Photos on your device, tap the share button at the top-right of the screen. Please note that the first time you run the app and try to save, iOS will ask you for permission to save to your Photos. Alternatively, the same share button will allow you to print your results or share them via Messages or social media apps you may have installed on your device. If you want to change values to try another scenario, tap the “Back” button at the top-left.
I suspect people will have one of several reactions to the results page: the number is in line with your expectations, a feeling of sticker shock because the number is higher than you thought it would be, or best of all, a surprise that you are closer to that number than you realized you were. Above all, don’t panic! If you’re among the shocked, I hope this motivates you to consider how to achieve your goals sooner. Perhaps it causes you to reconsider your current spending and saving, or causes you to think about budgeting to assess your true needs in more detail. As some will recall, I have found that the power of budgeting is all about making expenses visible so you can make intelligent decisions – like increasing your savings so you can retire sooner!
For some this may cause you to ask deeper questions: What would the impact be of Social Security on my retirement finances? What does this look like if I model in part-time work in retirement? The list is endless. There are myriad tools out there to model that level of detail. I can’t say I’ve assessed them all, as I certainly haven’t. One that I find particularly powerful yet easy to use is New Retirement (I receive no benefit from mentioning it! I just like it). But there are plenty of others. It might also cause you to talk with a financial advisor, which is certainly a reasonable course of action. Just ensure you select one having a fiduciary obligation to their clients.
But what if I don’t have an iPhone? I want that app!
OK so you are an Android user or don’t have any smartphone. Fret not! Here’s another option for you: I have made a simple web tool with the same functionality as the app, using Google Spreadsheets. Click this link for access to that and it will open in a web browser. If you would like to save a copy to your own Google Drive, select “File”, then “make a copy” in the menu bar at the top of the screen. Then you can name it whatever you like and save it in your Drive. Of course you can also just take a screenshot, print it out, or whatever you like.
This was certainly a useful exercise for me, and I hope I also produced something useful for you. I’m more confident about developing very simple apps at this point though I’m still spending time each day continuing my learning. I’m definitely going to keep that up!
Irrespective of what you do next, I hope this information provides you with a useful jumping off point. I suspect it may provoke conversations with your partner, friends, or family members. Perhaps it will cause you do dig into budgeting, or otherwise further investigate your current finances? Whatever comes next for you, I wish you all the best in your journey. Should you have any questions about the app or want to propose improvements to it, I’d love to hear from you.