Millennium Edition Generation-X Retirement Calculator.

Millennium Edition
Generation-X Retirement Calculator.

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The article was first posted on August 1, 2000, updated November 1, 2006.

The Millennium Edition Generation-X Retirement Planner is an Excel spreadsheet offering a quick and easy way to calculate how much money you'll need to Retire Early. It allows you to vary several parameters to see what affect they will have on your retirement date. For example, the table below shows the number of years to retirement for a 25-year-old making $30,000 per year for various savings rates and investment returns.

------- Years to Retirement ------- Single, current age = 25, age at death = 100, $30,000/yr initial salary, 10% annual salary increases, "100% safe" withdrawal rate, Starting portfolio balance = $0 4% annual inflation, 0.20% investment expenses, spending increases with salary
% of Salary Saved >>>>	10%	20%	30%	40%
% investment return	Years to Retirement - $30,000 salary
5% return	50+	50+	50+	50
10% return	50+	50+	41	24
15% return	45	32	23	16
20% return	31	23	17	13

Surprisingly, the results don't differ much for a married couple making $100,000 or even $200,000 per year. The tables below details "time to retirement" under both these scenarios.

------- Years to Retirement ------- Married, both working, current age = 25, age at death = 100, $100,000 or $200,000 initial salary, 10% annual salary increases, "100% safe" withdrawal rate, Starting portfolio balance = $0 4% annual inflation, 0.20% investment expenses, spending increases with inflation
% of Salary Saved >>>>	10%	20%	30%	40%
% investment return	Years to Retirement - $100,000 salary
5% return	56	43	37	24
10% return	38	31	24	16
15% return	29	23	17	13
20% return	23	18	14	11
.	Years to Retirement - $200,000 salary
5% return	53	43	37	25
10% return	38	32	23	17
15% return	29	22	17	13
20% return	23	18	14	10

You can retire even earlier if you save more of your pay raises.

The tables above assume you save a constant percentage of your salary even though if you kept your spending relatively constant (i.e., limited your spending increases to the rate of inflation), you could actually save more as your salary increases. Savings is a much more reliable path to early retirement than betting on outsized investment returns. These astonishing results are shown in red in the table below.

------- Years to Retirement ------- Single, current age = 25, age at death = 100, $30,000/yr initial salary, 10% annual salary increases, "100% safe" withdrawal rate, Starting portfolio balance = $0 4% annual inflation, 0.20% investment expenses, spending increases with salary in black spending increases limited to inflation in red.
% of Salary Saved >>>>	10%	20%	30%	40%
% investment return	Years to Retirement - $30,000 salary
5% return	50+ / 22	50+ / 20	50+ / 17	50 / 14
10% return	50+ / 19	50+ / 17	41 / 15	24 / 12
15% return	45 / 17	32 / 15	23 / 13	16 / 11
20% return	31 / 15	23 / 13	17 / 11	13 / 9

Here's the results for a married couple that limits their spending increases to the rate of inflation

------- Years to Retirement ------- Married, both working, current age = 25, age at death = 100, $100,000 or $200,000 initial salary, 10% annual salary increases, "100% safe" withdrawal rate, Starting portfolio balance = $0 4% annual inflation, 0.20% investment expenses, spending increases with salary in black spending increases limited to inflation in red.
% of Salary Saved >>>>	10%	20%	30%	40%
% investment return	Years to Retirement - $100,000 salary
5% return	50+ / 23	50+ / 21	50+ / 17	38 / 13
10% return	50+ / 20	44 / 17	35 / 15	26 / 11
15% return	39 / 18	32 / 15	25 / 13	17 / 10
20% return	30 / 16	24 / 13	18 / 11	13 / 9
.	Years to Retirement - $200,000 salary
5% return	50+ / 24	50+ / 21	50+ / 18	31 / 13
10% return	50+ / 20	43 / 18	28 / 15	25 / 11
15% return	38 / 18	26 / 15	24 / 13	16 / 10
20% return	26 / 16	24 / 13	18 / 11	13 / 9

Download Free Software

The Millennium Edition of the Generation-X Retirement Calculator can be downloaded directly in Excel format. This eliminates some of the problems users have had in the past with "zipped" files. You need Excel 95 or a later version of the program to use the spreadsheet.

Download Generation-X Retirement Calculator
(recalc_2006.xls size = 318,976 bytes)

User Instructions.

The Generation-X Retirement Planner spreadsheet is shown below (Figure 1.). There are 23 input parameters that the user must define in the left hand column of the spreadsheet. Each of the 23 parameters are explained in detail below Figure 1.

The graph on the right side of the spreadsheet shows the calculation results. The red line shows the retirement assets required to fund your living expenses in retirement, the black line is the current value of your retirement assets. You can retire once the red and black lines meet.

The second graph to the right of "Retirement Assets" shows (1) Gross Income While Working, (2) After-Tax Living Expenses While Working, (3) Pre-tax Living Expenses in Retirement, and (4) After-tax Living Expenses in Retirement. The spreadsheet allows you to vary to ratio between your after tax working and retirement living expenses.

You may want to print this page so that you can refer to these instructions while you work with the retirement planning spreadsheet.

Figure 1.

The RETIRE EARLY Home Page
Generation-X Retirement Calculator Version 2.01
Release Date: August 19, 2000
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You can retire when the red and black lines cross on the chart at right.
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Annual Spending Model	2	1=Spending increases with salary
.	.	2=Spending increases limited to inflation
If "2" selected, increase annual spending	2.0%	more than inflation
Annual Income and Savings	.	.
Gross Annual Income	$90,000	.
Percent of Gross Saved	50%	of Initial Salary
Present Age	35	Years Old
Age at Death	95	Years Old
Max Annual IRA Contrib.	$2,000	.
Max 401k Contrib. (%)	10.0%	.
Max Company 401k Contrib. (%)	3.0%	.
Starting Account Balances	.	.
IRA & 401k amount	$0	.
Taxable accounts	$0	.
Income Tax Assumptions	.	.
Itemized Deductions	0.0%	as a % of Gross Income.
No. of Exemptions	1	Federal Tax Return
Filing Status	1	1=Single, 2=Married
FICA Wages	1	1=Single or Married w/1 income,
.	.	2=Married both working
State Income Tax	0.0%	as a % of Federal Income Tax
Adjust Retirement Taxes for Cap Gains	1.00	1.00=all ordinary income.
Living Expenses in Retirement	.	.
Ratio to Current Living Expenses	4.0%	.
Safe Withdrawal Risk	1	1=100% Safe, 2=98%, 3=95%, 4=90%
Assumptions	.	.
Annual Inflation Rate (Exp.)	4.0%	.
Annual Salary Increase	5.0%	.
Annual Investment Return	10.0%	.
Investment Expenses (% of Assets)	0.20%	.

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Input parameters.

Annual Spending Model Select "1" if you want to increase your spending as your salary increases. If you limit your spending increases to the rate of inflation (while your salary grows faster than inflation) you can save even more and retire even earlier. Selection "2" enables this model. If you want to increase your annual spending at a rate above inflation, enter the percentage desired. (Tip: If your salary is growing at 10% per year and inflation is 4% per year, the most you can increase your spending is 6% more than inflation. You can't retire early if you are spending faster than your salary increases.)

Gross Annual Income. Wage or salary income. Do not include interest or dividend (investment) income on this line.

Percent of Gross Saved. Percentage of your annual wage or salary income you plan to save for retirement. (Note: This includes all retirement savings. Your IRA, 401k, plus any money you're saving for retirement in a "taxable" account. Do not include money you're saving for college tuition, buying a home, etc.)

Present Age. How old are you today?

Age at Death It's best to include some extra. Why not use 100 years old?

Max Annual IRA Contrib. Currently, $4,000, $5000 if you are age 50 or older.

Max 401k Contrib. (%) Your personnel department can probably tell you for sure. Depending on your employer, it can be as much as 15% of your salary or $15,000, whichever is less. (The $15,000 limit is also adjusted annually for inflation.)

Starting Account Balances

401k and IRA Account How much you've saved to date in your IRA and 401k accounts.

Taxable accounts. How much you saved to date outside of your IRA and 401k accounts for retirement. (Note: Do not include money saved for college tuition, a new car, or a down payment on a house, etc.)

Income Tax Assumptions

Itemized Deductions Input your Itemized Deductions as a Percent of Gross Income. The spreadsheet will automatically use the Standard Deduction if that's greater than your Itemized Deductions.

No. of Exemptions Enter the No. of Exemptions on your Federal tax return.

Filing Status If Single, enter "1", Married, enter "2".

FICA Wages Enter a "1" if you are Single or Married with only one income. Enter a "2" if you are Married with both spouses working.

State Income Tax This is tricky. It's state income tax as a percentage of your Federal Income tax. For example, if you paid $10,000 in Federal Income taxes and $3,000 in state income taxes, you would enter 30%.

Adjust Retirement Taxes for Capital Gains This is another tricky input. If you get any of your income in retirement from capital gains, you can lower your tax bite. For example, if you are in the 15% tax bracket and get 1/4 of your income from capital gains (10% capital gains rate for those in the 15% tax bracket.) The calculation would look like this: (75 x 0.15)+(25 x 0.10)= 13.75% average. 13.75/15.00 = 0.92. You would enter a 0.92 instead of a 1.00 if this described your capital gains situation. If you get most of your income from capital gains, and are able to match the sale of "winners" and "losers", you might pay little, if any, tax at all.

Living Expenses in Retirement

Ratio to Current Living Expenses Many people spend more or less in retirement than when they were working. If you will spend 10% less than when you were working enter 0.90. If you will spend 25% more when you are retired, enter 1.25. Those spending about the same enter 1.00.

Safe Withdrawal Risk This is a measure of how much risk you're willing to take that you'll outlive your money in retirement. Enter a "1" for "100% safe", "2" for "98% safe" (meaning there is a 2% risk you'll run out of money) "3" for "95% safe" and "4" for "90% safe". For more on "safe withdrawal rates" see the Retire Early Study on Safe Withdrawal Rates..

Assumptions

Annual Inflation Rate (Exp.) How much you expect your living expenses to increase annually. (percent)

Annual Salary Increase. If this number (percent) is less than the inflation rate you entered above, you're in trouble.

Annual Investment Return Enter the percent return on investment you expect for your IRA and 401k accounts (typically, 10% for stocks, 7% on long-term bonds, 4% on short-term savings. If you are a very aggressive investor, you might get 15% or 20% annual returns. But then again, you might lose it all!)
Investment Expenses (% of assets) You should strive to keep this number as low as possible. Vanguard's S&P500 index fund has an expense ratio of 0.17%. For more on investment expenses see the article "Are Your Mutual Fund Fees So High You Can't Retire?"

Run some scenarios.

The Generation-X Retirement Planner allows you to input different parameters and see the results immediately. Remember, the red line is the retirement nest egg needed to support your living expenses. The black line is your current account balance. Once they cross, you've arrived. (If you continue to work and save at the same rate, you'll likely have more money than you can spend. That's the reason the black line starts to go off the chart once the two lines cross.)

Use your imagination. See the results of a 1% increase in the inflation rate or a 1% decrease in your investment return. It will make you think. Hope you're able to Retire Early real soon.