The FIRE tab is an automatic FIRE calculator, predicting your pathway to financial independence and retiring early based on your live Net worth and spending habits.
Manual User Cells:
• Year of DOB
• Total Yearly Super contribution
• Estimated inflation rate (%)
• Estimated Withdrawal Rate (%)
• Preservation Age (date you can access retirement funds if locked away)
• Yearly spend at current lifestyle
The FIRE tab works on optimising growth on 2 fronts - personal investments that you can access at anytime as well assets in your Retirement funds that usually provide tax benefits.
For the purposes of this explanation these terms are defined:
• Personal portfolio - Your personally invested assets that you can access at any age.• Retirement funds - Retirement funds locked away until retirement (ie. Super, IRA, Pension)• Preservation Age - The age at which you're legally able to tap into your retirement funds.
The Path to FIRE
The path to FIRE is split into 3 stages:
Step 1: Accumulation phase - You're saving and investing money in both your personal portfolio whilst also contributing towards your retirement fund.
Step 2: Begin FIRE! You're retired and
2a. Independently living off income from your personal portfolio before your preservation age, whilst
2b. Contributing to your retirement fund and allowing it to grow. These contributions come from your personal portfolio FIRE income.
Step 3: Retirement Fund Phase - Exhaustion of your personal portfolio by the time you hit your preservation age and therefore from here onwards you're living on your retirement funds.
This tab therefore uses your net worth & retirement balance to calculate the sweet spot between steps 1, 2 & 3 to find out when you can FIRE. The sheet will give you a target date and Net Worth amount to achieve FIRE.
Needed to assess how far away you are from your preservation age.
Total Yearly Retirement Contribution
How much you're contribution to your retirement in total per year. This includes both mandatory and voluntary contributions.
Estimated Inflation Rate
The estimated inflation rate that needs to be taken into account.
Estimated Withdrawal Rate
The estimated withdrawal rate on your assets that you will live off when FIRE. This can vary and various FIRE writers have varying opinions depending on how conservative you may be. Rough ballpark figures are anywhere between 3-5%.
ie. To retire off $60,000 income per year with a 4% withdrawal rate you will need a Net Worth invested of $1,500,000. 1,500,000 x 0.04 = 60,000.
This figure is always purposely less than your predicted market growth rate to be conservative and account for the presence of inflation.
The age at which you're legally able to tap into your retirement funds.
Yearly spend at current lifestyle
How much you will spend a year once FIRE. Note this automatically feeds from the Sheet based on your average spend but feel free to override this value to make it more accurate. This is based on your current spend which may not be indicative of your FIRE lifestyle.