Hello $wanigans! Hope all is well. Things have been good here. We’re staying busy, but having fun doing it. Today I have something special for you…my first time ever announcing my target retirement date!
Ode to My Blog
I started this blog over a year and a half ago. I didn’t necessarily know all I was getting into, but I love personal finance and sharing my thoughts. What I didn’t necessarily expect to find was how big the personal finance and financial independence blogosphere was and that it is filled with other great and like-minded folks. The acquaintances and connections I’ve made have been a blessing.
Delving in to the blogosphere and regularly reading countless other blogs has been an eye-opener. I have learned so much (even though I was told my whole childhood I was a know-it-all, usually by my parents with a sarcastic tone…). I truly owe the blogosphere (other bloggers and readers alike) a big thank you as it has helped me formulate and refine my plans for wealth building and retirement.
For example, through the process of starting The Green Swan and being an active member the financial independence / retire early (FIRE) blogging community, I have come to conclusion that my target retirement amount is $3,000,000 which should allow for a stable, comfortable, and (hopefully…:) ) long-lived retirement. I may choose to work past this number for various reasons, but that is my baseline. Before blogging, I didn’t have a refined target, but now I feel comfortable circling that number (as I have shared before in my retirement lifestyle post, among other posts).
Armed with Money and a Model
Now that I have my target retirement portfolio size of $3,000,000 and a growing comfort in that number, it has come time to put a target retirement date out there to shoot for. I’m armed with knowledge and I plan on entering retirement armed with money. And that target retirement date is March 2023!
I have a couple different methods to model my portfolio size out into the future. However, I tend to gravitate toward a very simple model. I have always been a fan of the K.I.S.S. methodology (keep it simple stupid…). I’ve shown this template before, but below is my updated 2018 projection version. This is still preliminary (I won’t finalize it until early January). And this model evolves and changes every year (and may change further with the tax reform expected to pass and become effective 1/1/2018 – more to come on that in another post). Let me explain the assumptions:
– Value (BY) is my beginning year value. Of course my 2018 BY won’t be known until the end of 2017…but it represents my investment portfolio value as of early October 2017. This is not my net worth as I have other assets, but consists of my investment portfolio solely.
– Contributions for 2018 are an estimate, and each year thereafter it is set to grow at 3%. Neither assumption is likely to be correct. For example, a growing piece of my work compensation will be deferred comp which depending on my plan details I am uncertain I will get much value out of if I retire early. So I’m not sure how to count this in my “contributions”, but for now it is included. Secondly, growing at 3% is simplistic and likely understated as I know in a couple years when the kids are out of daycare that $20K+ per year will shift into additional contributions to my retirement plans.
– Return is based on an 8% assumption applied to the Value (BY) as well as to 50% of the contribution estimate (assuming contributions are layered in equally over the year which is conservative because they are usually front-loaded early in the year).
– Value (YE) is my year end value which is the sum of the preceding three columns.
As regular readers are aware, I expect to reach my FIRE-Starter at age 34, I intend to retire early once I attain my Smilodon at age 37, and other benchmark rows are highlighted for informational purposes including age 40 and when I would attain a Woolly Mammoth…assuming I don’t retire at 37.
You may be wondering why I have this table built out until age 57…well when I built this excel template years ago FIRE wasn’t on my mind! If I do embrace the grind for an extra 20 years and retire at 57 instead of 37 wouldn’t it be something to have $25 million!! However, I’m reminded of Your Money or Your Life! There is one thing you can never have more of and that is time.
My Retirement Date
Being armed with my model and hopefully a good chunk of change, I feel comfortable with my March 2023 retirement. My bonus for the preceding year will have cleared my bank account. Since most my annual contributions come in the first quarter, I will likely be hovering around $3 million portfolio value at that time.
Working in the finance field I know the value of models and that one things is always true…no model is ever 100% accurate! Things will change. That’s why I update the above projection chart annually! My contributions will change as I noted above and most importantly it is unrealistic to assume a constant 8% return. There will be ups and downs in the stock market. Over the long-term though I think it is safe to assume 8%.
Given the evolution of my projections and the fact my retirement date is still 5 years away, I expect it to change. And when it does, you can expect another post to talk about it! But for now, you will find my target retirement date badge displayed proudly on my homepage.
The Evolution of My Retirement Date
As I mentioned above, it goes without saying that my retirement date will likely evolve. It may get pushed back, but it also may very well get pulled forward. Who knows?! But that is one of the reasons I enjoy tracking my finances in excel so much. I can go back and look at my prior models to see how they have evolved.
The interesting conclusion is that I continue to project a greater and greater portfolio size sooner and sooner. This has largely been attributed to my growing and evolving career, earning more money, maintaining a relatively flat cost of living and funneling all extra savings into retirement accounts. If you care to know more about my millionaire story check out My Millionaire Interview with ESI Money!
The very first projection model I created was beginning in 2010. It was still early in my career, obviously, so you can expect the projection was wildly off, but it was my baseline at the time. In the eight years since you may be surprised to know that my projected value by the end of 2023 was merely half of what I project it today…around $1.5 million!
The projected value took a leap in 2013 at the time my career took a big step forward, and at that point I was projecting just over $2.1MM by 2023. And it took another big leap the next year with another promotion jumping to a projected $2.7MM. Since then it has grown more slowly as Lucy and my compensation increases have been increasingly put toward our growing family (especially daycare…).
What this goes to show is that I can most certainly expect further changes in the next five years! Perhaps wildly…again, who knows?! Maybe my small business investment will take off…more to come on that in a future post as well.
Thanks for taking a look!
The Green Swan