Modelling an Early Retirement
Financially modelling an early retirement with Excel
I mentioned in the last post that I was considering retirement.
The primary factor that would affect retirement would be can I survive long enough and how much would I need.
With this scenario, my wife would carry on working as that is what she wants to do in life.
Something that I was toying with was using a period of not needing to work full-time to re-roll my character and find something that I loved doing. This would be something that excited me and made me human again!
Me being Captain Spreadsheet - I wanted to work through the numbers to see how that might look.
Spreadsheets
The greatest expeditor of clarity when faced with a problem is introducing constraints.
Limitations put the horse blinkers on - allowing you to focus on one thing without being overwhelmed with distractions.
Starting off with our settings, I’ve identified that I need 50k per year to cover our costs and increasing that amount by 5% per year.
I’ve dropped the starting amount down to an arbitrary round number. I’ve reduced the rate of return down to 1/3rd of my 10 year CAGR for safety. I’ve doubled target inflation rates and factored in a 5% growth in withdrawal ever year.
The two columns at the end are remaining (how much I would have at that point in time) and Present Value (meaning what is the relative value of that money to today). I.e. if they keep on inflating money - a Mars Bar might be $10 dollars. So this column would be - what is the value of the Future Money relative to what it could buy you today.
Either way - we are looking for the Math to not head towards zero at any point. Also, the end point doesn’t really matter - as long as it goes horizontal or up - that’s all that matters.
So looking at this math - it looks that this is an actual option.
I really try to steer life through silently observing the world, intuition and following a North Star of goals. My character is definitely different to a lot of people - but - I’m happy that it is.
Have you considered doing micro-retirements? It's a trend among younger people these days to take months-years off from their profession to address burnout, recalibrate, and reprioritize. To be honest, I'd say I fit into this category. I work to accumulate enough income for me to feel comfortable taking a certain amount of time off, then I take a few months to a few years off.
In that time, I rest, pursue other interests and hobbies, and if I feel bored of financially unstable, I look for a contract and work a little while to repeat the process.
Honestly, I found doing that helped me re-discover why I went into my profession, what I love about it, and what I really dislike.
It also gives me the freedom, not worrying about the long term implications of my work, to quickly cut ties and leave work when I find it's getting boring, toxic, or undesirable.
I purposefully apply for positions 1-2 titles below what I'm actually capable of, and even if the pay isn't very good, it doesn't really matter, because the added income just helps stabilize my financial situation.
The worst part of work is how emotionally co-dependent long term coworkers become.
A lot of people in the corporate world these days have shattered families, especially management types, and so they start trying to treat their employees like family members, which is unbelievably awkward and stressful.
Alternatively, a lot of corporate culture is complete nonsense where all the fun is sucked away by edicts of incompetent or corrupt leadership.
Either way, it's all fine if you're "a new guy," but once you become "part of the team" and start seeing what it's actually like to be in the corporate world, it's nice to know you can just quit, take 6-24 months off, and come back and find a new position later.