Saturday, 14 January 2017

I made a calculator

Inspired by Aussie Firebug's early retirement spreadsheet, and my own frustrations with excel, I made a calculator with Javascript.
Most American FI calculators work on a single value, because their tax system includes 401ks and Roth IRAs and a bunch of other things I don't quite understand, but are quite similar to the Australian Superannuation system. The difference between Australia and America is that they have legitimate methods to withdraw from their Super, with or without penalties. In Australia we cannot touch our Super unless we're in some serious financial strife. And honestly, no one wants to plan their retirement on the basis of "If I declare myself broke I can crack open the Superannuation piggybank". The Australian government will make you burn through all your accessible assets before they let you.

As for why you would bother investing in Superannuation if you intend to retire before preservation age, it all comes down to taxes. You can salary sacrifice into your Superannuation account before taxes - so if you make $1,000 a week (a nice round number for doing maths with) then you would be paying $162 tax. If you could salary sacrifice half of your income, then you're only paying a measly $28. By placing half your income into your Superannuation, you get to 'take home' $972 a week, as opposed to $838. (Numbers using the 2015-16 income tax rates from the ATO simple tax calculator.)

Admittedly there are a few other complicated bits and pieces behind that (you pay 15% tax on everything in your Super account) but it's a big savings. The obvious problem is that you can't access that money until 65. Hence why Australian's need to consider both their Super account, and their accessible portfolios when doing the calculations on what they need for retirement. The total required in your portfolio doesn't change by a significant amount, but what you save on taxes is the kicker.

I'm still not thrilled with how this calculator looks visually, but all the calculations behind it are quite nice. In a nutshell, once you've entered you current age, the age you can access your super and your annual spend you'll be able to see exactly how much money you would need if you wanted to retire tomorrow.

The blue column is your Superannuation balance, the red is your accessible (and heavily taxable) portfolio. Hover over any column for more details.

If the amounts you enter for Inflation and Safe Withdrawal Rate add up to less than your expected return, then your portfolio should last forever. If you want to retire earlier you can fiddle with those percentages. The calculator will tell you how much wiggle room you have in each situation.

Edit 4th February - I came back to have a look at this calculator and find it wasn't working :( Blogger doesn't seem to be a fan of me forcibly injecting javascript into a post, so I've moved it across to a page. Hopefully it works a little better, but please leave a comment if you are having issues.

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