How to Use This Calculator
This dashboard is designed to be a powerful tool for planning your journey to financial independence. To get the most accurate projection, it's important to understand what each input field represents.
Your Current Situation
- Current Age: Your starting point. This is used to calculate the timeline for all projections.
- Current Investable Assets: The total value of your liquid assets that can be used for retirement. This includes stocks, bonds, unit trusts, and cash. It's important to exclude illiquid assets like the value of your home.
- Current Monthly Income & Savings: Your take-home pay and the amount you consistently save each month. This is used to model your wealth accumulation before retirement.
- Lump Sum Amount & Payout Age: Use this for any one-time cash injection you expect, such as an inheritance, bonus, or severance package. The amount will be added to your investable assets at the specific age you enter.
Retirement Phases
- Semi-Retirement Phase: This is an optional section for modeling a period of reduced work before full retirement. If you check "Enable," the calculator will use the lower income and savings figures for the years between your "Start Age" and your "Full Retirement Age."
- Full Retirement Phase: This section defines your final retirement.
- Full Retirement Age: The age you plan to stop working completely. From this point on, the simulation will stop adding savings and start withdrawing funds to cover your expenses.
- Late Retirement (L.R.) Start Age & Spending Reduction (%): These fields model the common trend of reduced spending later in life. At the "L.R. Start Age," your annual expenses will be reduced by the percentage you specify for the remainder of the projection.
Retirement Expenses & Income
- Estimated Monthly Retirement Expenses: Enter your expected expenses in today's dollars. The calculator will automatically account for inflation to project how much you'll need in the future.
- Projected Retirement Income: Here you can input your expected income streams in retirement. The model assumes your "Other Passive Income" starts at your Full Retirement Age, while "CPF LIFE" payouts begin at age 65.
Modelling Assumptions
- Expected Annual Return (%): The average annual growth rate you expect from your investments.
- Inflation Rate (%): The long-term average rate at which you expect the cost of living to increase.
- Safe Withdrawal Rate (%): The percentage of your portfolio you plan to withdraw in your first year of retirement. This is used to calculate your FI Target.
Frequently Asked Questions (FAQ)
Q: Why is my FI Target $0?
This happens when your projected retirement income (from CPF LIFE and/or other passive sources) is already greater than your projected retirement expenses. The dashboard is telling you that based on your inputs, your guaranteed income streams are sufficient to cover your lifestyle, so you don't need to draw down from your personal investment portfolio. Your FI Target for personal investments is therefore $0.
Q: Why do my funds run out even if the dashboard says I've hit my FI Target?
This is the critical "CPF Gap" scenario for early retirees. The FI Target is calculated conservatively based on your expenses *after* your passive income begins. If you retire early (e.g., at 50), you have a gap of several years until your CPF LIFE payouts start at 65. During this gap, your portfolio must cover 100% of your expenses, leading to a very high withdrawal rate that can deplete your funds before your CPF LIFE provides relief. The "Time to FI" metric indicates when your portfolio hits the target, but the graph shows the real-world outcome of your withdrawal plan.
Q: Should I focus on the "Projected" value or the "Inflation-Adjusted" value?
The Inflation-Adjusted Value (the blue line) is the most important number. It represents your true purchasing power in today's dollars. Your FI Target is also in today's dollars, so you achieve true financial independence when your blue line crosses the red FI Target line.
Q: Why does my projected wealth sometimes increase during retirement?
This is typically caused by the interplay between your Retirement Spending Reduction, investment returns, and inflation. The graph might bend upwards when your spending reduction kicks in (e.g., at age 75), causing your annual withdrawals to become less than your annual investment growth. However, as inflation continues to increase the cost of your expenses each year, your withdrawals may eventually overtake your investment growth again, causing the portfolio value to decline.
Q: How does the Safe Withdrawal Rate (SWR) work?
The SWR is the percentage of your portfolio you plan to withdraw in your first year of retirement. This amount then increases with inflation each year. A lower SWR is more conservative because you are withdrawing less, making your portfolio more likely to last through market downturns. A lower SWR will result in a higher FI Target, giving you a larger safety buffer.
Q: What is the difference between "Expected Annual Return" and "Inflation Rate"?
"Expected Annual Return" is the nominal growth of your investments (e.g., 7%). "Inflation Rate" is the rate at which your cost of living increases (e.g., 3%). Your real return, or the actual growth in your purchasing power, is the difference between these two. In this example, your real return would be approximately 4%.
Disclaimer
This tool is for educational and modeling purposes only and should not be considered financial advice. The projections are based on the assumptions you provide and do not guarantee future results. Please consult with a qualified financial advisor before making any financial decisions.