Two years before I reached critical mass, I made an Excel Workbook and logged in all expenses. Major categories: Home (mortgage, insurance, repairs, taxes, gas, electric, furniture, home office, TV, Internet, computers, phones, etc.), Medical, Transportation, Food, Personal, Entertainment, Federal/State Income Taxes, Farm Expenses, Family Expenses (Birthday, Christmas, etc,) and Capital Replacement Expenses (car, truck, tractor, equipment, major tools, etc,).
I then subtracted out those expenses I would not have in retirement and calculated Social Security and pension benefits. This gave me how much yearly incremental income I would need to provide. Using a 3% draw down rate, I then estimated the critical mass amount of monies I needed to have invested/saved to retire.
Example, say I need $100,000 annual income, Social Security provides $30,000, pension $20,000, then I need to get $50,000 from my investments/savings. Now $50,000/3% = $1,666,666 is critical mass I need to retire and have $100,000 annual income.
In this model, I do not run out of monies. You can also make a model where you draw your investments/savings down to zero at a specific age.
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Today's Featured Article - A Cautionary Tale - by Ian Minshull. In the early 1950s my father bought an Allis Chalmers B and I used it for all the row crop work with the mangolds and potatoes, rolling and the haymaking on our farm. The farm and the Allis were sold and I have spent a lifetime working on farms throughout the country. I promised myself that one day I would own an Allis. That time event
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