Retirement Financial Planner Spreadsheet Financial Independence

Are you looking for a retirement financial planner spreadsheet? How much do I need to save to reach my goals? Spending the time to prepare a financial model (spreadsheet) helped us determine the best path to our financial independence (FI). You don't need computer modeling skills, just download the Retirement Financial Planner spreadsheet below and plugin your numbers.

To evaluate your projections (goals), you'll benefit by varying the "assumptions" (your input) of the retirement financial planner spreadsheet. Doing this has helped us tremendously in determining the risks (outcomes) associated with each assumption. Also, the retirement financial planner tool helps us track our results and make the necessary adjustments annually.

Although I do have professional work experience in the computer modeling field, I didn't create the retirement financial planner spreadsheet. My spreadsheet is a revised version of the Microsoft Retirement Financial Planner template. It is available free online (download from Microsoft here). However, I did modify my version to include our real estate investments (rental property and home).

Before you dive into the spreadsheet, here are a few things I learned from modeling our financial projections for retirement:

Model Inputs (facts and assumptions): you will enter your age, current salary (income), investable assets (savings), and investment return information, as well as your desired retirement age and income, and the template will calculate and chart the required earnings and savings each year to achieve your goals. What "assumptions" you pick can make a huge difference in the results. Determine which assumptions are controlling the outcome/results by varying the numbers and percentages.

Investable assets include cash, funds in your bank accounts, money held in retirement accounts, mutual funds, stocks, bonds, certificates of deposit, and insurance contracts with cash value. Does NOT include your real estate investments (rental property, home).

Assumptions: obviously, the savings rate (annual amount of cash saved) has a significant impact on the financial model. Most importantly, you'll note the more you save earlier, the less you need to save overall to reach the same goal. Here's an example of how it works:

Model 1: Say you plan to save $300,000 over 15 years ($20,000/year consistently) to reach a goal of just over $500,000 making the assumption that your investment return will be 6%. If you save $20,000/year, you need to save $300,000 ($20k/yr. x 15 years = $300,000 saved). At a conservative 6% annual return on your investments, you'll reach your $500,000 goal at the end of 15 years.

Model 2: Say you increase your savings the first year to $36,000 (instead of $20,000), but you still save a total of $300,000 during the 15 years. In other words, you decrease your savings during the 15 years so your total saved is still $300,000. You'll end up with $25,000 more ($525,000) at the end of the 15 years. To model this example, put $36,000 into the spreadsheet as your annual savings amount and -9.75% (negative) as your "annual increase in savings." You will be saving less each year (total saved is still $300,000).

Another way to look at it, you only need to save $285,000 during the 15 years to reach your $500,000 goal if you save more earlier and decrease your savings each year thereafter during the 15 year period.

I'm not suggesting you decrease your savings each year; however, you can see how better off you are with what I call, "front-loading" your savings/investments. Ben Franklin and compound interest come to mind? This is one reason why only focusing on paying off your mortgage and not investing early can be a bad idea. Sorry Dave Ramsey fans but paying off your mortgage isn't necessarily the best way for everyone to build wealth over time. Boss Man Jax has no bones to pick with Dave Ramsey. He is providing a lot of great advice. However, let's do the math or call Dave Ramsey and ask him to do the math for you. I haven't seen him provide financial proof on this topic, but it may be somewhere I haven't looked?

What I've Learned - Model Results (for our finances)

I learned it is not wise for us to pay off our mortgage early given we have a mortgage interest rate below 4%. When I consider the real estate tax deductions, a conservative investment return of 5% (low risk) for the money I don't use to pay mortgage principal early, I end up with more money down the road. Also, I'm not forgetting there is "risk" with real estate.

I've heard Ramsey's argument that the "low risk" option is paying off your mortgage/debt verses investing. I don't agree based on doing the math and further researching the topic, at least for us.

I've owned rental property for 30 years and it goes up and down in value just like the stock market - there is risk involved. Real estate is very cyclical. If you pay off your mortgage, you are still at risk of losing your equity value. We can't easily (or cheaply) access our real estate equity, especially as interest rates go up. Interest rates are going up for sure folks. Realize you won't get OPM (Other Peoples Money - mortgage company) at today's low rates anytime in the near future, if ever again. Also, online bank savings rates are at 2% already and likely will go up annually during the next decade.

You can find numerous low risk investments, or at least as low risk as real estate, right now. If your mortgage rate is 4% (or lower), you may be better off saving/investing the funds you would use to pay off your mortgage IMHO. I did the math for us. Paying off our 3.375% mortgage results in having a lower net worth over time verses investing the money conservatively. Our investments give us a bigger net worth and the investments will more than pay off our mortgage in the future, if we choose to use them to do so. Not sure about this? I wasn't either until I did the math, researched the topic, and spoke to professional financial advisors I could trust.

A few years ago, I was paying huge amounts of principal on our mortgage to pay it off as quickly as possible. I drank the Kool-Aid (LOL) without doing my homework first. This was a big mistake given our low mortgage interest rate and the stock market returns during that time. I stopped paying off our mortgage (extra principal payments) immediately after becoming educated on the topic and doing the math for myself.

It appears paying off your mortgage is debatable for many. Let's see who else has done the math with respect to paying off low interest mortgages verses saving/investing. Ric Edelman for one has an analysis based on what appears to me to be sound financial modeling. Although I don't agree with everything Edelman says, his math associated with NOT paying off your mortgage is worth your review. For me, it doesn't make good financial sense to pay off our low interest mortgage in lieu of investing given our mortgage interest rate is below 4%. That's the cheapest money I will ever be able to borrow in my lifetime and I'm tempted to get more.

See: Ric Edelman, 11 Great Reasons to Carry a Big Long Mortgage - are you Smart Sam or Nervous Nick?

Also, see: Should you pay off your student loan debt before starting to save for retirement? Read the article on The Street website, Pay Off Student Loans or Save For Retirement? Pay particular attention to the later portion of the article where it quotes Kerry Uffman. NOTE: Boss Man Jax recommends paying off your student debt as soon as possible (just like our buddy Dave Ramsey). However, the math may not add up for everyone.

Like I said above, I've owned rental property for almost 30 years. One thing I learned is real estate values, just like the stock market, go up and down and there is risk in both investments. Another thing, I doubt you'll ever see mortgage interest rates as low as they are now anytime in the future.

More Model Results

Model Assumption: for the Retirement Financial Planner spreadsheet, you enter a figure for "Annual Pension Benefit" (or social security income) and "Annual Pension Benefit Increase" (you could consider this COLA; cost of living allowance). If you don't have a "pension" per se, you'll collect social security at some point. I used our expected social security income for the "Annual Pension Benefit" given I don't have a pension. Also, I used 1.8% as the annual pension increase; the average COLA for social security for the past 20 years has been 2.5% (2% in 2018). This input value has a significant impact on the financial model; therefore, I chose a conservative value of 1.8%. In addition, I assumed I'll have a payment (pension in the model) before I collect social security. I'm assuming I'll quite working full-time, but continue to have income before collecting social security. The "pension" income kicks in on the model when you retire (you enter your expected age at retirement), which is likely going to be before collecting social security, or possibly a pension. I'm assuming that income is side-hustle money or recurring revenue from my business that I'll receive even after I stop working.

I hope this helps you like it did us. A sound retirement financial planner is a great tool to set goals and evaluate the results. It is a little overwhelming writing it down in this post, so please feel free to ask questions and provide your comments below. I'll do my best to answer questions. Thanks for stopping by.

Additional Resources

VIABILITY OF THE SPEND SAFELY IN RETIREMENT STRATEGY: (July 2019) - The Stanford Center on Longevity, in collaboration with the Society of Actuaries, has analyzed the feasibility of the Spend Safely in Retirement Strategy (SSiRS), a straightforward retirement income strategy that could be implemented in virtually any IRA or 401k plan. The SSiRS can serve as a framework for deciding when to retire and how to deploy savings in retirement.