Fundamentals: Trinity Study, 4% Rule, and Withdrawal Rate
The Trinity Study (Wikipedia) – This is a landmark paper consistently referenced by the FIRE community and is the source of the “4% Rule”. There’s a lot written about it online and this short WP entry will help get you started.
Analysis of the Trinity Study (The Poor Swiss) – This article is a great follow up to the basics in the Wikipedia article. Be sure to check out the link in the comments section for an updated analysis by the author.
Safe Withdrawal Rate Series (Early Retirement Now) – dig into topics like withdrawal rate, sequence of return risk, and challenges to the 4% Rule with Karsten Jeske’s aka “Big ERN’s” 50+(!) post series. This is a tremendous resource to examine once you have a good understanding of the basics. Pace yourself – it’s a marathon, not a sprint.
Calculating and tracking “your number”
As referenced in Episode 4 and elsewhere, calculating and tracking the assets needed to achieve financial independence (FI) is a key step in the FIRE journey. These links will provide further information and tools to help get you started.
Personal Capital – A very popular and easy to use free tool (they also offer paid consulting) for tracking your various investment accounts and net worth. PC has simple to use account linking to make it a more automated experience.
App (iOS) and Google Sheets calculator (Next Phase is NOW) – This article and the tools linked here provide a very simple starting point for generating “the number”. All you need to enter is your desired annual spending and your withdrawal rate, and you’ll get the answer.
Portfolio, Asset allocation, and rebalancing tools
Our Asset Allocation + Rebalancing Calculator provides a convenient and easy mechanism to enter and track your asset allocation, flag when any assets exceed your allocation targets, and model any rebalancing that may be needed.
Portfolio Visualizer is a site containing a variety of modeling tools which allows one to backtest different portfolio asset allocations. While past results are not necessarily predictive of future returns, this approach does allow one to understand the merit + drawbacks of various asset allocations. One useful approach this enables is to compare the performance of your current portfolio vs. a variety of others of your construction.
Portfolio Charts offers a wealth of different portfolio visualization tools and calculators for deeper analysis of your asset allocation, and other personal finance elements. As Eric mentioned in the episode, you’re not likely to find another resource with so many different visualizations available.
Our discussion in Episode 4 included mention of several tools used to model the likelihood of success of a given FI target using methods including Monte Carlo analysis. Here are a few of the many options out there for you to consider.
cFIREsim – This popular tool is the “Crowdsourced Financial Independence and Retire Early Simulator”. cFIREsim is among our favorite sites for performing Monte Carlo analysis of a given FIRE strategy. While you can get started with just a handful of simple parameters, this site is extremely flexible and will allow you to do more complex modeling if that is of interest.
New Retirement – Jason really likes this platform and more people on Reddit seem to be discussing this comprehensive retirement planning tool as well. They have a very full-featured free offering (sign up here) as well as a modestly priced paid “PlannerPlus” version with a host of really nice features (14 day free trial here), as well as consulting services. Be sure to check out their Monte Carlo analysis, which is a different approach than cFIREsim, and therefore is a nice complement to it. There’s a very active Facebook community as well.
Big ERN’s SWR Spreadsheet (Early Retirement Now) is a comprehensive planning tool largely aimed at investigating safe withdrawal rate. In line with Big ERN’s standard approach, this is a resource aimed at those desiring detailed, quantitative analysis, and is a bit more “in the weeds”. But having the ability to input your asset allocation along and projected rates of return, is vital to do truly informed modeling. Other tools may be easier starting points, but this one has lots of power when you’re ready to dig deeper.
The Best Retirement Calculators (Can I Retire Yet) – This is the granddaddy of lists of retirement calculators and simulation tools. Darrow has reviewed many tools over the years and this is a great resource for those seeking info about the options out there.
You Need a Budget (YNAB) – In our opinion, there is no budgeting tool more widely discussed, nor with a user base so passionate than YNAB. If manual spreadsheets aren’t your thing, or you’ve struggled with budgeting, look no further. YNAB has a free 34-day trial and the $84 readily pays for itself. Jason has been using YNAB for several years now and still can’t stop singing its praises! (affiliate link – a free month for each of us if you sign up!)
Mapped Out Money – Nick True is widely regarded as one of the best YouTube resources for zero-based budgeting and in particular, for his YNAB videos. If you’d like to get started with budgeting and this is your first foray – or you’ve struggled before, look not further!
The Best Budgeting Tools to Reach FI (How to FIRE) – If you’re interested in budgeting and want a more comprehensive view of the free and paid options available, this is a good summary of the landscape.