1. What is the Early Retirement Calculation?

The Early Retirement calculation determines how much savings you need to sustain your lifestyle without working, based on your annual expenses and a safe withdrawal rate from your investments.

2. How Does the Calculator Work?

The calculator uses the Early Retirement equation:

Where:

• \( Annual\ Expenses \) — Your yearly living costs in AUD
• \( Safe\ Withdrawal\ Rate \) — Percentage you can withdraw annually (typically 3-4%)

Explanation: This calculation is based on the "4% rule" which suggests you can withdraw 4% of your portfolio annually with low risk of running out of money over 30 years.

3. Importance of Retirement Planning

Details: Proper retirement planning ensures financial independence and helps maintain your desired lifestyle without the need for employment income.

4. Using the Calculator

Tips: Enter your annual expenses in AUD and your chosen safe withdrawal rate as a decimal (e.g., 0.04 for 4%). Be realistic about your expenses and conservative with withdrawal rates.

5. Frequently Asked Questions (FAQ)

Q1: What's a typical safe withdrawal rate?
A: Most financial planners recommend 3-4% for traditional retirement, but early retirees may want to use 3% or less for longer time horizons.

Q2: Does this account for inflation?
A: The 4% rule includes inflation adjustments, but you should review this annually based on actual inflation rates.

Q3: What about investment returns?
A: The safe withdrawal rate assumes a balanced portfolio with average returns that outpace inflation over time.

Q4: Should I include my superannuation?
A: Yes, but remember you can't access super until preservation age (currently 60 for most Australians).

Q5: What other factors should I consider?
A: Healthcare costs, one-time expenses, tax implications, and potential changes to government benefits.