Do you want to know how long your early retirement assets can potentially last tax free? You’ve come to the right place. This post will provide you a super simple and absolutely free tax free calculator (bottom of post).
Since retiring early with a Brokerage account and Roth conversions will yield the most tax free income potential, the Secret Life of FI calculator will estimate how long your assets will last using this method.
What the Calculator will show
After inputting some basics (annual expenses, 401k/403/IRA, etc), the calculator will provide two estimates:
- How long your entire nest egg will last following the safe 4% withdrawal rule
- How long your tax free retirement funds will last with and without Roth conversions
For example, if your inputs add up to a nest egg of $1.2M against $50K yearly expenses, the calculator will project this:
While this view is a good long term estimate, this assumes no Roth conversions (and no early withdrawal penalties, FYI, so plan accordingly). As you can see the Roths and brokerage (tax free funds) last 8 years before depleting in this example.
So what happens if you convert to your Roth yearly up to the standard tax deduction ($25,900 married filed jointly) as laid out here (link)? The results might astound you. The calculator shows the tax free funds will go from lasting 8 years to 15 years. Wow. Unreal.
Take a look at what the calculator projects. The red line shows the tax free assets lasting 8 years, while the green line shows the tax free assets that include Roth conversions last 15 years.
Want to give it a try? Download the free tax free calculator below. If you don’t have excel, you can use Google Sheets through your Google Chrome browser for free (that’s what I used to create it).
Direction for use are at the top of the file. You only need to fill in a few cells that are clearly marked at the top, and the calculator will do the work for you.
Now, enjoy the results!
In the comments: any surprising results found in the value of Roth conversions? How many years of potential tax free income did this create for you? Does this change your early retirement plans in any way?